A big myth about cloud computing is that it’s instantly less expensive than maintaining on-premise infrastructure. This is not completely true. Unfortunately, when a business migrates to (or considers migrating to) the cloud, the cost savings associated with cloud computing may not be immediately apparent.
Several studies have found that businesses that use the on-demand cloud model incur higher monthly costs than those that use traditional on-premise systems. This raises the question of whether cloud computing is actually more cost-effective.
The answer is dependent on the point of view from which you are estimating your cloud-based cost savings.
It is possible to look at cloud savings from two different perspectives:
- When compared to on-premise infrastructure, how much money can you save?
- What additional savings you can realize by effectively managing your cloud costs.
Throughout this article, we’ll analyze both questions and discuss why they’re important for determining total cloud savings in the end.
First question: Is Cloud Computing a Cost-Effective Option, When compared to traditional infrastructure?
When it comes to businesses considering cloud computing, comparing the cost of cloud computing to the cost of on-premise infrastructure is usually the most straightforward way to understand cloud savings. In any case, understanding your total cloud savings requires looking beyond the head-to-head cost of on-premises infrastructure versus cloud infrastructure and taking into account the other intangible but significant benefits of cloud computing.
The following are specific areas in which the cloud could save your company more money than an on-premises model in your organization.
There Is No Need To Spend On Upfront Capital Expenditure (Capex)
If you are running your own data centers, you must factor in the costs of physical space, personnel, heating, cooling, and electricity that are required to keep them running efficiently. The infrastructure and operational data are also expensive, which adds to the overall cost.
By transferring your data to the cloud, you are transferring the costs of infrastructure, operation, and maintenance of the data center to the cloud service providers.
Demand Anticipation Costs are Lower
There are significant potential savings in this area. Responding quickly to spikes in demand is critical for any business and has a direct impact on the bottom line. When using an on-premises model, the cost of anticipating demand can be extremely high, if not impossible to predict. In order to handle peak periods, you would have to pay for and maintain backup servers.
Consider the case of a non-profit organization that provides assistance to communities that have been impacted by natural disasters.
When a disaster strikes, more people are likely to visit the organization’s website in order to make a contribution. It goes without saying that this is precisely the time when the nonprofit cannot afford to have their website unavailable. A disaster, on the other hand, can strike at any moment. How do you prepare your organization for periods of high demand that may occur at any time and for no apparent reason?
In this case, there are two options: It is necessary to build your capacity to meet that maximum and keep it ready at all times if you are on-premises, which is a time-consuming and expensive strategy. An additional option is provided by the cloud.
The cloud allows you to quickly scale up when demand increases and then scale down when demand returns to normal levels. You will not be charged for anticipating that peak load, and you will be able to respond quickly if the need arises.
As an example, you might find yourself paying slightly more for raw computing power at peak times than you would have if you had built your own network infrastructure. If you’re using cloud computing’s elasticity, you won’t have to worry about wasting money during the rest of the time when your infrastructure is sitting idle.
More Robust Security
The responsibility for securing everything from the physical space to the operating system, hardware, and software falls on your shoulders if you manage your own on-premises IT infrastructure. This is an extremely time-consuming and expensive undertaking. Good security professionals are also difficult to come by.
You can offload a lot of that responsibility by putting it in the cloud. The majority of cloud service providers use a shared risk model, in which they are responsible for securing the infrastructure and you are responsible for specific security details that vary depending on the services you are using. On the whole, cloud platforms provide better security because they have more dedicated cloud experts than you could possibly find on your own.
Innovate More Quickly by Focusing on the Most Crucial Business Goals
The cloud offers a number of intangible benefits as well as tangible ones. If your company is not in the infrastructure business, do you really want to be in the business of recruiting, hiring, training, and managing information technology employees when you could be concentrating on your core business activities?
With the click of a button, businesses can access services that would otherwise be prohibitively expensive, such as text-to-speech transcription. Engineering can innovate and build products more quickly as a result of this accessibility. Because of the longer provisioning processes involved in an on-premises environment, engineers may be more hesitant to work on new ideas.
Advantages For The Environment
The damaging effects of traditional data centers on the environment are enormous. A constant temperature and humidity must be maintained in them, and they consume a significant amount of electricity. It is much less harmful to the environment if three or four companies work together to run these highly inefficient data centers at hyper-scale rather than every single company attempting to do so.
Aiming for a 100 percent renewable energy supply by 2025, Microsoft has developed an impressive sustainability plan for its cloud services. Developing a data center that is 100 percent renewable is extremely unlikely for small and medium-sized enterprises. We are all concerned about the future of our planet, and environmental sustainability is unquestionably important.
Second question: How Do You Determine the Savings in Costs Associated with the Use of Cloud Computing Services?
Those already utilizing cloud computing see their focus shift from how much money they save when compared to an on-premises model to cloud cost optimization.
Most importantly, shifting the conversation away from the absolute dollar amount per month and toward the cost in terms of meaningful key performance indicators (KPIs) is critical to comprehending and increasing cloud computing savings in this context. This is due to the fact that, if your business is successful, your absolute cloud costs will rise as a result of the on-demand nature of cloud usage.
