Well, that depends. How much of your environment are you intending to put in the cloud? Are you intending to just put a toe in the water, or are you going to put everything in?
If you’re talking about moving all your servers into the cloud, Microsoft produced a whitepaper in November 2010 that showed the Economics of going cloud. That whitepaper is found here: Microsoft Economics Of The Cloud
To keep it simple, in the article, on page 10 there is a graph. It shows the Total Cost of Ownership based on how many servers you have in the cloud. It starts at 100 servers, and as the number of servers increases, the costs drop. The sweet point is around 1000 servers, where the real benefits reach their peak. After that, the costs do still reduce, but not at the rate up to the 1000 server point.
For a mid-sized company, I would expect to see between 20% and 30% reduction in costs. I recently had a conversation with a company that has 40,000 employees that have now put everything in the cloud. They claimed a 25% reduction, and I would say they are pretty conservative with their calculations.
The next issue is private vs. public cloud. Of course, there are many companies that can’t put their data in the public cloud for a variety of reasons. Many organisations can’t share or even be seen to be sharing their data with other companies. Organisations with privacy issues, such as childcare providers or elderly facilities, government, military. There are organisations that have regulatory issues relocating data to offshore data centres. The public cloud for Australia, for example, is located in Singapore. There are organisations you don’t want to hear have gone to the public cloud. This is in spite of the fact that the public cloud is architected with the utmost focus on security and separation of tenants and their data. These people need to choose a private cloud.
A private cloud can be hosted in house, or in a local data centre and is generally set up for you by a larger organisation, such as Fujitsu. The equipment is sourced from the same batch of computers that would be found in a public cloud set up, but you don’t share any machines with other organisations. You are the only tenant. Whoever you get to implement your private cloud will also manage your service, so they can have employees that manage significantly more servers than your own infrastructure employees can manage, so you get that economy of scale. The only problem with private cloud is that it costs, because you are the only tenant.
If you look at the Microsoft Economics of the Cloud whitepaper, on page 15, they have a graph that shows the relative costs of private cloud vs. public cloud. For smaller organisations, such as those with 100 servers, the cost of private cloud is more than 40 times the cost of utilising public servers. Of course, the cost of private cloud drops as you add on more servers. Looking at the graph, by the time you get to 1000 servers, the cost of private cloud is 10 times the cost of the public cloud.
But you really need to ask yourself, do I really need private cloud? Security in the public cloud is extremely robust. The architecture prohibits data crossing the tenant boundary. Microsoft and other organisations know that if they have security breaches then they are virtually finished, as Amazon found recently. And Microsoft must be the most attacked company in history. So if they send their security specialists in to architect a system where companies may want to put their most secure trade secrets, they have to make sure it is secure. There are large multinational companies with their entire operations in the public cloud. I’ve met one of them. They wouldn’t have done it if they had real concerns about the safety of their data.