Cloud Customers Report Capital Cost Savings

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cloudsSix in 10 cloud computing customers say that they’ve been able to reduce their IT capital costs, according to a recent survey, in which end users also report that cloud deployments have improved service quality, reduced IT operations costs, and reduced IT management complexity.

Enterprise Management Associates (EMA) interviewed 159 enterprises with active, or immediately planned cloud deployments, and reports that 75 percent said private cloud is the preferred model. Fifty two percent are implementing both on-premises and off-premises clouds, EMA says in its report The Responsible Cloud.

Of the enterprises already running cloud computing, lowered IT capital costs (hardware, facilities, licenses, etc.) was cited by 61% of respondents. One quarter of all respondents reported that they had reduced both capital expenditure and operational expenditures such as staff, power, rent and maintenance costs.

Multiple Benefits Cited
Other benefits include freeing up strategic resources (49%), enabling disaster recovery/business continuity planning (46%), and increased flexibility and agility (46%). Overall, 89% of customers reported multiple outcomes, with just under half of all enterprises (46%) reporting five or more significant outcomes.

The report also found that the single most common level of OpEx reduction (from a sample of 79 respondents) was in the range of 21-30 percent. However, across all these respondents, cloud computing returned an average 22 percent OpEx saving.

Of the 76% of cloud customers that also reported real, measurable cost savings, the single most common level of CapEx reduction was between 11-20%. The CapEx return across all these respondents was 26%.

Barriers to Deployment
Human and political issues were cited as the top barrier (40%) to cloud deployment, but EMA notes that these issues also came out tops in previous research into virtualization. Implementation challenges (35%) are also a strong barrier for cloud computing deployments.

The report highlights some contradictions and differences in opinion. Lack of flexibility/agility was cited by 25% of cloud customers (a tie with inadequate management, and increased operational costs) as the third highest barrier to deployment, but flexibility and agility had been cited as benefits to deployment.

EMA also notes some clear differences in opinion between respondents with a current cloud deployment compared to those that are still in the planning stages. For example, 18% of soon-to-be cloud customers said they expect increased OpEx to be an issue, but 28% of current customers reported this as an actual issue. Similarly, 18% of pre-deployment respondents feared degraded compliance would be an issue, but this was experienced by 26% of existing customers.

EMA has developed a prescriptive model for building what it terms the Responsible Cloud, using its EMA Maturity Model to combine virtualization, IT automation, service management, and security.

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5 Comments

  1. I am not convinced how Cloud deployment can save mainly CAPEX savings. I strongly believe that this is due to Virtualization and not just deploying REST based services. If they really went to REST based services for storage, applications, etc., then they would have encountered lots of professional services expenses which is not shown. May be this article also needs to capture how Cloud Computing is defined.

  2. I don't think anyone has ever claimed that cloud computing would not reduce CapEx...in theory it should shift all expenditures to OpEx (to the extend that dedicated colo &/or licensing costs can avoided) and eliminate CapEx. The question that plagues the market is whether the cloud truly offers the reliability that traditional infrastructure (whether self managed, in dedicated colo, or in a more progressive fully managed environment...all of which have gained overall enterprise confidence). Although there are many other significant hurdles the cloud must still overcome, the market's lack of confidence in reliability is a key impediment to adoption - not cost. Based on our experience in the market, the few large enterprises that are investing in cloud services, are either reserving the usage for either non-mission critical infrastructure functions or where temporary excess capacity (i.e. seasonal retail) is necessary. In some very limited instances - where we are seeing full blown reliance on the cloud - the theme is relatively common. Namely that the enterprises adopting the cloud would not be able to economically justify their infrastructure deployment via any other architecture. Although these observations are great early signs of adoption, the confidence in cloud computing is still in its early stages (based on some very valid concerns). As for the CapEx/OpEx discussion, I think everyone is agreed that should an enterprise ever make the move to truly go to the cloud (again this is few and far between) that CapEx goes away and overall TCO shall reduce dramatically along with unprecedented ability to scale an enterprise up or down based on utility requirements. Very exciting times...

  3. Nikihl

    can anyone pls tell me how cloud helps in reducing the cost??