Cloudshock: is the cloud hiding costs from you?

Written by on February 3, 2016 in Guest Blog with 1 Comment

cloudshockCloudshock: a look at why so many businesses make the case for Cloud on cost savings, only to discover a plethora of unexpected costs.

We’re not longer in the phase of ‘why cloud’ or even ‘when cloud’ – we’ve rapidly and imperceptibly moved to ‘which cloud, and how cloud’.

The motivation for adopting cloud services ranges from increased agility and flexibility to security, competitive advantage, anticipated costs savings and even just because end users are adopting it and bypassing CIO control.

If we just focus on cost alone we find that over one-third of enterprises are adopting cloud to save money, according to a study by CIOInsight. The reality though is that what you think you’ll pay – what goes into the business case to justify it – can be far from the reality of what you end up paying. As Teresa Cottam, our Chief Strategist, often fairly cynically says: some business cases really should be contenders for the Man Booker Prize for Fiction!

While the expectation is that Cloud will save you money compared to boring, old on-premises software and storage, the realisation is starting to dawn that managing cloud costs to avoid unexpected billshock (or cloudshock, as we like to call it), is a critical necessity. (see Telesperience: Cloudshock: Why the True Cost of Cloud is Rarely Understood). One problem being, that IT may no longer be in control or even understand Cloud usage within the enterprise.

The reason for this is that Shadow Cloud is rife. Shadow Cloud – the Cloud equivalent of Shadow IT (see Telesperience: Shadow Cloud and How it Changes the Role of IT) – is where business users simply buy Cloud services directly with their credit cards without reference to IT. Often this is because IT is not providing features or applications they feel they need and takes a less than helpful stance when these are requested (or expresses the requirement for complex purchasing and extended timescales to implement). The scale of Shadow Cloud is staggering. Take CityMD, a CISCO customer, they found during a pilot that their employees used some 522 cloud services but only 20 were being supported by IT.

To be an effective business tool, (and avoid Cloudshock), Cloud needs to be tracked, managed and have its usage monitored. If this doesn’t happen, the business is exposed to compliance issues, security breaches, business continuity issues and, importantly, extra costs. It’s a symptom of our times that the CIO is no longer the only buyer of IT services and the decision-making process is no longer controlled by IT. So widespread is this problem becoming that keeping track of, and controlling, cloud-based services has now spawned a whole new sector of software – akin to telecoms expense management, but aimed at Cloud.

This is undoubtedly helpful but costs, we must remember, can be both direct and indirect, obvious and hidden. The direct costs of Cloud are often underestimated. CISCO, for example, argues that CIOs can be paying 25 times more than they had planned to for cloud services. (CISCO recently announced the release of their Cloud Consumption Modeling Service.) While inflated costs might be great for vendors, it’s disastrous for enterprises.

But as shocking as this figure is, the business impacts of Cloud services that don’t work as well as they should, or as well as the company needs them to, can be even more significant. If you’re going to bet your business on the Cloud, then better make sure the Cloud is going to deliver the performance you expect. And all too often this performance is determined within the networks connecting businesses and end users to the Cloud.

This is resulting in a dawning realisation – at least in the B2B market – that not all networks are equal, and that network performance is critical to business success. Here that most elusive of measures – customer experience – can finally be nailed down to meaningful measures, with latency or outages in the network correlating to productivity or even revenue loss.

Our message is quite simple. 1. Understand the economics of Cloud. 2. Don’t see it as just a cheaper option. 3. Understand the likely true costs and how costs are inflated. 4. Measure the business impacts and understand that not all networks are equal and the cheapest network option may in the long run cost you heavily.

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Tracy Monday

About the Author

About the Author: Tracy is an Analyst with UK-based analyst firm Telesperience. She has 20 years’ experience working with communications service providers, infrastructure providers and systems integrators. ( See www.telesperience.com for more details.) .

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  1. Avatar Michah Himmelman says:

    The biggest cost saver of Cloud services is the “time-to-market”, but that doesn’t mean that it will cost less in dollars spent.

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