Beware hidden costs in public cloud adoption

Public cloud services can be cost-efficient but business customers need to look out for fees paid to other non-stated areas such as integration to legacy systems and educating existing IT staff, analysts note.
Written by Kevin Kwang, Contributor

Public cloud computing vendors can push cost-efficient offerings due to a high level of standardization and the ability to share a common pool of compute resources with many systems and customers. However, businesses need to also consider hidden costs in integrating the cloud service with legacy IT systems and equipping staff to manage these services.

According to Errol Rasit, principal analyst at Gartner, customers need to find a way to measure the costs of delivering an on-premise service in order to make an informed decision to adopt public cloud services. This measurement, however, might not be readily available to every enterprise though, Rasit added.

For instance, in order to compare the cost of a cloud-based e-mail service, which might cost US$30 per user per month, the enterprise customer must be able to find out the cost of acquiring the requisite IT hardware, facilities, software, licensing, implementation and support costs over the lifetime of the service. The information is important for the company to know before deciding which course of action would incur a higher cost, the Gartner analyst explained.

Additionally, cost may not be the only driver or inhibitor for companies to move to the public cloud. Rasit pointed out: "Quality, reliability, integration, security, certification and flexibility of the service are other key areas of comparison."

Arun Chandrasekaran, research director of ICT practice at Frost & Sullivan Asia-Pacific, also noted that cloud services are, by nature, touted to be "intuitive and easy to use". This is particularly so for infrastructure-as-a-service (IaaS) products, whereas software-as-a-service (SaaS) can take substantial training time and integration with on-premise infrastructure, he said in his e-mail.

"While public cloud services do present true cost savings, organizations need to do a thorough evaluation to understand clearly the explicit and hidden costs," Chandrasekaran stated. "The costs that need to be clearly understood include integration costs, depreciation costs of existing infrastructure, bandwidth costs and the risk premium."

Rasit agreed, citing a recent Gartner survey on SaaS adoption which showed that the No. 1 complaint after adopting the service was the integration process. While the balance of responsibility falls more on the service provider, IT departments still need to manage aspects such as ensuring the availability of the service within the organization, he added.

He went one step further to point out that for public cloud services chosen for their low costs, IT would have to closely monitor and manage these services to prevent "Jevons Paradox". He explained that Jevons Paradox refers to the increase in efficiency from using a resource that, in turn, results in increased consumption of the resource.

"Therefore, the more efficient, or cost-efficient, the service is, the more potential for wastage or underutilization," Rasit added.

TCO still lower
One enterprise ZDNet Asia spoke to noted that while the hidden costs can add to the advertised price of public cloud services, the total cost of ownership (TCO) for companies is still lower than building and running their own applications on internal IT infrastructure.

Brian Kissel, vice president of business IT at Juniper Networks, said the company considers public cloud services provided by vendors such as Amazon Web Services (AWS) and Google to be "quite cost competitive". They are also "aggressively pursuing" SaaS, IaaS and platform-as-a-service (PaaS) offerings for a range of functionalities within the organization, he added.

Quizzed on what the hidden costs were for Juniper Networks, Kissel pointed to new applications which added to the complexity of utilizing public cloud services.

For example, the company currently uses Siebel for its customer relationship management (CRM) deployment but is in the midst of adding new functionalities using Salesforce.com's products. This means its IT department needs to be proficient with both applications, and provide connectivity between both CRM systems to other applications and infrastructure components, he revealed.

"If we eventually make a full migration to Salesforce.com's suite, then that duplicative cost goes away. But in the transition, we [will have to] to bear an extra burden," Kissel noted.

Rasit reiterated that every new service consumed would require operational skills and certification that perhaps were not available in the company previously. So the cost of educating staff in the new service may be diminished in some cases but can never be completely removed, he noted.

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