Should Your Business Rent in the Cloud?
August 8, 2012
Sometimes it can feel like we have tunnel vision here at Cii. We see technology angles in subjects that, on first glance, may seem completely unrelated.
Case in point: last week Zillow Real Estate Research released it’s latest report on the old question “Should you Buy or Rent?” Some people might have simply stopped at the real estate angle. We saw a connection to this Forbes article on the economics of cloud computing.
How? We’re glad you asked.
First, let’s look at the Zillow research. The traditional model for determining housing value is to look at the median listing price of real estate for sale versus the median annual rental rates of the same area.
But here’s the catch that Zillow found: the amount you’d pay to buy a big place in the burbs is way different than what you’d spend to purchase a pad downtown. It’s an apples oranges comparison.
So the researchers came up with a different ratio (a Zestimate, to use their lingo). When looking at a rental property, they instead took the home’s market value and divided it by the rental price. All of these Zesimates were then used to calculate the median household value for rental properties in a given metro area.
These new calculations resulted in a better model of how long it takes before buying a home becomes a better bet than renting. Of course, as Zillow acknowledged, there’re a lot of factors that play into this ratio that can’t always be accounted for, like current low mortgage and interest rates, the length of time a person plans to stay in a particular area, property tax, and maintenance (it is still hurricane season).
OK, we hear you asking: what does this have to do with cloud computing?
Back to that Forbes article we mentioned; the reporter dug deep to answer the question “Is Cloud Computing Really Cheaper?” Beyond the “maybes” and “in certain cases,” he found some cloud enthusiasts that openly admitted that renting cloud space might not be cost effective. One leader in the industry actually said that “for the most part – today – cloud economics across any cloud provider do not make sense for larger scale applications.”
So it sounds like you’re better off keeping your own in-house infrastructure, right?
Just like with Zillow’s rent versus buy dilemna, though, we need to make sure we’re comparing the same thing. A legacy server your company bought back in the dark ages and that needs lots of support to keep it running probably isn’t going to provide the same value as a cloud server that’s top-of-the-line and professionally monitored for optimal performance.
Then, too, the cloud opens up possibilities that might not have existed with your previous infrastructure; as another commenter in the article explained: “the value proposition quickly changes from how much does it cost, to what value does it create?” Put that way, the cloud becomes a factor in how competitive your business can become, kind of like the renter who always shows up for work early versus the homeowner stuck in traffic every morning.
Here’s the thing: cloud computing isn’t so much about finding a dirt cheap option (which in real estate terms might put both renters and buyers in a less than desirable place), but determining the value it can provide for your business.
Chances are you’d contact a realtor before moving to a new area to help you weigh your options. In the same vein, getting technical advice on the cloud options out there can make all the difference in making sure your business dollars are put to the best use. We’ve helped a lot of companies make those choices, and we’d love to help yours (just fill out this contact form to get the conversation started).
But we know you want an answer to the original question: should you rent in the cloud? Leaving aside individual business requirements, we tend to agree with this parting wisdom from the Forbes article:
The answer really does come down to how closely you are able to manage, track and adjust your infrastructure. If you’re taking a blind approach to just throwing your apps in the cloud without any kind of tracking or accountability than the answer is mostly likely no. If you take the time to clearly analyze your IT objectives, do the comparisons, the cloud is certainly cheaper.