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Why go to the Cloud?

Don’t answer. It’s not a good question. The question to ask is whether you should go to the Cloud. And maybe where.

It might seem like a distinction without a difference. But it isn’t. Ask why and you assume the conclusion. It’s a dangerous habit, because once you do that, you gather information as ammunition, not to help you make a complicated decision.

I’ve been doing some pro bono work with a local non-profit — 25 wonderful, dedicated people, who work for far less than they could make anywhere else and run their information technology so long that if it were a car it would be an original VW Beetle, held together with duct tape and Bondo.

Their server is out of gas.

They have three different applications that have to keep track of contacts, with no integration except brute force, and no way to afford anything better. Beyond that, they’re pretty basic. MS Office. Outlook and hosted Exchange with bundled administration and support. InDesign. QuickBooks.

And a high-end networked copier/printer/scanner.

A perfect candidate to move to the Cloud.

Or so I thought until I scratched beneath the surface. It didn’t take much scratching, starting with two basics — identity management and printer queue management.

25 employees are enough to need Active Directory (or eDirectory, or LDAP, if they wanted to move to the Linux world). Right now these live inside the firewall no matter what else a company does with its architecture.

25 employees hitting a printer also means a server-mediated print queue.

Conclusion: They might not need a very big server, but they do need a server.

But surely they could do everything else in the Cloud, couldn’t they?

Sure they could, except that with a staff of 25, they just don’t need very much processing power. Storage, yes. Which, once they own a server, is cheap … dirt cheap. 2 terabytes of mirrored storage — enough to last them five years — would cost about four hundred bucks.

No, that doesn’t buy them the real-time collaboration they could get with hosted SharePoint or Google Apps. On the other hand, the most inexpensive hosted SharePoint they could get would cost them $10 per gigabyte per month.

As they’re a non-profit, they’d probably quality for Google’s free program for non-profits. Free, that is, other than what they’d have to spend to integrate it with Active Directory, recreate their current folder structure, migrate their data, and then pay for a higher-speed Internet pipe than what they currently need, because now every file retrieval is going to the Cloud and back. Estimated incremental cost: $600 per year — more than what they’d spend for 2 TB of on-site storage, once and done.

Which yes, they do need to back up. Add two backup drives, simple backup software (with encryption), and an employee willing to transport the backup drives back-and-forth and that’s taken care of for just about nothing, too.

Not fancy; more than good enough.

What to make of this?

They’re in the Cloud with hosted Exchange. The bottom line benefit doesn’t come from hardware and software savings, but from not having to employ a sysadmin to run and administer the sucker. Score one for the Cloud. Could they switch to gmail and Google Calendar? Sure, but then they’d have a migration to manage, after which they’d have to take on their own email administration and bring staff support in-house as well.

One of their three contact management applications is also in the cloud … a bulk emailing service. Same story.

So for an organization that should be an ideal target for Cloud computing, the Cloud turns out to be a case-by-case choice, not a strategic solution.

The more I look at the Cloud, the more concerned I am that its economic model is based on a seriously flawed assumption: That paying “by the drink” is more attractive than paying a lump sum and getting it over with.

No question about it — if you’re in a business where processing loads are unpredictable, varying from a low baseline level to very large short-term peaks, then the Cloud’s ability to provision resources dynamically is just the beverage you need.

I suspect, though, that most businesses will find, for most of the situations they face, what oenophiles have known forever: That when they pay by the drink, a glass of wine at a restaurant costs a whole lot more than paying by the bottle to enjoy a glass of the same fine wine at home.

That’s true even if they only drink half the bottle.

Comments (12)

  • Bob, I read your stuff every week, religiously. I find myself nodding my head in agreement and having “a-ha” moments all the time. I share your articles at least a couple times a month.

    But today you’ve ventured onto my turf — nonprofit IT consulting. And while I agree that every organization needs to consider *whether* to use the cloud in their service choices, I disagree with your calculations in this case. Or lack of sufficient calculations, because there are hard and soft costs associated with these choices, and the soft costs are more important at the small scale than the hard costs.

    There are advantages to be had with the cloud that go beyond $400 hard drives or $600 annual service fees. Those are the easy numbers. Here’s where I suggest your analysis lacks dimension:

    [1] A higher-cost higher-speed Internet connection can offer benefits to the organization beyond allowing for hosted email and calendaring. Employee morale and productivity — notoriously hard to calculate — can be improved with faster Internet access.

