Beware so-called savings in the clouds

“Billions of IT savings in the Clouds” trumpeted the Australian Financial Review a couple of weeks ago, in a front page article on cloud computing that went on to claim moving services online could “slash technology costs by up to 80%”.

If nothing else, those lines lead any IT industry veteran to raise a wry brow. A business that adopts a new platform, technology or vendor solely on the claim of massive cost savings is in for a world of pain, disappointment and heartbreak.

There’s no doubt that cloud computing and software as a service are the IT industry’s growth areas and there are many benefits for the businesses that adopt these technologies. Reduced costs is one of the attractions, but it isn’t the only factor a business should consider.

Other aspects are the flexibility of not locking yourself into specific hardware and technology platforms, reduced capital and labour commitments, along with improved security, reliability and data protection.

This last point is probably the killer reason why you shouldn’t be looking for 80% cost savings with any product. As I discussed awhile back, to go onto the cloud you have to trust your supplier has the utmost competence and integrity. A provider who offers nothing but slashed costs will struggle to provide peace of mind.

It’s likely in a few years time only the biggest of the big companies will have in-house IT staff and servers, as most IT operations will run over the internet and through web browsers. Most businesses will think having IT staff on the payroll is as unusual as employing a full-time plumber or electrician in the office.

Although we probably won’t get to bank those savings — as we’ve found with the roll out of IT services in the last 20 years, new industries will develop that will soak up the labour and create new cost centres. While today’s services may be 80% cheaper, just as today’s computers and mobile phone are 80% cheaper than those of 20 years ago, we’ll be using other services and the price of those will soak up a lot of those savings.

A bigger concern is for the cloud and software as a service industries themselves. If online services are identified as merely a cost cutting product, then these markets are going to be rapidly commoditised with a race to the bottom not dissimilar to what we’ve seen in the PC industry. Which will perversely mean security and reliability conscious businesses will keep their IT in-house rather than risk it to a “cheap as chips” data service.

History has shown that selling and buying cheap in technology is a mug’s game. So don’t get seduced by claims of ridiculous savings with any technology; be it cloud computing, telecoms services or any other online item. All too often that cheap price or massive savings hides some nasty traps.

Cloud computing is almost certainly the way businesses will go over the next few years because of the compelling benefits, but those who choose a platform simply because it appears 80% cheaper probably won’t be around to tell us about it.

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Paul Wallbank is a writer, speaker and broadcaster on technology issues. He founded national support organisation PC Rescue in 1995 and has spent over 14 years helping businesses get the most from their IT investment. His PC Rescue and IT Queries websites provide free advice to business computer users and his monthly newsletter has over 3,000 subscribers.