Well, this is awkward – after spending years playfully eviscerating 451 Research analyst Owen Rogers, finally, I’m taking him to task “for reals.” Some research he’s just completed, while empirically correct in its findings, is intrinsically flawed in its focus.

451 Research has just published a report (well, Canonical published the report, that they commissioned from 451 Research, but you get the point) entitled “Busting the myths of private cloud economics.” In articulating why the report was written (well, beyond the aim to deliver some more revenue to Canonical, of course) it is pointed out that 50% of enterprise IT decision-makers identify cost as their number one pain point of the public cloud.  The report then aims to compare current managed public cloud pricing structures to those of private cloud. It grandiosely promises to debunk the myth of cloud economics and help businesses find the best and most economical option.

The report findings are worth summarizing before I jump on my soapbox to suggest that the fundamental question was flawed. But first….

“Public cloud isn’t always a bargain.”

The report opines about promises of better economics from public clouds but found that the reality was different. According to 451, Cloud computing has long promised huge cost benefits for enterprises – to whit, 40% of enterprise IT decision-makers surveyed for 451 Research’s Voice of the Enterprise: Cloud Transformation, Organizational Dynamics study said that reducing costs was their main reason for moving to the cloud. But over 50% of decision-makers said cost and budget were still their number one pain point in a study just a few months later. The reason as 451 sees it? Once companies start consuming cloud services, they realize the value that on-demand access to IT resources brings to the business in terms of quicker time to market, easier product development and the ability to scale to meet unexpected opportunities. As a result, enterprises consume more and more cloud services as they look to grow revenue and increase productivity. With scale, public cloud costs can mount rapidly, without savings from economies of scale being passed on.

This behavior is called Jevon’s Paradox and Wikipedia (the source of all information, right?) defines it thusly: “In economics, the Jevons paradox (sometimes Jevons effect) occurs when technological progress increases the efficiency with which a resource is used (reducing the amount necessary for any one use), but the rate of consumption of that resource rises because of increasing demand.” Or, in other words, it’s good and cheaper and brings benefits so you use more in total.

MyPOV

There are some more findings, specifically related to what the sponsor of this research, Canonical, is trying to push. I’ll look at that stuff in a future post (slightly unfair, I know, but editorial control and all that). For today, however, I want to write what I’ve said probably a million times before: if you’re moving to the public cloud to save money, you’re doing things wrong. The public cloud brings a variety of benefits: it enables organizations to focus on core business, it allows them to scale (up or down) easily, it allows them to avoid the horrendous impacts of capital investment.

All of those benefits, however, are about adding value to the organizations – allowing it to move faster, iterate more rapidly and innovate at a higher level – they are all value drivers and, as such, looking at value accretion rather than cost reduction is the appropriate lens to use.

In fairness, Rogers and 451 moderate their viewpoint somewhat in further findings which I’ll write about tomorrow. But the fundamental thesis that costs matter (as a basis for making a decision) is shortsighted, in my view.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

6 Comments
  • When I go to the pub on a Friday, I choose a premium beer. It’s certainly not the cheapest, but I get value in the form of additional enjoyment for that extra pound. There’s another pub down the road but my premium beer of choice is a pound more than in my local pub – I don’t hang out there so much. I’m happy to pay more for something I appreciate, but I also don’t want to pay more than I have to.

    It’s similar with cloud. Of course, if you choose your cloud provider purely based on price, then you’re not really embracing its potential. But once you’ve worked out what you want and what you need in terms of features and functionality, you’d be mad to pay more than you have to.

    You wouldn’t expect my local pub to be better value than the other pub, because it’s so much prettier. It goes to show – do your research, and be careful of making decisions on which cloud model is cheapest.

  • I really don’t like the term “public” cloud. There is nothing truly public about it, it’s being run by public corporations (as in “traded on the stock market”) perhaps but that’s all.

    • wcurtispreston |

      I’m fine with the term. It’s public in that anyone can use it, just like a public park. But even in a public park, you can reserve private spaces for your exclusive use.

  • I experience daily the struggle a traditional IT department has with adjusting their everything(training, people
    processes) to make full use of the cloud. Comparing by cost reminds me of an old quote that a cynic is someone who knows the cost of everything but the value of nothing.

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