How SMBs can save money with cloud computing

Other than increased security and data availability, cost cutting is a widely advertised factor of cloud computing. Cloud computing specialist Akita is finding more businesses, regardless of their size, are opting for cloud solutions to ensure their data is stored safely and cost effectively. Analyst Ben Kepes has also recently written a whitepaper outlining how to make the most of cost savings in the cloud, giving further details that are beyond this posts scope.  

Infrastructure as a service

Infrastructure as a service, or IaaS, is perhaps a better name for the cloud computing discussed in this article as it describes exactly which services are being utilised. IaaS delivers infrastructure – most often a virtualised server housed in a data centre – as a scalable service for the user. The amount of resources provisioned for any one user at any time can change in line with the computing power required, and the users receive only the bill for what is used.  This is one of the key cost saving principles of cloud computing.

Saving costs with the cloud

While each business will realise different cost savings, most businesses that are experiencing growth or are just starting out will reap greater initial benefits.  However, in the longer term, all businesses will save as hardware replacement costs are mitigated.

Economies of scale

Cloud computing as a commercial product can be an extremely cost effective venture, as the cost of hard disk storage and bandwidth is relatively low. Like almost all services, cloud computing adheres to the Boston Consulting Group’s Economies of Scale Model. The more resources purchased from the firm, the cheaper each marginal unit of data becomes. This is mainly due to management and operating costs being relatively fixed, and economies of scale gained through purchasing larger storage mediums.

Pay as you go – for what you use

The new IaaS model means that firms no longer have to suffer paying the high costs of being overcapacity. Traditionally, organisations were forced to set their computing capacity based on peak load requirements, meaning they would purchase an abundance of servers ‘just in case’. However, with variable provisioning, they are now able to manage costs more effectively and increase memory provisions only when required.  The image below illustrates this effectively. 

No capital investment, just operating expenditure

IaaS is often compared to traditional utilities because it’s billed monthly and listed as an operating cost, rather than capital expenditure. Companies operating in the cloud can be a lot more dynamic and nimble then their competitors who aren’t. The lack of upfront investment also means smaller companies and start-ups can access first grade equipment, as opposed to cheaper alternatives. Typically companies offering IaaS will have already invested in data centre grade equipment to manage their operating and maintenance costs.

Rackspace uses a great analogy to demonstrate this principle; “acquiring infrastructure is like purchasing paper and toner rather than purchasing a printer itself”.

Efficiency of outsourcing

Outsourcing the management of data security and backups frees up business owners to concentrate on their core business. IT managers should be focusing on higher level strategic decisions rather than maintenance of infrastructure that is better suited to IT professionals. Gartner suggests that previously, up to 80 per cent of IT expenditure was allocated to simply “keeping the lights on”.

Reduced total cost of ownership

Economies of scale and utility pricing assume that benefits realised by IaaS vendors are passed on to customers. To ensure that business owners and IT managers are able to benefit the most, it’s recommended that they consider the granularity of billing, service level agreements, support options and prices and compliance issues.

Granular billing affords better cost control, but customers should look to ensure they are getting a good deal by comparing overall costs with those with less granular billing.

Cloud computing is undoubtedly a high growth area in the IT industry. The risks and rewards need to be considered well from an individual businesses’ perspective. Many IT decision makers are still unaware of the cost benefits that cloud computing can bring to an organisation in addition to the improved security and data resilience. We have no doubt that cloud computing will continue to be a growth sector for the industry, and many more companies will adopt the cloud this year.  

We always recommend all business owners and IT professionals seek professional assistance in procuring all IT infrastructure.

Aaron is a content marketer for Akita Systems. Akita is an IT support company based in Kent in the UK.