In a recent survey Logicalis conducted, we found that despite almost 90% of respondents highlighting the positive cost and strategic benefits of cloud adoption, over half of those surveyed (56%) had not adopted or deployed any kind of cloud service in their organisation and only 11% were extremely likely to deploy a cloud solution in the near future. The evidence presented in this article aims to demonstrate that the opportunities for greater effiicency are real and significant.
We already discussed the strategic benefits of cloud adoption: here we will focus on one of the leading incentives for businesses to make the jump to cloud – cost savings.
In the recent Logicalis survey, we asked CIOs and IT heads their perception on the benefits of cloud. Here’s what some of them said:
- “I am expecting to reduce infrastructure costs. I will have the ability to enable server and storage at any time for developing work instead of buying hardware that may not fit the purpose.”
- “Cloud service makes sense as both a planning and cost-effective tool as we are leveraging the ‘economies of scale’ model ie. it will be cheaper than us managing it ourselves.”
- “Secure cloud computing (including Software and Infrastructure-as-a-Service) would allow us to retire a number of legacy systems and decrease applications maintenance costs. Cloud services means a reduction in expensive capital costs of equipment and movement to a more service-based IT model.”
The Australian Government Department of Finance and Deregulation has highlighted the benefits of cloud deployment for government agencies in their 2011 Cloud Computing Strategic Direction paper:
- "A major advantage that cloud solutions offer is that they are scalable, flexible and responsive to change, thus allowing enterprises to be more agile. Essentially, cloud solutions easily scale without the significant financial investments required for infrastructure purchase and maintenance."
- "There is a significant decrease in operating costs with the reduced energy consumption, lower IT systems management costs, reduced risks caused by delays, lower support and maintenance costs and potentially the reduction in demand for data centre resources."
KPMG approached CIOs and IT Directors from medium to large enterprises that were aggressive early adopters of cloud solutions in Australia to get a first hand understanding of their journey to the cloud. Through this research, it found that these organisations made the transition to cloud in the hopes of generating cost savings, and their expectations were met and exceeded from the initial stages of the transition.
Respondents noted that in the initial stage they were able to see good value for money, mainly due to the significantly lower expenditure on hardware and software maintenance. They also noticed the increased cost savings that came out of labour cost reductions and easier and faster implementation . Beyond implementation, respondents found that modifications, new modules and bespoke developments were completed faster and was therefore, cheaper. With a cloud solution in place, respondents typically reported ongoing operational cost savings as they were able to save on labour, training, ongoing maintenance and support costs.
Whilst networking costs went up due to increased traffic and bandwidth demands, respondents generally agreed that these were insignificant compared to the savings they were generating. Ultimately, these organisations enjoyed around 30% annual reduction on IT expenditure and about a 30% decrease in personnel managing servers. In one case, the ratio of IT expenditure to company revenue had been reduced by almost 50%.
The Logicalis cloud commercial model provides cloud-based services on an operational expense model to allow flexibility and cost savings from deploying these IT services, and can extend beyond the public cloud to hybrid and private clouds. Cloud solutions essentially present an opportunity for businesses like yours to generate more cost savings than ever before. Chris Meager, CEO of Logicalis, urges businesses to “embrace the dual operational and costs benefits while they’re available”.
Read more about cloud computing and how to make it work for you here.