Why cloud computing may cost more than on-premise systems

Panelists discuss how clouds are extensions of enterprises, and require the same levels of planning, architecture, integration, security, accountability, and governance that go into managing on-premise applications and systems.

The cloud and SOA are creating a lot of shifts in the market. As we've said here, the lines between service providers and consumers are blurring, and this has implications for pure software vendors.

One industry shift that is becoming readily apparent -- and this was just pointed out by Sandy Rogers at a recent BriefingsDirect podcast hosted by ZDNet colleague Dana Gardner -- is that vendors are assuming the roles of service providers. "Many technology providers have to grow into the role of a service provider," she says. This is requiring a much tighter relationship with customers, versus simply shipping CDs and cashing the check.

As Sandy points out, "cloud providers [and this means most vendors now], because they are in the business of providing a service, are starting to become much more transparent regarding the usage in order to help their customers make decisions and plan for the future."

I have spoken with a number of CIOs and IT executives who have sourced out some of their applications or systems to cloud providers, and a common thread among many is to immerse themselves within the cloud providers' operations, from participation on customer boards to frequent site visits. Enterprise managers -- at least on the IT side -- are not going to simply hand over a credit card and hope for the best.

Sandy elaborated on this theme, stating that cloud service providers are under the gun to show a great deal of accountability, something which has not been enforced as strictly with on-premise enterprise IT shops. Thanks to the potential competition of cloud, this may change.  "The ability to correlate the computing that's being used with what the value is to the business may actually move forward with cloud," Sandy says. "And put a lot of pressure on those that are providing computing resources on-premise to provide the same kind of metrics."

The bottom line is that clouds are becoming extensions of enterprises, and therefore require high levels of planning, architecture, integration, security, accountability, and governance -- the same, or even more than go into managing on-premise applications and systems.

Enterprises shouldn't be fooled for one minute thinking that outside cloud services offer dirt-cheap alternatives to on-premise IT. Dave Linthicum, who also participated in Dana's latest analyst roundtable, points out that there's a lot more to enterprise IT than simply accessing and running applications. "Cloud computing typically is going to be a better, more strategic, more agile architecture, but it's also typically going to be more expensive, at least on the outcome," he remarks.

Cloud computing more expensive than on-premise IT?  How can that be?

Dave says the expenses arise because cloud requires lots of changes. "You're going to have to redo your infrastructure, as I write in my book, to leverage newer architectural patterns, such as SOA, and that's typically very expensive to get out and access the services that are available to you on demand, out of the cloud." Add to this the costs involved in retraining staff and re-aligning the business.

"Ultimately, you get to a much better, higher value strategic architecture which is going to add more value to the business," Dave says. "But it's going to cost you some additional dollars to get there."


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