In the case of a spike in website visitors, you’ll be charged more than if there is little website activity, as an example. You would be missing out on the big picture if you only looked at the absolute cost of your cloud services. Instead, it is preferable to tie your cloud costs to the amount of business value you are generating.
Is It Possible To Reduce Cloud Costs By Linking Them To Key Performance Indicators (KPIS)?
Take, for example, the cost per customer of a B2B SaaS company.
Consider the following scenario: a company has a $50,000 Amazon cloud bill and 1,000 customers in a given month, respectively. This means that the cost per customer for that month is $50 per person. If their total Amazon bill increases by 10% ($55,000) in the next month, but the number of customers increases by 50% (1500), the business will do better because the cost per customer will be lower ($37) in the next month. If you compare it to the previous month, the company saved $13 per customer on cloud spending.
If you’re trying to figure out what your cloud costs are and how to cut them, understanding the context is critical. You can look at month-over-month how your business decisions affect that cost and find ways to reduce it, which will ultimately increase your profit margins. Even if your cloud usage is increasing, having a dollar amount that is directly related to a business outcome allows you to analyze how your business decisions affect that cost and find ways to reduce it, resulting in increased profit margins.
For example, a capability that is expensive to provide but isn’t used by many customers might be considered a waste of resources. That functionality may not be necessary, and you may want to reduce your investment in it. A popular feature among customers, on the other hand, might come at a high price, as you discover. Following the receipt of this information, you can investigate options for redesigning that feature to provide the same functionality at a lower cost.
In practice, this may entail switching to a different cloud service or adopting a different utilization model. Changing your pricing structure to make the expensive and popular feature available only in the paid tier rather than the free tier may also be necessary.
Because cloud costs are linked to key business metrics, engineering leaders can engage in more strategic discussions about how to reduce costs and maximize their cloud savings.
Recognizing and Developing the Business Context you Require
Cloud service providers send invoices that have been customized to their needs and circumstances. You can see how many instances you’ve used and how much they cost on your AWS bill, for example, Nevertheless, the absolute bill does not provide you with much information about the performance of your company.
What you’ll need to consider is the cost data provided by AWS and combine it with information about your application and software; thus, putting all of this information into a context that is relevant to your company’s operation. In this hypothetical case, which features, products, or customer segments do you prioritize and how much money do you spend on each?
To illustrate, consider the following situation: It is possible that a change introduced by an engineer will cause a performance or quality issue during the manufacturing process. MTTK (mean time to detect and fix an issue) and immediate deployment of a fix in production are the goals of DevOps practices (MTTR).
The same is true in terms of price. A change in production can result in an unanticipated increase in costs.
Let’s consider now, a new perspective to save money by taking advantage of a Cloud Phone System. As you may already perceive, even if you have no plans to cut monthly costs, cloud-based software is something you should at least learn about, especially if you’re looking to scale up your business.
Save Money with a Cloud-Based Phone System
A traditional phone system costs money in both initial investment and maintenance. It is also the most commonly overlooked spending for many businesses. But the truth is that you can’t run a business without phones.
It has been reported that businesses save about 50 to 75 percent on their costs by migrating their phone to the cloud. This is a huge bite of money you could be investing in other crucial purposes.
Now, you’re probably wondering: how can a cloud-based phone system possibly accomplish this? Let’s find out.
1. Eliminate Huge Hardware Expenditures
On-premises phone systems require a significant amount of costly local hardware.
Additionally, you will have to purchase and implement any feature you would like to see added to your phone system. Just to mention one example, you would have to buy the relevant hardware if you plan to use a call transfer system.
It is important to note that a cloud phone requires no additional hardware because it is a software app that is hosted on your provider’s servers.
You can use it on any device you already have at your office, like a smartphone, desktop or tablet. Additionally, you can enjoy advanced features without having the need for bulky equipment or installing additional software.
2. Reduced Calling Prices
Most companies pay a monthly bill to operate traditional landlines. You may be charged for every minute of each call based on the local, long-distance, or international service fees.
Thanks to cloud telephone systems, your team members and customers are able to call one another over the Internet. International and local phone calls are much more affordable. Most reputable providers offer easy-to-understand pricing plans that include no extra fees and access to all of the services. These rates are usually much lower compared to legacy phone systems.
3. Stop Worrying About Maintenance
Phone systems are as prone to breaking as anything else, including other types of technology. That’s why a lot of businesses have to allocate funds for in-house, dedicated repair teams. And lastly, it is particularly hard to get individual components for traditional phone systems. Not to mention they are often expensive to buy.
Businesses will no longer have to concern themselves with troubleshooting equipment or other issues that arise during use. A trustworthy company should handle this responsibility for your organization.
4. Upgrade Your Service Easily
Anytime an upgrade is needed for your landline phone, an expert team is required to handle the installation of the necessary hardware. This normally carries extra costs.
With a cloud phone system, your network will always be running at the latest software. This is something your provider will take care of. With every update, they’ll include the latest features without you needing to worry about missing anything.
Using a cloud-based VoIP system can be an incredibly profitable venture. These are only a few of the many ways it can save you money. Invest in a trustworthy service that can provide simple payment plans with additional features and benefits.
Make sure you make an assessment of the features you’ll need the most, how many users are required, and what your budget is. With this information in mind, research the various cloud phone providers and choose the one that fits your expectations the most.
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