18/02/2013 10:46 GMT | Updated 19/04/2013 06:12 BST

TCO is One Reason Why Data is Headed to the Cloud

In the good old days, the primary (or usually only) choice was to have their own IT infrastructure installed on the business premises. But with the increasing bandwidths and network accessibility, cloud-based services have established themselves as a credible and cheaper alternative.

The Web is growing at an ever accelerating pace. More and more people are connecting to the internet these days compared to ten years ago. And businesses are also inevitably moving a lot of their services and applications online to stay in contention on the teeming cyberspace. And as more applications and sensors go online, the amount of data collected also goes up. And what are the choices in front of a business to handle their online application suites and services as well their databases? In the good old days, the primary (or usually only) choice was to have their own IT infrastructure installed on the business premises. But with the increasing bandwidths and network accessibility, cloud-based services have established themselves as a credible and cheaper alternative.

What it means in terms of cost

For any new technology to gain traction in the business world, it has to prove its worth in money terms: be it profit, or more emphatically, cost. Reduction in costs is like the Holy Grail of business. The rapid rise of the cloud computing sector in recent years is a testament in no uncertain terms to its efficiency in cost reduction, especially for businesses below Enterprise-level. Big businesses have the financial resources to maintain huge IT infrastructure and the manpower required to run, maintain and upgrade the same over time. But for SMEs, IT infrastructure can be a costly investment choice.

TCO or Total Cost of Ownership is a useful metric to analyze the difference in costs between making a capital asset investment in IT infrastructure and getting a similar service online from a Cloud service vendor. It is a simple and straightforward tool actually. First, measure all the expenses that would be incurred in setting up and running an on-site IT infrastructure: hardware and installation costs, HR costs and potential expenses for repairs, maintenance and upgrades. And then measure it against the costs that one would incur when a comparable Cloud service is leased from a vendor.

Right off the bat, the financial impact of embracing the cloud can seem quite startling, especially for businesses that fall below Enterprise level. One of the major problems faced by SMEs would be in maintaining an adequate IT staff to run their servers. Putting their data and applications on the Cloud service vendor's remote servers allows these businesses to benefit from substantial reduction in costs. The vendor is the one who incurs the total cost of infrastructure maintenance. And since vendors service numerous customers on the same cloud architecture, these sizeable maintenance costs can be offset by the fees collected from their total customer base, with minimized burden on individual clients.

And it is not just about cutting expenses

Though a cardinal virtue, being cheap should not be the only reason for businesses to invest in a particular technology. And data management in the Cloud offers several key benefits, with greater flexibility and elasticity being one of the most significant. Look at it this way: once you install a particular server array and ancillary networking infrastructure, its maintenance expense remains constant while there is no guarantee that the infrastructure will be constantly used at 100% of its potential. Recent experience has shown that in online data management, standard deviation in load is much higher than what it was just a decade ago. For businesses, the focus is now on making their databases more scalable and elastic. Cloud computing allows you just that. It makes more economical sense for SMEs with limited financial resources to migrate their data to Cloud environments since they offer highly flexible and often tailor made services.

The definition of an ideal Cloud computing services vendor

For a dependable benchmark on what cloud computing should be, the US Government's National Institute of Standards and Testing (NIST) offers a good starting point. NIST has five major criteria to define cloud computing: on-demand self-service, broad network access, resource pooling, rapid elasticity and measured service. And ideal cloud services vendor would be one that scores high on all the above five standards. With the public cloud IT market poised to cross $100 billion in the coming years, a host of major and minor players have emerged in what is promising to be a very wide market with a lot of depth. They include the likes of AWS,, Verizon/Terremark and VMWare. Let us take a look at one among them, Orion System Integrators Inc., to get an idea of what kind of services businesses can expect from a cloud services vendor.

Based in Monmouth, NJ, the company has an international footprint with several data centers in India and Chile along with a few more based in the US. The company is well connected, being multi-certified Microsoft Partner with tie-ins with the likes Amazon Web Services and Google App Engine. Their approach towards customers seems to be quite flexible enough. For example, businesses have the option to choose private cloud architecture or public cloud or even a Service Provider Cloud setup based on their requirements. They offer cross-platform compatibility which more of a norm than an exception these days. System Integration and Telecom network are key areas where the company claims core competency. With the kind of resources at their disposal, Orion System Integrators seems to be geared towards addressing the needs of both SMEs as well Enterprise level customers. As to whether that is good thing, especially for the interests of the smaller clients is a debatable question.