Hidden costs obscured by cloud

currency_dollars.gifA new report from Diamond Management & Technology Consultants called for enterprises to undertake an objective assessment of cloud computing "free of vendor hype", in order to weigh up the benefits, challenges and their readiness for a shift in operating model. As businesses begin embracing the processes and financial models that accompany the practical realities of introducing a new set of technologies, Diamond said that it is important to consider the "net" value achieved, and not just the "gross" savings trumpeted.

It was noted that "hidden cloud expenses can really alter a company's outlook". While expenditure related to people, processes and architectures is not new to IT professionals, the challenge in the cloud world is uncovering these expenses under the new regime, and determining accountability for each. Among the areas where additional charges may be incurred are purchasing, finance, security, compliance and legal charges, and architecture and integration enhancements.

In order to assess the potential for these hidden costs, buyers need to look at the viable paths to move (or replace) legacy applications in the cloud; the architectural changes required to integrate cloud and non-cloud applications; how technology and operational processes should be changed to take advantage of different procurement, provisioning and management models; the potential flexibility and cost trade-offs between public and private clouds; and the other, complimentary cloud services which may be available.

Diamond also anticipates that companies will travel toward the cloud in two directions. For companies with high business and technology demands, many of which will also have to meet mandated regulatory and security requirements, the current hosting model will become a hybrid incorporating elements of the private cloud. In this case, some may selectively adopt public cloud services for certain tasks (for example CRM), but in the main public clouds will not meet their needs. For small-to-mid sized companies in less regulated industries, current hosting models will be augmented or replaced by the public cloud, which can meet their less stringent demands.

The report, The Future is Partly Cloudy, can be downloaded here.

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