There are countless benefits that result from migrating to the cloud. In fact, we wrote about the top 9 benefits (here). Today we’re talking money, so this post runs through the top 5 financial benefits of cloud computing.
The cloud offers worthwhile functions such as backup, recovery, and security, but one of the main reasons why companies migrate to the cloud is due to its associated cost savings.
The cloud is mainstream, and for good reason too.
“Cloud is mainstream today, driven forward by users’ desire for lower cost solutions, better scalability, and business agility.”
Running a traditional infrastructure involves endless server glitches, software bugs, a team of people, and most importantly, costly updates. If you have a traditional data warehouse, you are probably familiar with the necessary responsibilities and upkeep to maintain the infrastructure.
Some of the responsibilities include updating and maintaining:
- Disaster recovery
- the list goes on…
Don’t forget! As your business grows, so does the need for increased infrastructure and manpower.
Thanks to the cloud, your business can benefit from the countless advantages of storing information in the cloud and using software hosted on the internet, while only paying for what you use.
Cloud computing is no longer just a popular technology; it’s a viable business strategy with major economic advantages. Below are the 5 financial reasons why a cloud migration is a must for enterprises and small business alike.
1. Fully utilized hardware
Cloud computing brings natural economies of scale by supporting virtual services. Migrating resources to the cloud no longer requires purchasing hardware and equipment. Rather, cloud migration makes full use of hardware.
Not only do businesses save on the initial purchase expenses of hardware, but businesses also financially benefit from the cloud ‘pay-as-you-go’ model of only paying for the storage businesses need and use.
Traditional hardware was designed to handle data storage at a maximum workload, forcing you to pay for maximum hardware when it’s not necessarily in use. The cloud does not waste any resources. Thus, migrating to the cloud provides the opportunity for your company to scale up as computing needs increase and easily scale down if they decrease.
For example, pay-as-you-go platforms like Amazon EC2, allows users to tailor computing resources by what is used, while plugging in any additional software to run their environment, such as:
- Operating system
- Access controls
- Networking capacity
Cloud computing services such as infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS) all use a different form of the pay-as-you-go model. These types of services help users significantly save in hardware, which tends to add up over time.
2. Lower power costs & carbon footprint
Traditional data centers require significant energy to maintain the necessary hardware. Additionally, as your business grows you will require more space to address new business demands. Moving your operations to the cloud rather than maintaining on-site storage can help reduce your carbon footprint as well as save on power costs due to not using more power or space than necessary.
Usually, when you run your own data center, your servers won’t be fully-utilized which leaves you with idle servers. Idle servers waste energy, so regardless of demand, a cloud service provider will charge you less for energy used.
This gives cloud users the additional perk of being greener while also saving green on the energy bills.
You’re not only saving energy when migrating to the cloud, but you’re also benefiting from what your cloud service provider has done to reduce its data centers’ carbon footprint, as well as saving money that you might otherwise have spent on carbon offsets.
For instance, an analysis conducted by Accenture and WSP indicated that enterprises who run cloud services gain the highest cost-savings by reducing energy use.
This study also revealed that cloud services reduced carbon emissions by 30% per user by migrating to the cloud.
3. Lower operational cost
Every business has their own idea of how to best determine cloud ROI. Most businesses consider operational expenses (OpEx) and capital expenses (CapEx) when determining cloud ROI.
Whenever we analyze an organization’s computing costs, the biggest single line item is often the staffing budget, which can make up more than half of the operational costs for a business.
In fact, Forrester report estimated:
Over 50% of the total cloud migration costs are due to labor, not platform services or infrastructure costs.
For many, these high labor costs derive from errors and inexperience on part of the staff.
What else makes this amount so high?
Good IT professionals are expensive. Their salaries, benefits, and other employment costs usually outweigh the costs of hardware and software, and that’s before you add in the costs of recruiting good staff with the right experience.
When moving to the cloud, some of the money spent on the service goes to the provider’s staffing costs. It’s typically a much smaller amount than if you did all that work in-house.
This doesn’t mean that you’ll be forced to downsize your current staff, but rather, you’ll be able to efficiently improve your IT department’s operations by deploying staff to other areas of your business, improving your bottom-line capabilities.
4. Lower capital costs
As far as capital expenses go, the cloud ensures lower costs through higher utilization and scale. But when you’re running your own servers, you’re looking at up-front capital costs.
As previously mentioned, the equipment needed to establish and maintain an on-premise IT infrastructure can become a costly capital expenditure. On-premise IT infrastructures require:
- Storage drives
- Load balancers
- Networking gear
- Cooling equipment
Add those to your capital expenses as well as the cost of IT personnel to oversee and maintain your on-premises infrastructure. You can see how the bills quickly pile up.
For example, a study by KPMG found that a typical IT organization spends over 30% of their budget on infrastructure. The study also concluded that shifting your workload to the cloud can save companies from 10-20% of their annual IT budget.
When using cloud business solutions to run business-critical applications, companies can expect to save on capital expenditure. Companies can then use these savings to reinvest in innovation and growth.
Cloud-based solutions provide the ability to save on costs due to the positive effects of agility. It’s critical that companies modify their IT infrastructure with their business demands, especially for rapidly evolving industries.
David Linthicum, Chief Cloud Strategy Officer at Deloitte Consulting said the following about TCO savings when migrating to the cloud:
“There’s an average TCO savings of 40% for industries such as communications and financial services, whereas the savings are usually higher in retail and other sectors that endure seasonal changes.”
The positive effects of agility is certainly a financial benefit an owner must think of when considering migrating their business to the cloud.
While the idea of cloud computing can sometimes seem hard to grasp, it’s clear that it saves its users money. No matter where you are in your cloud transformation, make sure to take advantage of the cloud’s new technologies that can deliver the flexibility you need to ensure reliable performance, maintain security, all while controlling costs along the way.
These are just a few of the financial benefits that using a cloud business solution can provide.
Interested in working with cloud specialists who can lead you through your cloud journey?
We would be honored to guide you.
When you work with us, we’ll make sure you have no IT baggage weighing you down, and we’ll guide you through your cloud transformation so you can get on with running your business.
If so, you’re in luck. We are offering a FREE customized cloud demo to businesses interested in trying the cloud.
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