Moving to the cloud: The risks explained

The financial downturn has forced companies to reassess their operations and examine where efficiencies can be made without reducing productivity.

January 29, 2013

Deon Scheepers, Regional Business Development Manager, Interactive Intelligence Africa

The financial downturn has forced companies to reassess their operations and examine where efficiencies can be made without reducing productivity. The advent of cloud computing has been seen by many to offer the answer for reducing IT costs and associated outlay.
While on the face of it the cloud might offer savings, if you pick the wrong service, it could cost more than expected. Therefore, it is wise to look at all aspects of a cloud service to see if it offers the best return on investment and efficiencies for your business.

It’s Not All or Nothing
One of the first areas that companies need to examine before moving into the cloud is how much of the IT infrastructure they should actually transfer. Some might think that basing all their telephony systems in the cloud would save money, with services being accessed through a public network or a VoIP, meaning that there is no carrier relationship onsite. This would eliminate capital expenditure costs for their phone system, requiring only a monthly rental or per use payment. While this appears to offer better long-term budgeting, it is worth noting that if the VoIP connection is lost then so is all access to data or calls, which can be very costly indeed. This is particularly true for those businesses that rely on telephony for purchases or financial transactions, such as a retailer or a bank. Every minute that a customer can’t be contacted is time lost for selling. Research from CA Technologies estimates that the global amount of revenue lost to IT downtime is $26.5bn and among those departments most affected are sales and finance.

The safest option is to create a private cloud by purchasing and installing an infrastructure on the premises. However, this can be very costly both in terms of installation and continuing maintenance, making it only suitable for the largest organisations. The most cost effective option is a hosted hybrid model that offers the best of both public and private cloud networks: infrastructure operated by the vendor is deployed on a company’s local network with voice and data kept on the premises ensuring continued access and security, while the logic and routing is in the public cloud and offers the public cloud price model.

Important things companies need to look out for is the onsite equipment – who owns it and what does it cost? Some vendors might just rent out the equipment for a monthly tariff which could be supplementary to the service charge while others will offer the opportunity to buy the equipment for a lump sum or a payment plan spread out over a certain period. Again, it is worth checking how these are priced.

Data and Users
Businesses are producing increasing amounts of data that needs to be kept. This includes financial institutions that need to record and store an ever-growing number of calls under compliance regulations. As large amounts of data can be expensive to store in-house, many believe that storing this information in the cloud is a more cost effective solution. Indeed, with the right provider it is, but organisations must be aware of is that even though cloud providers can mitigate some of the expense of providing storage through economies of scale, they will encounter similar overhead constraints and data costs as an in-house solution.

Telecoms and Internet Service Providers
Finally, is worth considering how a business is going to connect to the cloud. Some cloud providers will want customers to use a partner ISP, with the cost incorporated into the monthly bill for the cloud service. While this sounds like a great deal, many companies are tied into existing ISP contracts that they will either have to keep paying until the contract expires or be liable for a hefty get-out fee.

There are also some cloud providers that will allow their customers to bring along their own third-party ISP, but will charge them a monthly interconnect fee per service per line.

In relation to telephony, in a true cloud-based scenario all that comes into the building are the broadband circuits. The phone lines are connected into the cloud provider’s data centre, for which a customer will be charged a premium. For example, the great rates a business has negotiated with its existing Telco for making calls to certain codes may not be offered by the cloud provider, particularly with calls to mobile numbers.

A Bright Outlook
Undoubtedly there are risks that businesses need to be aware of to avoid any nasty surprises, but looking carefully through a contract will reveal several of these. The most important piece of advice for anyone looking to move to the cloud is to research.
Moving to the cloud can create significant efficiency savings for companies but only if they are aware of all the concealed costs.