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“There is a common misconception among IT managers in small to medium-sized enterprises that the public cloud is 
the best option for reducing cost and improving return on investment.” -- Brian Garrett, Vice President, ESG Lab

As you’ll recall, in The Cloudification of Healthcare IT, I had touched on the polarity in opinions around the TCO of an on-premises deployment vs. a cloud deployment. In this post, I want to socialize some data from a report developed in partnership with ESG. In Simply Pure Cloud Economics 101, Brian Garrett, Vice President, ESG Lab, contemplates the “The True Costs of Public versus Hosted Private Cloud Infrastructure.”

Most of us are consumers of the ubiquitous cloud — both at home and at work. The pros and cons of the cloud are well known and not worth rehashing. However, the hidden costs of the cloud can, and sometimes do, come back to bite you, so it’s best to do due diligence at the front end to ensure that you’re not surprised later.

Let’s start with Brian’s high-level analysis, where he compares the economics of “… the monthly cost of public cloud infrastructure with the monthly cost of leasing a converged private cloud.”

ESG performs break-even analysis whereby public cloud pricing is compared to the monthly costs of leasing a converged system at a hosted colocation facility. The following graph illustrates a scenario with a break-even point of  $13,236 per month, at which point it is more economical to leverage a converged private cloud (in this case, the Pure Storage FlashStack all-flash-cloud).

ESG-breakeven-graph

Further, the report shows a spread of between 3% and 57% monthly savings based on the relevant break-even point. Those are real dollars that you can take and re-invest back into your organization — use to improve your infrastructure, work on automation and orchestration, innovate or collaborate. Real dollars back to you.

Brian describes the break-even analysis technique in detail (what he calls Cloud Economics 101), and then delves into the meat of comparing public vs. hosted converged cloud costs (i.e., the true costs). Note that while Brian’s report focuses on “IT managers in small to medium-sized enterprises (SMEs)”, I believe that the lessons and techniques he provides in the ESG report are equally applicable to larger enterprises.

Brian also references ESG’s 2016 IT Spending intentions Survey which indicates an interesting juxtaposition between the use of cloud computing services and purchasing new technologies with improved return on investment:

ESG-cloud-economics

Brian concludes the report by stating “There is a common misconception among IT managers in small to medium-sized enterprises that the public cloud is the best option for reducing cost and improving return on investment.” I agree with Brian’s assessment: in some cases, especially in Healthcare, migrating to the cloud and reducing cost/improving ROI are often orthogonal goals.

The ESG report, the lessons, techniques, and Brian’s to-the-point summary are worth a read. It may just save your organization between 3% and 57% in OpEx monthly!

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