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Public cloud ROI diminished by app migration snags, subscription fees

IntroIT shops with the in-house expertise to run a virtual datacenter may not find much added value in a move to the public cloud, especially for legacy apps. There's a fine line between gaining flexibility with public cloud computing and taking on unnecessary expenses with pay-per-month pricing, not to mention a tricky cloud migration process, according to Sean McDermott, CEO of Windward IT Solutions, an IT service management and systems engineering firm based in Herndon, Va. Windward is heavily invested in for CRM, but has considered other alternatives, including some on-premises possibilities. It has become increasingly difficult to justify paying Salesforce's monthly subscription cost of $125 per user, per month given that Windward is a technology-focused business with the expertise to host a CRM application in-house. Other Software as a Service providers typically charge less, McDermott said. SugarCRM Corporate goes for about $45 per user per month, about $15,000 per year. The enterprise version costs $60 per user, per month. Voice over IP (VoIP) is another example of a service that might come back in-house at his company. Windward IT uses a cloud service for $3,500 a month, but the recent release of the CudaTel VoIP switch appliance by Barracuda Networks has given him pause. CudaTel costs $4,000 as a one-time capital expenditure. Tack on an estimated $500 a month for a cloud-based Session Initiation Protocol provider for call transfers, and the return on investment (ROI) would be realized in just a few months. Technology like VoIP switches has improved, server hardware has never been cheaper, and the "race to zero" price competition among public cloud service providers may be slowing, McDermott said. Not every business is in a position to host a private cloud, but McDermott said Fortune 1000 companies usually have big IT staffs and a high level of technical expertise in-house, making the public cloud harder to justify in terms of cloud ROI. "You can go buy half a million dollars of [Cisco Systems Inc.'s Unified Computing System] and another quarter million dollars of [other] technology and build your own cloud for less than a million dollars," McDermott said. "When you start doing the math on the number of servers you can provision off that and the cost of a CPU per hour, you probably start looking at it going, 'OK, what are the economics of moving to the public cloud?'" To simply transfer existing applications onto a cloud-hosted infrastructure is fairly pointless, unless it's part of a bid to create higher-level service offerings, other IT pros said. "In your legacy platform, usually you're just happy if you can deliver the same thing you were delivering in your datacenter" when there's a move to public cloud, according to Sean Perry, CTO for specialized staffing firm Robert Half International, based in San Ramon, Calif. "There usually aren't significant wins there, perhaps with the exception of [disaster recovery] capabilities or failover. But for most development teams, that's not high on their priority list." Companies bent on using the public cloud may just choose to discard legacy applications for newer cloud-based offerings, rather than port legacy apps to the cloud, Perry said. The bottom line? "The business doesn't care who runs the server, they care what value they get out of a service," said Arne Josefsberg, CTO for ServiceNOW, which makes IT service management software for private and public clouds.

IT pros wary of public cloud commitments

While analyst firms such as IDC predict increases in public cloud adoption that could amount to a compound annual growth rate of 27.6% by 2015, IT pros surveyed by TechTarget have a different outlook. Use of the cloud in general could be on a decline, based on the results of two TechTarget surveys of some 1300 global IT respondents. A survey conducted this month showed that 53.5% of respondents said they use cloud services now and 46.5% do not. In August 2012, 61% said they used cloud services now and 39% did not. Further, 601 respondents to the March survey that do not currently use cloud services indicated they aren't immediately interested; 85% do not plan on using the cloud for at least a year, up from 80% in August, while 46.8% do not plan on using cloud IT services at all, compared with 40% in August. Users that chose to forego the cloud primarily cited control, existing infrastructure limitations and security as reasons. But there was also pushback that cited existing in-house IT expenditures (31%) and concern over inadequate benefits offered by the cloud (24%). Even when the public cloud is in use, that's not a guarantee of a commitment to base an infrastructure on it, analysts noted. "We have talked to a lot of customers who have deployed four or five sizes of machines at Amazon or Rackspace -- they will use the public cloud provider to find out how many resources they actually need, and then they'll come back in house and make a [virtual machine] internally to match that," said Kyle Hilgendorf, principal research analyst for Stamford, Conn.-based Gartner Inc.
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