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Cloud services can save you money -- if you're careful

Nancy Gohring | March 14, 2013
Determining whether using the Cloud will pay off is an extremely complicated process.

One way that Northern Kentucky is making sure cloud services save costs is by pushing its vendors to offer true usage-based costing. Many vendors of SaaS services that Ferguson has looked at are trying to charge on a per-seat basis. But for a university, with its slow times during the summer and holidays, that pricing model doesn't make sense. At peak usage, the pricing would save money for Ferguson but on average, because of the valleys, the per-seat model ends up costing him more than keeping many apps in house.

That's a particularly important issue for Northern Kentucky's ERP system, which supports class registration. The system peaks when students are registering for class and then "flatlines," he says. While his group spends a lot of time managing the on-premises SAP implementation, "if I have to pay for the peak for an entire year, that's not very interesting," he says.

Also, the SAP system is one that the university can't take risks with because the software has to be totally available when students want to register for class. That means Ferguson is going to move that system to the cloud only when he's totally confident it won't fail. "We're going to accept less risk when it comes to those bread and butter systems," he says.

The calculation

To try to figure out the ROI of any of its proposed cloud projects, Northern Kentucky starts with an ROI calculator and research from Gartner, adapting it for the university's own special needs.

For instance, Ferguson has strict privacy requirements since many cloud services used by the university handle students' information including Social Security numbers and other personally identifying data. NKU includes privacy in its ROI calculation by subtracting value when considering a vendor that doesn't seem to grasp the university's privacy requirements, he says.

The value of various factors will vary based on the organization. Security may be more important at one business than another; the speed at which you can add more capacity might be most important for another; and liability could be critical to others. "That question of value is complicated," Domicity's Brien says.

Valuing redundancy is one factor that many businesses struggle with when transitioning to the cloud.

There are two camps that don't build in redundancy when using cloud services like IaaS, says Mark Eisenberg, who formerly worked on the Azure team at Microsoft and now is a director at IT consulting company Fino Consulting. The first are businesses that simply don't know that, for instance, when moving a workload to AWS they must balance it across regions if they want to avert the repercussions of a regional outage. AWS has been good about releasing white papers and other advice on how to properly do this, Eisenberg says.


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