Opinion and Return on Technology

ALTOM: Cost dictates whether cloud is right for your business

September 7, 2013

Life used to be so simple—we put data on a floppy disk and stored it in a little box or carried it around with us.

I can remember working for a company that had only one printer. It was on the ground floor and we worked on the floor above, so when we needed to print something, we “printed” the file to a floppy, then skipped downstairs with it to a second computer that hooked to the printer. Sometimes it worked, sometimes it didn’t.

Although our shoe-leather network was frustrating, it was simple. One floppy, one printer. We called it “sneakernet.” No multiple choices about how to store or send data, or how much each method cost. Not efficient, maybe. But simple. There was no Internet, no email, and no way to do it besides the sneakernet. Decision-making at its least difficult.

Today I’m not sure efficiency is much better, but simplicity is sure out the window. Now we have numerous ways to store and ship data, with varying costs depending on all sorts of factors.

What’s made the picture much bigger is the rise of “cloud apps,” business software that exists only “somewhere out there” in the cloud and not on your own computers. There still are programs that run locally on your computer, called “on-premises,” or “on-prem.” Some software providers do both, giving you yet more choices to sort through.

How to choose? One factor is how mobile you are. If your job takes you out of the office you may need to access your accounts from a phone, laptop or tablet from anywhere on earth, and the cloud applications may be necessary.

Portability is one of the big advantages cloud application vendors emphasize when pitching their wares. One of the biggest of the cloud applications, for example, is Salesforce, customer relationship management software that can be accessed from almost anywhere.

Salesforce replaces the old Rolodex the way that a Lexus replaces the horse and buggy. Its website advertises its Group service, which should suit almost any microbusiness for $25 a month per user. Larger companies may do well with the next step up for $65 a month per user. When you are paying by the user, the costs add up fast. But they’re still much cheaper than an on-premises solution like Microsoft’s Dynamics once you figure in the cost of local hardware, networks and maintenance.

Office software offers yet more confusing choices. Microsoft has gone so far as to field an entirely cloud-based Office version, called Office365 for a starting price of $5 per user per month. The slightly better version, called Small Business Premium, jumps to $12.50 per user per month. For an office with 10 people, Small Business Premium would run you $1,500 a year for all the users. An on-premises, locally-loaded version of Microsoft Office 2010 that’s roughly equivalent to Small Business Premium is $376 from Amazon as of this writing, or $3,760 for a 10-person office.

The price difference is one of Microsoft’s obvious selling points for cloud-based Office. But there are other benefits they can tout, too. The cloud version is maintained by Microsoft, not by your local IT, so you have lowered support costs. The cloud version is always updated, so you never have to do it, saving you yet more money.

Scale matters, however. If you’re a big firm, you can negotiate a much lower price for on-premises software, and you don’t have to worry as much about data security or connectivity. Larger firms already have IT support, so that added cost may not be much of an issue.

The major point here is that there are lots of costs to consider, not just the initial list price. Ten people all trying to use cloud software at the same moment can slow down internal networks as well as connections to the Internet, so you might need higher-quality equipment and a more expensive connection to the outside world. If the far-off provider has technical problems, then you have problems, too. How much will that cost you?

If you’re looking at an on-premises solution, is there a lower-cost alternative, perhaps in the open source community, that’s competitive with the cloud application? Can you get by with older versions of on-premises software that can often be purchased for far less than current ones? Other factors are whether third parties need access to your data, which argues for the cloud, or if you need extensive customization, which is typically easier on-premises.

On-premises can be cheaper, and cloud may be cheaper. It just all depends on circumstances. Ignoring those circumstances is probably the most expensive decision of all.•

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Altom is an independent local technology consultant. His column appears every other week. He can be reached at taltom@ibj.com.

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