Organisations underestimate the cost of cloud computing

Moving IT to the public cloud could costs IT departments more than running services in-house, research from analyst firm Ovum has revealed.

Moving IT to the public cloud could cost IT departments more than running services in-house, research from analyst firm Ovum has revealed.

Despite claims from suppliers that cloud computing will inevitably cut costs, businesses could find themselves having to pay more, said senior analyst Laurent Lachal.

"Every time you talk to a service provider, they tell you buy my stuff because it will lower your cost and boost your profit. It might be the case but you better do your calculations first," he said.

In reality, IT departments will need to invest heavily to integrate cloud services into their own IT structures, if they are to benefit from the flexibility the cloud offers.

Cloud Computing: 10 tips for IT departments and suppliers.

Sign up to Computer Weekly to download this report from Ovum.

"This integration and orchestration requires a lot of effort," he said. "You have got to think about integration at all levels, governance, management, process and data integration."

At the same time, IT departments will come under pressure to upgrade their own systems to match capabilities of the cloud, Lachal warned.

"One of the key challenges of the public cloud is for IT to keep up with the cost transparency and ease of use of the cloud, " he said. "In the public cloud, you know what things cost, while cost transparency is not something that many data centres yet deliver."

"The move from a data centre that is funded on the basis of an annual budget to a data centre that is funded based on the use of IT assets is a big challenge," he said.

CIOs need to do their homework if they are to get value for money from cloud computing suppilers, Lachal warned, but most organisations do not understand the choices on offer.

Public cloud services can charge according to the number of CPUs an organisation uses, how much memory, network throughput and the amount of data they need to store.

"There is a range of pricing structures out there. Software as a service, is mostly subscription. There is an element of pay-as-you-go with platform and infrastructure as a service. Even companies like Amazon are evolving more complex pricing. You need to understand the pricing structures before you can compare them," he said.

"For example, if you develop an application that is CPU intensive and does not store a lot of data, and put it on a cloud service where CPU cost is high and data cost is very low, you are going to get a lower ROI," he says.

Some cloud suppliers charge companies on the basis of the size of data footprint. They compress the file to store it, but charge for the original footprint.

It is important for IT procurement people to understand the supplier's tricks, he said.

"Do your homework. Get advice. There are plenty of companies out there to give advice. Companies like IBM, HP, and Accenture have a lot of workshops on cloud computing."

Download Ovum's ten tips on cloud computing for IT departments and suppliers.

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