Developing Sound Strategy: Understanding Risks Before Moving to the Cloud
December 10, 2012
Post recession, the trend that companies in the Middle East have been following has been to reassess their operations and examine where efficiencies can be made without reducing productivity. The advent of cloud computing has been seen by many as a means to achieve this. The cloud minimizes capital expenditure and at the same time offers easy upgrade of systems and permits staff to work remotely.
While on the face of it the cloud might offer savings, failure to properly analyze the inherent risks can lead to far greater expenses. Therefore, it is wise to look at all aspects of a cloud service to see if it truly offers the best return on investment and efficiencies for your business.
It’s Not All or Nothing?
One of the first areas that companies need to examine before moving into the cloud is how much of the IT infrastructure they should actually transfer. Some might think that basing all their telephony systems in the cloud would save money, with services being accessed through a public network or a VoIP, meaning that there is no carrier relationship onsite. This would eliminate capital expenditure costs for their phone system, requiring only a monthly rental or per- use payment. While this appears to offer better long-term budgeting, it is worth noting that if the VoIP connection is lost then so is all access to data or calls, which can be very costly indeed. This is particularly true for those businesses that rely on telephony for purchases or financial transactions, such as a retailer or a bank. Research from CA Technologies (News - Alert) estimates that the global amount of revenue lost to IT downtime is £17.1bn (UAE Dirhams 97.4bn) and among those departments most affected are sales and finance.
The safest option to remedy this would be to deploy an on-premise private cloud, but this comes at a price. A more cost-effective solution then would be to opt for a hybrid model that offers the best of both worlds. Companies need to look out for the onsite equipment - who owns it and what does it cost? Some vendors might just rent out the equipment for a monthly tariff that could be supplementary to the service charge, while others will offer the opportunity to buy the equipment for a lump sum or a payment plan spread out over a certain period. Again, it is worth checking how these are priced.
Data and Users
To meet compliance regulations and ensure business continuity, enterprises are now required to handle and retain vast amounts of data. As this is expensive to store in-house, many believe that storing information in the cloud is a more cost effective solution. And while this may hold true, organizations must be aware that through economies of scale, they can encounter similar overhead constraints and data costs as with an in-house solution. For instance, many providers will set an agreed data limit on what can be stored each year and if an organization happens to exceed this – which is easy to do– the price can quickly escalate with additional data capacity costing upwards of UAE Dirhams 6000 per year per Terabyte.
It is a similar story with the number of users. Many vendors will set a contract that limits the maximum number of users. As the organization grows over time, exponential expanding its workforce, it could easily outgrow its contract and end up paying a hefty price tag (News - Alert) for these additional users.
The Data Center Hardware
In terms of data center hardware, the cheapest up-front solution is multi-tenant hardware, wherein many customers share the same server and hard drives. However as there exist no barriers between accounts, if one customer's infrastructure becomes infected with a virus, this can quickly spread to all the other customers on that machine. The result is that the network can go down, through no fault of the customer, meaning that valuable work can be lost and communications severed.
To avoid such a catastrophe, the business may opt to entrust its critical IT infrastructure to a dedicated server in the vendor’s data center. However, the known expense is high, making it only viable for organizations that have extremely large IT budgets.
The newer, cost-effective way of offering cloud infrastructure is through the use of virtual machines. The customer then benefits from a high-level of security and integrity comparable to having dedicated hardware, while at the same time reaps the reward of the lower upfront costs of the multi-tenant model. However, organizations should bear in mind that virtual machines have a limited data capacity and if this is exceeded, the vendor may well move the account to its own dedicated machine which negates the cost savings of virtualization.
Telecoms and Internet Service Providers
Finally, is worth considering how a business is going to connect to the cloud. Some cloud providers will want customers to use a partner ISP, with the cost incorporated into the monthly bill for the cloud service. While this sounds like a great deal, many companies are tied into existing ISP contracts that they will either have to keep paying until the contract expires or be liable for a hefty get-out fee.
In relation to telephony, in a true cloud-based scenario all that comes into the building are the broadband circuits. The phone lines are connected into the cloud provider’s data center, for which a customer will be charged a premium. The great rates a business has negotiated with its existing Telco for making calls to certain codes may not be offered by the cloud provider, particularly with calls to mobile numbers.
A Bright Outlook
Undoubtedly there are risks that businesses need to be aware of to avoid any nasty surprises, but looking carefully through a contract will reveal several of these. The most important piece of advice for anyone looking to move to the cloud is to research. Make sure all the facts and possible eventualities have been considered, for example being tied into a long contract just because it is cheaper is not necessarily the most cost effective option.
Moving to the cloud can create significant efficiency savings for companies but only if they are aware of all the risks involved.
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Edited by Brooke Neuman