Virtualization Technology News and Information
Is Your Infrastructure Costing You Too Much

Article Written by Adnan Raja, Vice President of Marketing, Atlantic.Net

When you look at the statistics for information technology worldwide, you can understand why getting infrastructure costs down is such a key concern. IT spending worldwide was projected at $3.41 trillion for 2016 by industry analyst Gartner. Computers have simply become increasingly important business tools, and that is backed up by different buying patterns over time. In 1990, 15 million computers were shipped; in 2015, 65 million computers shipped per quarter.

While technology is critical to your success, your organization may still be spending too much on its backend. In this article, we look at the cost of not using cloud, why managed services make sense in 2017, and - most importantly - security as a critical factor in cost-containment.

Cost of not using cloud

From another Gartner report (beyond the one cited above), here are three ways that using cloud hosting and services will save you money:

  1. Spending becomes more flexible. Since cloud is fundamentally tied to demand, you won't have to pay for unused resources as is the case in the traditional model.
  2. Cloud reduces upfront budgetary strain. There is no set cost with using these remote services as there is when you are building an on-premise datacenter and have to periodically refresh your hardware.
  3. You lower your opportunity costs. You don't just let go of money when you spend it but also miss out on opportunities those funds could have allowed. When you get your resources on-demand through the cloud rather than building your own infrastructure, you are able to use the money you save in that huge capital expense of a datacenter on business development or other areas.

Another way to look at why cloud is preferable to your legacy servers is by assessing the total cost of ownership (TCO) of each of the setups. 

As its name suggests, TCO considers a hosting environment from a comprehensive perspective (over time, and with inclusion of service and support), rather than in terms of individual expenses. The best way to approach TCO analysis is in terms of three major categories: capital expenses (onsite servers and applications), operating expenses (maintenance and support costs so that the technology stays live, secure, and functional) and indirect costs (possible outages and slow-downs in time-to-market).

Gina Longoria, a senior analyst at Moor Insights and Strategy, noted in Forbes how these three elements apply to cloud hosting (infrastructure as a service, or IaaS) and cloud-hosted solutions (i.e. software or platforms as a service, a.k.a. SaaS or PaaS):

  • Capital expenses (Capex): In an onsite deployment, these costs are for physical servers and other components, as well as any software that is bought upfront to bring the project to life and a portion of new datacenter costs, if applicable. With cloud service providers (CSPs), you don't have to get any hardware or set up a datacenter, so you will not incur any capital expenses (reducing the long-term costs).
  • Operating expenses (Opex): You do not just want to think in terms of the price of servers and other infrastructural elements. You need to additionally look at Opex -- the costs of installation, configuration, and maintenance throughout the lifecycle of the system. Your labor costs for internal management of your datacenter and the applications it hosts can be particularly high. When a company does not specialize in information technology, "it often makes more businesses sense to outsource some or all of the service and support required to run IT resources more efficiently," said Longoria. By transitioning from legacy to cloud and getting managed services from that external provider, you will create space for your computing personnel to center their attention on innovation and efforts to bring in additional money (rather than focusing on maintenance).
  • Indirect costs: Your expenses go beyond Capex and Opex. If your systems go down or if there are delays in getting the hosting environment prepared for a revenue-building project, that money should be included in infrastructure analysis. Typically in a cloud computing environment, you will have a service level agreement (SLA) that will give you stronger uptime than many organizations can achieve in-house. Unplanned downtime can be devastating from numerous standpoints (retention, credibility, sales, ability to complete internal tasks, etc.). Cloud also allows you to scale on-demand (so that traffic levels don't impact service quality) and reduce your time-to-market (which in turn can mean that your business expands more rapidly).

What do all the above ways in which cloud can reduce cost mean? Expenses will vary based on specifics, but Longoria noted that a cloud host can cut TCO over a three-year period by 37% (based on 2016 direct analysis).

Why managed services make sense in 2017

Understanding cloud is fundamentally concerned with understanding managed services, since managed services are often tied into or added to cloud packages. To get a sense of why cloud is important from a managed services perspective, it helps to look at the role of IT departments and how that has changed over time. In the past, a company's own IT staff was the only way resources were delivered to its systems. Today, third-party managed services are also available to provide infrastructure. Businesses often view the IT department as a drain on the budget. Managed services can help you avoid overstaffing; plus, they can help you cut costs and stay current, rather than investing in today's technology to serve tomorrow's needs.

The general shift that is occurring to cloud hosting or managed services is aligned with today's cultural moment. Think in terms of your own employees, noted Jeffrey Bannister in CIO. While your older staff members are probably more concerned with ownership (their home, vehicle, etc.), your younger personnel are likely renting apartments and using car-sharing. In other words, generationally, we have been shifting from a Capex to Opex model. In this climate, external relationships triumph over initial investments.

Security as a critical factor

A 2017 report in Business Insider revealed that the average cost of a data breach is $7 million. The ability of a hacker to compromise your organization will depend in large part on the decision between in-house and cloud solutions, since the latter typically has better security. 

David Linthicum noted that on-premise environments are hit with more than double the attacks as cloud providers are: 61.4 to 27.8. Also, "those who build cloud-based platforms for enterprises typically focus more on security and governance than those who build systems that will exist inside firewalls," he noted

Furthermore, the security personnel at a cloud provider is niche-specialized to protect that system. You will save money by not having to pay the salaries of security professionals; that can be impactful, since the average salary of an information security analyst was $93,250 in 2015.

Finally, a cloud datacenter will need to prove its security to earn your business, which in turn means that it should be able to provide you with certifications on safeguards and practices - such as SSAE 18 SOC 1 Type II and SOC 2 Type 1 auditing from the American Institute of CPAs (AICPA). In other words, by accessing a cloud provider, you should in turn access expert and objective third-party verification of security controls.


About the Author

Adnan Raja 

Adnan Raja has been the Vice President of Marketing at Atlantic.Net for 14 years. During Raja's tenure, the Orlando-based, privately held hosting company has grown from having a primarily regional presence to garnering and developing attention nationwide and internationally. In collaboration with a skilled and dedicated team, Raja has successfully led a full spectrum of marketing campaigns, as well as handling PR work with major news outlets and the formation of key strategic alliances. 

Published Thursday, November 30, 2017 9:01 AM by David Marshall
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