Cloud Computing: More Secure And More Expensive

The upside of cloud computing is usually said to be reduced costs and administrative hassle; the downside is a perception of increased risk and lack of control. Yet experts say both those perceptions can be downright wrong most of the time. Why is that, and what can you do to make workplace cloud projects more effective?

Picture by Esparta Palma

At the Australian Information Industry Association (AIIA) Cloud Summit event in Canberra last week, KPMG presented an analysis of the cost savings involved with a range of cloud projects undertaken in Australia. Those figures suggest that while there are savings to be had from implementing cloud-based systems rather than more traditional on-premises IT equipment, the reductions are not necessarily as dramatic as many people assume.

KPMG's analysis was based on just 26 companies, a relatively small percentage of the 200 companies the firm initially approached. While the exact basis for calculating those figures could stimulate endless argument, KPMG's Nicky Hutley pointed out that a bigger issue was the lack of detailed return-on-investment calculations for many cloud projects.

"Not a lot of companies appear to be doing any ROI analysis of their cloud computing," she said. The fact that accounting standards don't separate cloud systems from other types of IT investment was a factor in that lack of data, she suggested. "It's very difficult to find somebody who can say 'here's this line of spending and it has declined by this percentage'."

As you'd expect, moving to cloud has a bigger impact on capital expenditure (capex, which covers hardware) than operating expenditure (opex). KPMG's analysis suggests that in the finance industry, capex for IT could drop from 31.1 per cent of the total to 9.4 per cent. Opex would fall from 1.6 per cent to 1.3 per cent. Similar falls were seen in other sectors.

In terms of impact on gross domestic product, KPMG's analysis suggested that shifting to cloud could see a reduction of capex for businesses in the order of .07%, and of operational expenses of .05%. While those are small figures, they still translate to a potential improvement of more than $1.5 billion.

Cloud computing remains a highly divisive subject, Hutley noted. "The community is very divided between enthusiasts and naysayers. People who were implementing cloud were incredibly passionate about it." However, that passion rarely translated into ROI calculations.

The risk factor

A common argument against moving to the cloud is that taking information out of the company creates security and access challenges. "On the surface it appears to be wonderful, but the conversations is always about risks," said Dr Steve Hodgkinson, Asia Pacific Research Director IT for analyst firm Ovum.

Ovum's discussions with local companies that have implemented cloud solutions suggest that issue is exaggerated, Hodgkinson said. "Risk perceptions are overstated; that is absolutely the reality of the experience when you talk to people in the market."

"There's no issue around lack of knowledge of how to do these things. What there is a fundamental crisis about how to put good practice into actual practice."

Hodgkinson also offered some basic tips for businesses considering a move to cloud solutions:

  • Have a strategic plan and implement selectively, rather than making a massive switch. The experience gained in one cloud project will help future projects implement more quickly.
  • Don't compromise on compliance. The potential fines and business issues aren't worth the drama.
  • Rein in "stealth cloud" projects implemented by individual business units. "There's no excuse for quick and dirty IT," Hodgkinson said.
  • While service level agreements (SLAs) are important, they aren't necessarily the most important factor when using large-scale public cloud services. Recognise that the "wrath of the cloud" also works for you. "These systems work well because lots of people complain when they don't," Hodgkinson noted.

Evolve is a weekly column at Lifehacker looking at trends and technologies IT workers need to know about to stay employed and improve their careers.


    ASIO needs you in the cloud...

    "stealth cloud" is now the phrase of the week.

    Practically speaking, if you're a large company and have vaguely competent IT, you probably wont see a huge cost saving going to the cloud since you already have scale. What it will get you is a reduction in non-core staff and a good scapegoat when things break.

    Those who really benefit are the small-to-medium businesses, as always. With a company of 20 people you could spend $5k on a cheapish SBS server with exchange (plus office licenses), or you could spend $1k/year for 20 google apps accounts. They each have advantages, but google apps requires minimal grooming from IT to work.

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