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To Cloud, or Not to Cloud

April 25, 2011 No Comments

SOURCE:  Wall Street Journal

Heading into the cloud can seem like an attractive prospect. But there are a lot of questions companies should consider before they make the trip.

The sales pitch for cloud computing is simple: Companies pay a third-party vendor to run one or more of their systems, like email or payroll, on its own servers. In theory, the clients save a bundle on hardware, software and personnel costs and can devote those resources to boosting their business.

But the reality usually isn’t so clear-cut. The costs may not be as attractive as they look at first glance, for instance, and it may be better to keep some critical or complex software in-house even if it’s more expensive to do so. There are also potential legal issues that arise from using cloud servers; companies might unwittingly violate the terms of their software licenses or federal rules on storing data. Plus, reliability may be an issue, as some customers of Amazon.com Inc.’s cloud services learned last week.

Here’s a look at some of the most important questions to ask before committing to the cloud.

How Much Do We Save, If Anything?

When considering which systems are candidates for the cloud, companies need to start with the basics: Is this move going to save money, and will it bring better technical results?

The calculation sometimes isn’t as simple as it looks. Let’s say a company is paying a cloud vendor based on how much bandwidth it uses. In some cases, the rates are staggered and start to climb as clients use more bandwidth. So, it may be cheaper to invest in an in-house system instead.

Companies also need to consider the money they’ve already sunk into in-house systems before dropping them for the cloud. They may want to wait to depreciate the costs of their existing systems before switching.

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