One of the hot topics in IT at the moment is “cloud” computing. Effectively, outsourcing your hardware to a dedicated data centre. A lot of people try to convince me that this is the way forward, that everything should be put “on the cloud” and that this will save astonishing amounts of money. I’ve seen some of the calculations and I am not sure that they always stand up to scrutiny.
For example, I looked at a Dell PowerEdge unit – the cost to buy outright (£1,200) was a bit higher than the cost to rent in a data centre for a year (£700), but obviously over a longer period such as 4 years, it would work out cheaper. There is an advantage to the cloud offer in that they would replace the equipment (probably with newer equipment) at a set point, but then it doesn’t appear on the asset ledger in the company accounts, which upsets the beancounters.
Of course the purchase price doesn’t include the Operating System, whereas the cloud offer usually does (but not always); and there is the cost of electric to run the item and to provide cooling which have to be factored into the equation. There is also a need to provide anti-virus protection, patch updates, data backups etc. Again, that is not always included in the price of the hosting contract and so might need to be added to their quoted price – something that is always clear.
In addition, there is the cost of managing the unit – and they don’t always provide all of the management services that might be needed. In most cost comparisons, they show a figure for on-site management (and I sometimes feel that these figures are inflated a bit) - but then they don’t include similar values in the cloud offer even though it would be appropriate to do so, making the comparisons meaningless.
Suppose the 4 year basic cost of renting the server in a data centre would be £2,800 – reading the small print of some hosts, adding in the other items could take it to as much as £4,500. My calculations show the internal cost of the device for keeping it on site could be about the same, perhaps just a little more. Certainly the outsourced system might still be cheaper, but not by that much.
Then there is another point – what happens when things go wrong. It doesn’t happen that often, but when it does, the PTB want to know that someone is working on the problem. They like to be able to go into the server room, and for staff to point out flashing lights, explain what is happening – it gives them enormous comfort to see that someone is on the job and that the problem will be resolved evetually. This can’t happen with an outsourced system – even with numerous phones calls, they just don’t get the same level of reassurance, and you cannot put a price on that.
Now I will accept that I have used very generic figures – and to be blunt, most numbers can be manipulated to show pretty much anything that you want. Ultimately, it should be down to each individual case to be decided on it’s own merits. If it makes sense to keep it in house, then do so; if it is cheaper to host outside then that has to be the right decision.
For example, we have our company websites hosted externally – the cost is far cheaper than we could do it for as we don’t pay for a whole server box, and in addition, we don’t have to provide 24 x 7 support which would really rack up the support cost. However, we maintain our own CRM system – we checked it against SalesForce.com and our internal system works out at half the cost over 2 years. We also maintain our own ERP system – we were offered the chance to have it outsourced, and the cost of the management fees per year alone was more than the wages of our entire IT department.
So I suppose my advice would be to look at the numbers very carefully – make sure that you are really comparing like for like. Then think about the importance of the systems to the business and what would happen if the external system failed and how much of an issue it would be. If the risk is acceptable and the figures check out, then by all means outsource it. But I would strongly suggest that for many people, cloud computing is not the great panacea that it is made out to be, and that it would be appropriate to think carefully before rushing headlong into a situation just because it is the latest, greatest thing.