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To find cloud cost savings, all you need is a little patience

IntroCorporate IT execs are locked in debate over whether their companies can really save money by moving some applications to the cloud. The IT community is riddled with stories of companies that launched a public cloud app, only to build a private cloud once costs flew out of control. So does cloud computing really save money? And how do you choose the cloud platform best for your needs? When Brickfish, a Chicago-based social media marketing software provider, moved its headquarters from San Diego to Chicago in 2009, the company switched from an on-premises datacenter to Rackspace Hosting's managed service model. But it found the cost savings to be negligible. Renting servers with Rackspace still cost the company about $47,000 to $52,000 a month, said Michael Mullarkey, CEO of Brickfish. When it was time to renew its Rackspace contract, Mullarkey thought he could cut expenditures and improve Brickfish's ability to innovate if he moved the company's entire technology stack to NaviSite's NaviCloud. The shift also allowed Brickfish to partition off certain virtual machines for some of its larger clients that wanted their own virtual private clouds for security reasons. One such company was retailer Vera Bradley, which used Brickfish's social marketing app to create a page on Facebook that features its housewares products. With the cloud migration to Navisite, Mullarkey saw significant cost reductions. Brickfish went from spending just under $700,000 hosting and maintaining boxes with Rackspace to under $200,000 with NaviCloud. Mullarkey was able to pump that $500,000 in savings back into Brickfish's own research and development. Others do agree that there are cost savings from the cloud, although not necessarily immediate. Bluebird Auto Rental Systems, a Dover, N.J.-based firm that handles credit card transactions for auto rental centers worldwide, needed a cloud provider with PCI DSS certification. Shortly after Amazon Web Services (AWS) became PCI DSS-certified, Phil Jones, vice president at Bluebird, said the company jumped from hosting physical servers with OpSource to AWS EC2 public cloud. By simply eliminating the server-leasing fees it had with OpSource, Bluebird cut costs from 60% to 70%. However, the money saved from moving to EC2 didn't magically stream in. "After we were in the cloud for about six months and were sure this was the way we wanted to go, we took advantage of [AWS EC2] reserved instances and now get a much lower rate," Jones said. "The break-even point is about six months. That's where we're saving money for the rest of the three-year term." Cloud value isn't just about the almighty dollar The cost savings of moving to a public or private cloud is one thing, but you're getting much more value than cold, hard cash, said Mitch Greenwald, CEO of CloudBakers, a Chicago-based integrator. The trick is to choose the right cloud service model and cloud provider in order to get that value. "SaaS offers an extremely high value proposition, and PaaS [offers] accessibility," he said. And while IaaS has its benefits for some companies, it won't necessarily reduce capital expenditures. "With Rackspace or AWS, you still need to manage servers, monitor your network and maintain it -- even though it's a cloud," Greenwald added.
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