ColumbusTechAudit: Is the Cloud Right For My Company?

Will the Cloud save our company money?

Recently, a potential client asked me a simple question: Will the cloud save my company money? We’ve all seen the claims that cloud computing cuts costs, but is there any real truth behind these promises?

Many Managed Service Providers often miscalculate costs, selling solutions that don’t lower IT expenses but actually drive them up. While cloud solutions can reduce costs in the short term, they come with hidden factors that are rarely disclosed.

Traditionally, these factors are often miscalculated by all parties involved. Let’s take a closer look at them here.

1. Data Transfer and Bandwidth Costs

• Upload and Download Fees: Cloud providers often charge for the amount of data transferred into and out of the cloud. For a business that regularly uploads or downloads large files (e.g., customer data, inventory files, or media), these costs can add up quickly.

• Bandwidth Usage: If your business has multiple locations or a large team, the bandwidth needed to access cloud services can result in higher internet service provider (ISP) charges.

• Internal Infrastructure Scaling Costs: As you no longer have your servers on your site, you will now need to compensate for the traffic difference, many times this will require new network equipment such as switches, and enterprise firewalls to support the additional flow of traffic.

2. Storage Costs

• Additional Storage: Many cloud providers offer a limited amount of storage for a fixed price. However, as your business grows and you store more data (e.g., customer information, product catalogs, etc.), you’ll need to purchase additional storage, which can be more expensive as your needs increase.

• Data Redundancy and Backup: To ensure business continuity and data protection, you may need to pay extra for data redundancy and backup services (e.g., keeping multiple copies of data across different locations or regions).

3. Licensing and Software Fees

• Software-as-a-Service (SaaS) Subscriptions: Many cloud providers offer tools like Microsoft Office 365, Salesforce, and other productivity software. While subscription fees are typically predictable, businesses may need to pay extra for premium features, add-ons, or more user licenses as the team grows.

• Enterprise Software Licenses: Cloud providers may also have tiered pricing for enterprise-level features, meaning you could be charged more for advanced functionalities such as greater security, compliance features, or customization's, which is typical in Azure.

4. Security and Compliance Costs

• Enhanced Security Features: While cloud providers generally offer basic security, your business may require additional measures like encryption, identity and access management (IAM), firewall services, and multi-factor authentication (MFA). These often come at an extra cost.

• Compliance and Regulatory Requirements: If your business operates in a regulated industry (e.g., healthcare, finance, etc.), you'll need to ensure that your cloud services comply with industry regulations (HIPAA, GDPR, etc.). This may mean paying extra for specialized compliance tools or additional security measures.

• Additional Data Theft Risk Association: Think about it, you are moving your data, that is located behind a secure firewall, from a small business, into a location where major corporations store data, utilize enterprise level advanced infrastructure configurations, and now you have a higher risk of data theft, as you are now more exposed to a breach.

5. Migration and Integration Costs

• Migration to the Cloud: Moving your existing infrastructure to the cloud (e.g., transferring legacy systems, databases, applications) will be expensive. Costs can include hiring third-party consultants, purchasing additional migration tools, or even taking time away from daily operations to facilitate the transition.

• Ongoing Integration: Cloud systems often need to integrate with your existing on-premise systems or other software solutions. This integration may require custom development work, API connectors, additional monthly services or specialized IT support to ensure everything works seamlessly together.

6. Training and Adoption Costs

• Employee Training: Shifting to cloud-based services often requires your employees to learn new software and workflows. You may need to invest in training programs or pay for external training services to ensure your team can fully leverage the cloud tools.

• Support and Change Management: Beyond training, there may be hidden costs associated with managing the change. Employees may need time to adapt to new systems, and additional IT support will be required during the transition period.

7. Downtime and Reliability

• Service Interruptions: While cloud providers typically promise high availability, outages can and do occur. If the cloud service is down or inaccessible, it can lead to productivity loss. Your business may need to invest in contingency plans or backup solutions to ensure continuity during these times. (Azure Outage Tracking) Usually this is redundancy with another Provider, such as AWS, or Green Cloud. These redundancy configurations generally increase costs exponentially.

• Reliability Concerns: While cloud providers guarantee up-time, businesses still need to pay for enhanced SLAs (service level agreements) that promise better reliability, faster response times, or compensation in case of downtime.

8. Long-term Cost Implications

• Scaling Costs: As your business grows, so too will your cloud expenses. While it may start as a cost-effective solution, additional users, data, services, and software licenses can quickly escalate the overall cost. Understanding how these expenses will scale over time is crucial in projecting long-term IT budgets, this is where Columbus Tech Audit's Auditing Services can really help.

• SaaS limitations: While Software as a Service does offer some automation in regards of updating software functions and features as they are released, many SaaS providers will simply stop supporting older software versions. Over the years we have helped companies convert applications to support the later software builds after custom in-house applications failed to work any longer with SaaS changes. Development costs have come down since Ai, but there is still a level of technical knowledge involved for legacy applications, and a shrinking number of people available to develop in these older languages.

9. Management and Optimization

• Cost Monitoring Tools: Cloud usage costs can be difficult to track without the right tools. Some businesses invest in cloud management and cost optimization services to keep expenses in check. Without these, you may see unexpected spikes in your monthly bills due to inefficient usage or configuration.

• Underutilized Resources: Cloud services often include features and capacities that you may not fully use. For instance, purchasing extra storage or compute power for future scaling needs can lead to paying for unused resources that could have been optimized, Something that Columbus Tech Audit will find in our extensive audit process.

10. You still need Local Infrastructure Support

• Desktop Maintenance: A common oversight in Managed Service Provider estimates is the lack of transparency about needing ongoing maintenance for your internal infrastructure. You’ll still rely on antivirus, network monitoring, ransomware support, documentation, password management, upgrades, and other desktop support tasks that will still require the same support as before the cloud solution was implemented.

• Network Support: Migrating to the cloud often complicates the process and increases network support costs, as aging equipment is rarely upgraded or replaced. Issues like outdated cabling, old computers, data types, storage needs, and other limitations of existing equipment are often overlooked during cloud migrations.

• Local Server Still exists: In many cases, cloud solutions complement rather than replace existing infrastructure. This is common with large file applications like SolidWorks, CAD, REVIT, or AutoDesk, where file sizes are too large to access directly from the cloud. Additionally, many companies maintain local domain controllers to ensure users can still print or log in if the network is down. While it's possible to eliminate some local servers, the savings are often under $200/month, and when you factor in the added costs of cloud solutions, those savings quickly fade.

11. Electricity Costs

• Local UPS Requirements: Since the cloud is hosted remotely, you'll need to invest in additional battery backups for critical equipment like switches, firewalls, and modems. Additionally, your ISP may need to be contacted to add a battery backup at the node, ensuring that in the event of a power outage, your internal staff can still access cloud servers and data to maintain productivity.

• Actual Cost Savings in Electricity: A new Dell R730 server consumes approximately 6,000 kWh of electricity annually. At the current rate per kWh by AEP, the electricity cost to run the server comes to about $630.00 per year. Adding in the cost of cooling, which is roughly $290.00 per year, the total electricity cost for running the server—including cooling—comes to approximately $920.00 per year. Cloud providers maintain massive data centers that require significant power and cooling. While these costs are typically built into the service, heavy cloud usage by your business could indirectly contribute to higher energy costs, especially if your team accesses data frequently from remote locations.

For many of us, the simple answer is no. Let’s take a closer look at why.