What is Cloud Computing? Is it hype or will it give me real benefits?

January 24, 2012

There is still a lot of misunderstanding about what the cloud is. People think that having their servers hosted in a data centre is the same as having it in the cloud, so they can’t visualise the change. The cloud is about providing economies of scale, and also it’s about bulk administration of servers and services provided.

Firstly, there are cloud data centres. The cloud providers go out and get the system architected so that they can then mass produce a single server type for their data centres. Then they bulk produce it. The data centres are absolutely massive. The interesting thing is that for them to add another server in, it costs in the order of $10. (Feel free to jump in with corrected figures if you have them. The figure I was originally told was actually less) That means that they can pass on some of the savings to you.

Secondly, there are the cloud applications. Hosted applications in the cloud. This means that instead of your staff having to go buy and build a server, install the software, and configure it, you can simply put in a request to have it provisioned and a new instance will be created and available either instantaneously are within a very short period of time. You no longer need staff that are skilled in building and configuring hardware. You just provision another application and it’s up and running in a timely manner.

Of course, if you’ve already got all the hardware and got all the licences, you’re quite possibly not going to consider moving to the cloud. Therefore many people will wait around until their hardware or O/S is virtually obsolete. This will perhaps cause them to miss an opportunity to reduce or retask headcount.

That’s because the cloud providers will be providing all the hardware and provisioning of servers. They have teams that can administer 1000 servers per person. Within your own company, you’d be lucky if you had one person that could administer 100 servers. So instead of employing people to manage all that infrastructure, you need less people.

Now, I’ll use a lot of figures here to try to make a point. It’s hypothetical. In fact, I’ll say they’re all made up so I don’t have to get into arguments about them. (If you believe you have accurate references to the true costs, by all means, put them forward!)

To a small business, whether you spend $200 a year or $300 a year on a server, there’s not really much difference. But consider larger organisations that have 1000 servers. The cost difference in that case becomes $200,000 vs $300,000.

In the cloud case, that server cost might drop to $100 per server per year.

Say a person with that skillset was costing you, say, $150,000 a year (not what they’re earning, their cost to the business), and you now needed 3 less staff members because of it. The saving from that is $390,000 a year. Add the $200,000 saving from server cloud and that starts looking like a more interesting $590,000.

So when companies consider the cloud and they scoff at moving to the latest “fad” because of their existing environments you think, yea ok. But then consider new companies, fast movers, up and coming. They aren’t going to care about all these issues bigger companies are having regarding corporate governance and data safety, because the cloud offering will be an adequate proposition for them. Data safety and security will be good enough. Then when it comes for these companies to scale, they can just spin up new servers. Old school companies will move much slower and the new cloud businesses will become the rule breakers that will catch up faster than ever before.