Squeezing savings from the cloud

Determining whether cloud services will pay off is an extremely complicated process. Here's how to compute the ROI.

The key to earning a positive return on investment when adopting cloud services -- including software-as-a-service and infrastructure-as-a-service -- is carefully studying costs and benefits to ensure that such a shift will pay off.

Sounds like many of the other IT projects you've shepherded, right? But it turns out it's incredibly complex to determine whether a move to the cloud will pay off for a given application. When done in haste, that analysis can lead companies to adopt the cloud for the wrong reasons, leaving them with higher costs or an inferior product when compared to an on-premises installation.

The good news is that despite all the hype around the cloud, it appears that many businesses recognize the dangers and are proceeding with caution.

The cloud is "not a silver bullet. It's not the right answer for every situation," says Casey Coleman, CIO for the General Services Administration.

As the first federal government agency to deploy a cloud-based email service agency-wide, the GSA didn't have a road map to follow, she says. So in May 2009, it launched an effort to thoroughly examine its current costs and the projected costs of the cloud service.

"It is the case that it has to be well thought-out and methodical. This is an IT project like any other. You have to plan for change management, promote user awareness, ensure cybersecurity in contractual terms, like with any IT project. If you don't approach it in that manner, you might have a different experience," Coleman says. "The promise of cloud computing has been borne out in our experience."

When the GSA adopted Google Apps for email in July 2011, it was able to realize added cost savings by also transitioning non-email systems that were attached to its legacy email system. The agency had been using Lotus Notes for email, plus Domino for workflow apps. As part of its review of adopting Apps for email, the GSA took a hard look at the Domino apps. "We ended up reviewing those apps and eliminating most of them," says Coleman.

The GSA had 2,000 apps in Domino, ranging from small databases to more substantial workflows. It got rid of all but 500 of those, with many consolidated and reworked. Cutting so many apps meant that the GSA could then turn off 300 in-house servers, Coleman says.

Those cuts plus others enabled the GSA to project that it would save $16 million over five years by moving to Google Apps for email -- and to date that estimate is proving to be accurate, Coleman says.

Not every transition to the cloud will save that kind of money, but closely examining costs and benefits may reveal that the cloud makes sense even if it doesn't impact the bottom line.

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