The Economics of the Cloud

Microsoft, of all companies, recently published a great article on the economics cloud computing. If you ever wanted to get a concisely presented solid understanding about why cloud computing is good for you, this article answers the question.

Here are some key take-aways:

1. When you deploy applications on the public cloud, you can experience a 40x reduction in the total cost of ownership if  you are a small enterprise (small handful of servers), and a 10x reduction in cost if you are a medium-sized enterprise.
2. You can deploy servers much more quickly on a public cloud in response to demand, and you can de-commission these servers just as quickly for almost nothing. 
3. If you want to realize the full benefit of deploying to the cloud, you are better off using a platform-as-a-service (PaaS) offering or a software-as-a-service (SaaS) rather than using infrastructure-as-a-service (IaaS). (You still do well with IaaS, but it is only a few times better than PaaS/IaaS). 

With numbers like this, you have to try one. Imagine, you are a small office with 10 servers, and you are paying $4k/year/server to own and operate them (for a total of $40k/year). Now suppose you have to expand your capacity by 10%. So you try using one cloud server, which will cost you about $1000/year. It works, so you try two cloud servers, and get rid of one of your in-house servers. Now you are paying $36k/yr for your in-house servers and $2k/yr for your cloud servers, which is a 5% cost saving in spite of increasing capacity by 10%. With numbers like this it is hard not to try to do more.

The long and the short of this article is that cloud computing has advanced far enough for small and medium-sized enterprises to try cloud computing to see if they can realize the cost advantages of going to the cloud. For many enterprises it will be  a worthwhile and profitable experiment.