    [2] Running email and calendaring systems in-house (like Exchange) carries a management cost that you don’t acknowledge. You mention the cost of migration and that’s a very real thing, but the cost of managing the server, ensuring backups are working, and so forth is a very real expense. This nonprofit of yours will either have to dedicate staff time (likely inexperienced staff) or hire an outside consulting firm anyway. What does that cost them? Using a solution like Google Apps eliminates those administrative tasks.

    [3] With 25 users, the cost and complexity of Active Directory integration with Google Apps or other solutions is unnecessary. At that scale, you can manually update 2 or 3 systems when new employees arrive or old ones leave. It’s not that hard. Keep a spreadsheet or a checklist — don’t spend hundreds or thousands on integration. They should have a new employee checklist anyway.

    [4] Bulk emailing services are pretty much always in the cloud now, because they’re the only ones running the necessary infrastructure to get around spam filters both legally and efficiently. You’ll *almost always* have integration issues with any other contact management system. (In nonprofits, that’s usually a donor management system.)

    [5] Cloud-hosted Exchange is almost always a sucker’s bet in the nonprofit sector. It’s just too darn expensive. Even small businesses should avoid it unless there’s a really good use-case (far-flung employees).

    [6] Using a cloud solution like Google Apps is a great choice for nonprofits, partially because it’s free for up to 3,000 users, and partially because it’s evolving. I know in enterprise businesses having features that change can be a nightmare. But in small businesses, especially nonprofits, this would be a benefit to be enjoyed, not a burden.

    [7] I completely agree that they need a server on-site, and it doesn’t have to be particularly powerful. Not everything can be in the cloud. But don’t forget that server takes maintenance, which carries a cost. The less you do on the server, the less maintenance it takes. So moving some things — where appropriate — to the cloud can save costs on local resources, especially when those cloud solutions are free for nonprofits.

    [8] I have to specifically speak up for Google Apps, as that’s a collaboration suite that offers a lot of innovative (albeit not always “complete”) features a nonprofit could easily use. Integrated email, chat, calendar, groups, and sites plus free mobile device management is a great deal when the sticker price is $0. Sure, there are setup costs, but that’s true of any solution, and I would argue setup of Apps is a lot lighter than setup of Windows Server 2008 R2, Exchange 2010 (internal + web mail), and a backup system.

    All this said, I’m still with you that each organization must evaluate its needs very clearly and carefully. Hosted anything isn’t necessarily the best option — you’ve gotta know your goals. Plus, there are issues of scale: what works at 25 users may not work at 2.5 users or 250 users, and vice-versa. But comparing surface costs alone misses out on surrounding values of consulting time, user satisfaction, innovation, universal access, security, maintenance, and more.

    • I appreciate your help. I have to reply to a few of these:

      [1] Current bandwidth is adequate for browsing and hosted email. The additional bandwidth would most likely be neutral with respect to both morale and productivity, as even with it, file retrievals would be slower than with local storage.
      [2] I don’t acknowledge the management cost for Exchange because they aren’t running Exchange in house. It’s hosted, and at a modest cost that includes administration, server maintenance, and employee support.
      [3] AD integration might not be necessary, but without it, someone has to handle the additional administration, and employee support. Even if this only requires a 10-hour/week part-timer, they’ve added at least $15K/year to their OpEx budget. If they had this, I’d use it to replace their aging desktop computers.
      [5] For these folks, with their provider, hosted Exchange is an excellent value.
      [6] Google Apps is a possibility, but not to replace any current functionality. And again, someone would have to administer it — free doesn’t mean no cost.

      You might be right that I’ve missed some soft costs. If so, it wasn’t for lack of trying.

      – Bob

  • I am admiring your wordsmithing. You nailed the concept:

    “I suspect, though, that most businesses will find, for most of the situations they face, what oenophiles have known forever: That when they pay by the drink, a glass of wine at a restaurant costs a whole lot more than paying by the bottle to enjoy a glass of the same fine wine at home. That’s true even if they only drink half the bottle.”

    And you though we only looked at the pretty pictures!

  • Your comments mirror my experience – nice to read it from a guru.

  • Like the first commentator, I would be careful with figuring the costs for a nonprofit so quickly.

    At my old nonprofit, each employee was funded by a few separate grants. As a result, everybody had their own individual printer, and there was no shared storage space, no shared calendar, no centralized backup, and no shared contact list. (We bought some kind of donor management software, but after somebody spent dozens of hours manually entering contacts, it was abandoned.) People used whatever email client they liked. So there was no need for a server, and anyway, there was nobody who could maintain one. There was no real internal IT expertise. Our computer support was donated by a freelance developer we called when something broke. There was no real management recognition or understanding of IT management issues (there was no user training, for example.)

