The c-word? Yes, we’re simply talking Cloud! Squaring that means determining the “real” cost of moving to a cloud based business model.
There’s enough industry rhetoric and used cases that exemplify and addresses the value and efficiencies that cloud platforms supposedly provide. Surprisingly though, according to Gartner, the uptake to cloud has not been as rapid as anticipated in 2015. If we’re honest, this is likely due to inevitable (dare we say another c-word) costs often associated with cloud migration. There’s no revelation in this, but begs interest, according to research, is that when it comes to having progressive conversations with finance departments, many CIO/ CTO’s find it difficult to present a strong business case when addressing the negative financial impacts of cloud.
So, where’s our thoughts (and perhaps a different perspective) on the cost of cloud adoption, focusing on 3 Key Financial Implications, based on research findings and our experience to remedy the issue. Food for thought…
1. Less cost agility with software as a service (SaaS)
- SaaS providers are promising cost agility as one of the benefits; in reality, however, this is only working one way – up. Clients can end up paying more if they use more licenses, but not less if they don’t use as many.When negotiating with SaaS vendors, ensure that there is a ceiling on the indexation charges on renewals. Inflation or CPI is generally a good guide to ensure you don’t find your business locked into a SaaS offering whose prices astronomically increase at renewal time.
2. Higher subscription fees
- The total cost of ownership may be lower over five years, but the subscription fees are more than the perpetual licenses after year three or four; therefore, the savings need to be significant and ongoing to make cost lower after more than five to seven years.Ask your SaaS provider to show you the model they used on TCO and ROI calculations. Pay particular attentions to assumptions and dependencies made
3. High switching costs with SaaS
- The cost to get data out and bring it back on-premises is high.Ask your SaaS provider – what happens if you are not around next week? Ensure that a USABLE backup of data is provided on a regular basis. ASE provides extra value to services such as Office 365 for example which does not perform regular, restorable backups of its user data. ASE provides this as a value add when purchasing Office 365 through ASE AppCloud.