Will I really save money by taking my firm to the cloud?

Kenneth Johnson / December 10, 2014

For most companies the hope of saving money is one of the primary motivators of going to the cloud. Even as most companies large and small are saving 40% to 60% on average by closing data centers and migrating to cloud infrastructure, it has been my experience that professional firms often expect to pay more for cloud computing than they were paying for their traditional IT. Why is this?

Well for starters, when most professional firms consider cloud they are evaluating Software as a Service (SaaS) and other alternatives that charge per-user-per-month for the service offering. In addition to fixed fees per user, some of these models also replace only one piece of a firm’s capability—i.e. one application—and do not have the potential to completely eliminate the need to purchase and manage hardware, OS licensing etc.

So why can non-professional firm companies seem always to save money by moving to the cloud when professional firms never seem to? Simple. Small to mid-size businesses and global enterprises alike tend to favor Infrastructure as a Service providers like Amazon Web Services (AWS), Microsoft Azure, and others while professional firms tend to be willing to pay a premium to purchase cloud from companies that have traditionally operated in their respective industries

AWS and other IaaS providers have structured an elastic, pay-only-for-what-you-use service offering that not only completely eliminates the need for future Capital expenditure for IT, but also moves IT from a fixed Operating expense to a variable elastic model that can automatically expand and contract with the workload.

This elasticity has an important and powerful downward impact on costs that most professional firms do not understand. This is due to the fact that when purchasing traditional IT infrastructure a firm must estimate its peak demand and purchase to meet it. If workloads are prone to spikes (like tax or audit season for an accounting firm), these purchased resources go mostly under-utilized during the non-peak times while the cost to maintain and replace them continues at a steady or increasing rate! The purveyors of fixed-rate cloud services have understood this very well and priced their services for the peak usage—a very profitable proposition for them when workloads decrease and fees remain constant.

As I write this, I can hear the thoughts of my readers screaming that this is a very convenient argument for me because it would be nearly impossible for a firm to understand the effect of elasticity could have on its current traditional environment. Am I making a claim that cannot be refuted? Not at all. My firm moves professional firms to AWS and we use a tool called Cloudamize. Cloudamize can monitor an existing set of physical or virtual machines and the associated infrastructure and identify underutilization as well as bottlenecks to performance. With this information we can select the appropriate resources on AWS for the base workload and configure on-demand resources to spin up to meet the peaks and automatically spin down with not needed. We can also calculate with great accuracy the costs to run any environment on AWS.

Most IT pros when considering AWS make the mistake of going to the Simple Monthly Calculator on the AWS site and pricing cloud resources that correspond to their exiting under-utilized resources. When done this way the price often still seems compelling but it leaves out an important consideration.   While the Simple Monthly Calculator is a great tool, Cloudamize is much better for taking into account the powerful effect of elasticity.

The effect of elasticity has another very important implication if you are client of Blue Sentry. Since you have moved your firm’s IT expense from fixed to a variable pay-only-for-what-you-use model, you now know that, but for your clients’ work, you would incur very little IT expense. This means that if you had a reasonable allocation method you could bill your clients for the IT charges you incur while working on their matters. Blue Sentry’s patent pending software gives you that capability by analyzing your cloud computing activity and itemizing your cloud charges by client. You can now bill these charges back to your clients in the same way you would bill photocopies, faxes, LexisNexis and Westlaw online research charges.

So will you really save money by moving to the Cloud? If you go with a fixed-fee-per-user-per-month, probably not. If you work with a smart AWS consulting partner to take good advantage of elasticity on Amazon Web Services and the general low cost of on their demand resources you will likely save between 40 and 60%. If you are a client of Blue Sentry, you could save 100% or even turn IT into a profit center.

Blue Sentry is an advanced-tier Amazon Web Services (AWS) consulting partner specializing in application and data migrations, expert managed services and virtual desktops. Blue Sentry serves clients globally, with operations in North Carolina and South Carolina.