    In such an environment, I think there is a pretty good case for cloud services. And such environments are more common than is usually recognized.

    I bought a personal license of SugarSync for backups and used gmail and gdocs to store all my working materials, because I didn’t trust my five-year old PC and freeware security software. I wouldn’t have trusted any of my coworkers with tape backups. You gotta do what you gotta do.

  • Thanks for reminding us to check to see if the emperor is naked or not. While the cloud makes sense for interacting with the outside world, it introduces a dependency on one’s internet connection. While reliability has become very good in most areas, it’s not perfect. There are plenty of tasks that don’t require an immediate connection, and if they can be done offline they can be done anytime. And I’m not convinced that online security is bulletproof enough just yet – or, given government overreach and cyberwarfare, that it will ever be – to protect extremely sensitive data. These concerns might not be at the top of the list for the client in your example, but they’re questions that I make sure my clients consider before giving up the control that comes with inhouse apps.

  • In my small company, we bypassed Exchange for MDaemon for a mail server. Much, much less of a hassle than Exchange, and no need for a sysadmin. The consideration is not just Exchange or Cloud, people!

    Apart from the “wine” analogy, the other argument I’ve experienced against outsourcing is control. Once, a mail provider instigated a spam-filtering policy that was overly-aggressive, and many of our hundreds of vendors could not reach us. Being small, we did not have any clout to have this changed.

    That was when we deployed MDaemon in-house.

  • It’s a well written article. The thing I agree with is that cloud is not the default answer for every IT need – and many of us have been acting like it is. I am in IT in a large organization and my business partners always seem to want to go that way. You need a good framework to weigh the decision of whether cloud technologies fits a specific need or not.

    Here are things that I disagree with or feel were omitted:
    1. You are taking too short term a view of owning infrastructure. What about costs of refreshing the equipment and maintenance? In my experience, the equation changes when you start taking a longer term perspective
    2. Strategy – do you really think your company should be in the business of managing that infrastructure? Or should you be looking at utilizing your resources to focus on the business side of the world. True when you need an application based on unique technology not currently available I your IT portfolio
    3. Expertise – do you really have the experts to do a good job with the implementations and maintenance or should you letting an expert do that?
    4. You say that you have proven that cloud is not a strategic solution – however most problems you have talked about are short term – upfront costs, difficult in migrations
    5. The costs you described (2TB of mirrored storage for $400) probably suit small organization with systems that do not need High Availability and performance. At my company, the costs are closer to $10K/TB.

    • Comments on your comments:

      1. Actually, I was looking at the lifetime cost (with this organization, five years). With Cloud solutions, the organization would face a monthly cost for storage that’s about as high as the total 5-year spend for owning it. There isn’t much point in projecting IT spend beyond a five-year window.

      2. This is a common point of misunderstanding – contract out responsibility to any outsourcer and you still have to manage the function. There’s nothing about dealing with Cloud vendors that takes less management attention than dealing with a head of IT. In any event, the organization I’m working with has contracted out responsibility for day-to-day management. That and user support come from the same provider that gives them their hosted Exchange environment.

      3. See #2.

      4. Most of the problems aren’t up-front costs. They’re recurring costs … of storage, of administration, and of end-user support. That’s one of the Cloud’s big supposed selling points – spending OpEx (recurring) rather than CapEx (once and done).

      5. Fair enough. A question in response to your question: Including the additional bandwidth, low-latency engineering, redundant physical circuits and vendors, and the added costs most Cloud vendors charge for high availability environments, what would your cost of storage be taking it to the Cloud? Because once all your data reside there, your MPLS network has to be an order of magnitude more resilient and a couple of orders of magnitude faster to make sure performance doesn’t slow to a crawl.

      – Bob

  • That local non-profit is really lucky to have you working for them pro bono.

  • Bob,
    I work on the cloud team for our company and for the most part agree with your observations and analysis. For a company that small, a “guru” or to would be able to set up a rather efficient and cost effective solution that won’t break the bank. Some of the others commenting here have offered some decent tips as well.

    However not that your mention of Active Directory and LDAP should be clarified. LDAP is a protocol and not limited to Linux, in fact Active Directory uses LDAP to implement it’s service.

    Nice article, thank you.

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