People cite lots of examples of how cloud services save money. Top line these include: no capital investment in infrastructure and associated ongoing maintenance costs; the ability to outsource IT support; reduced assurance and compliance costs related to specific infrastructure and security components; reduced application support costs; and the ability to scale on demand, rather than protracted and resource intensive upgrade and enhancement deployment cycles.
The rapid speed to implementation, time to value and the agility cloud enables, clearly also deliver less direct, but nonetheless, equally important value and savings.
But more fundamentally it is the economics of the cloud service model that drives the substantive savings that position cloud technologies as the game changer solution as data and all things digital take precedence. And more important, this is achieved whilst the customer retains complete control over their cloud service instances – a key reason why cloud trumps traditional managed service approaches every time.
The economics of cloud work like this.
First – it’s a scale issue. On the supply side, because the buying power of cloud providers reduces their unit costs, they can pass these savings on to customers – buying big delivers the cost efficiencies that come with economies of scale.
On the demand side, higher utilisation of the infrastructure assets of cloud providers, similarly drives costs down, which again, can be passed on to customers.
Second, cloud services are inherently standards based. At a practical level this helps to provide clarity of design and enable seamless interoperability. From a cost efficiency perspective, common standards-based frameworks facilitate re-use (as opposed to ‘re-creation’ every time) and prevent proliferation of costly bespoke solutions. Standards drive efficiencies and efficiencies deliver cost savings.
Third, cloud enables the alignment of technology utilisation with the demand patterns of end users. In other words, you only use what you need and pay for what you use. You pay more as you use more. And when you use less you pay less. You can scale up and down to meet your needs. And you don’t pay for what you don’t use.
And finally, the ‘smarts’ of cloud – the ability to use technology automation, rather than people to manage your technology, reduces human resource costs – or at least enables them to focus on more value-add tasks.
In summary, the ‘economics’ of using cloud services means you get the cost benefits of scale; the cost efficiencies of standardisation; and the cost savings from only paying for what you use.
Economics like this means everyone wins.
