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Cloud will never be cheaper than on-premise: Claranet

But the real benefit is access to the economies of scale

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Deploying applications in the cloud is never going to be cheaper than deploying on-premise infrastructure, but the service benefits of cloud computing make the cost of adopting it worthwhile.

Speaking at the Apps World summit in London yesterday, Martin Saunders, product director at Claranet said: “People understand that cloud isn't cheaper. It is always going to be cheaper for a company to buy a server, stick it in server room and run it themselves.

“But I think if that's all you're focusing on then you're very much missing the point of what this thing is all about, because it's a service. It's not just about buying infrastructure and hardware.”

Saunders said that people often compare the cost of running a server on premise to the cost of running a server in the cloud, and conclude that the cost of the on-premise server can be written off in three years, whereas the cloud server will be an on-going expense.

However, he said that the labour and power costs of operating an in-house server 24/7 are often left out of these calculations, as well as the staff training and personnel required.

Ron Fraser, CTO of cloud services at Microsoft, added that cloud was traditionally sold as a cost-saving mechanism, and the cloud strategy belonged to the CIO. Now most of the conversations that vendors have around cloud computing are with chief marketing officers and chief financial officers.

“There's two personalities to cloud. There's the internal perspective, which is all about potential cost savings, risk assessments, and how you manage your portfolio apps. And there's also an external perspective, which is driven by the economics the cloud brings in,” he said.

“If nothing else, the fundamental shift that cloud brings is a democratisation of access to the economies of scale. You can be a small company, and you can access the same globally diversified, resilient infrastructure that an IBM or a JP Morgan can have at the same unit price point.”

Fraser said that this is levelling the competitive landscape in a lot of markets, meaning that very small companies can take on incumbents, unencumbered by legacy systems, legacy processes and legacy policies and risk assessment procedures.

The costs associated with cloud are coming under increasing scrutiny as the European Commission embarks on a new strategy to speed up and increase the use of cloud computing in the region.

The EC claims that 80 percent of organisations adopting cloud computing achieve cost savings of at least 10-20%, and intends the new strategy to create 2.5 million new jobs and boost GDP by €160 billion (£127bn) by 2020.

However, TechMarketView analyst Anthony Miller questions where the predicted growth in revenues and jobs (based on figures from IDC) are going to come from, given that cloud technologies are – almost by their very definition – deflationary.

“Our own forecasts for the UK market suggest that spending on software and IT services will decline in real terms (i.e. excluding inflation) until 2015 and then will remain pretty much flat (plus or minus) till the end of the decade,” he said.


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Waxil Davidson said: Thats likely because on premise doesnt exist its on premises basic English skills are important and yes everyone that says on premise is wrong

Mike_Acker said: Cloud isnt something thats happening its being pushed the issue is ownershipaccess of datai think Cloud might be useful for those things you want to be public facing Too I think we will have data assets that we prefer to keep to ourselves-- behind an intranet with access only via VPN -- or -- a home system with better security Im switching to LinuxUbuntu I have to learn to use Linux versions of some programs instead of my old shoes that Ive used in Windows for yearsIts All Good

Anthony Shaw said: Its not about choosing the right or wrong provider theyre all priced in the same ballpark The point is that a service provider cannot buy the hardware service it and operate it for less than a client can buy the hardware for this has been proven countless times against Amazon Rackspace etc They can sell you a virtual machine for less than you can run a virtual machine for because of the scale But the point they were making is it isnt a cost saving exercise its about financial and operational agility

Erin Hunter said: I think that Claranet has fundamentally got it wrong when itcomes to the cloudSure it can be more expensive if you choose the wrongprovider but with the right provider and platform it will be significantlycheaper Im talking a few thousand pounds instead of an amount thats wellinto six-figuresIts not just that the cost of a cloud deployment isshifted from CAPEX to OPEX and the speed-to-value is substantially better thanon-premise The cloud is where everything is going and what will the cost beto the businesses that dont moveThe cloud brings more than just financial benefits Itspossible for everyone to become an app developer and develop apps to analysetheir data to be able to make smarter timelier decisions something which ismissing from most enterprises today

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