Recently over on GigaOm, Charlie Oppenheimer wrote an extensive article looking at the relative costs of cloud versus self-hosting. It’s an excellently written article but one which in my (not so) humble opinion is flawed. Oppenheimer worked his calculations based on one particular vendor but my commentary that follows looks more at Cloud Computing in general.

We devoted an entire section of the CloudU curriculum to discussing the economics of Cloud Computing. But what is really telling, and what relates directly to this discussion, is the fact that only a very small part of our discussion in the Cloudonomics lesson related to bottom line costs. Rather, we spent time looking at the other economic implications of Cloud Computing, namely speed, focus and agility.

It’s worth recapping these areas in an effort to remedy the harm done by an unhealthy focus on bottom line costs.


Very simply, Cloud is faster than a comparable on-premise solution. The time-to-deployment metrics for Cloud applications or Cloud infrastructure overwhelmingly speaks to this point. Sign up for a Cloud application and compare the time it takes to buying, installing and learning often unfriendly traditional software. Spin up a server with your favorite Cloud infrastructure vendor and compare it to requisitioning, getting final approval for, and waiting for deployment of physical hardware. Like for like, Cloud is faster. And that drives indirect economic benefits.


The economy is tanking, companies are expecting more from their people for less and we’re all busier than ever before. Any solution that gives us the ability to focus on core business and ignore the minutiae of un-strategic matters is beneficial for the organization. It’s a somewhat cliched analogy but you wouldn’t expect your CIO to worry about maintaining the turbines at his own power plant, maintaining software and servers is the same. Abstraction = Focus and that delivers economic benefits.


Silicon Valley has an overused term – “The Pivot” – to describe the trend of businesses changing who they are and what they do – seemingly on a dime. Now clearly Silicon Valley is a particular kind of a place, but it’s hard to argue that all organizations, no matter whether they’re based in Afghanistan or Zimbabwe, have similar pressures to start quickly, move quickly and change direction quickly. Cloud Computing, with its utility pricing, ease of set up and lesser degree of lock-in than other alternatives, increases an organization’s ability to be agile. Agility = Competitiveness and that drives economic benefit.

Focus on Value. Not Cost

The bottom line is this: Any organization that simply tries to carve cost out of its operations without an equal (or higher) focus on driving value, is like someone starving themselves in order to lose weight. It might deliver in the short term, but in the long term the prognosis is decidedly dreary. Cloud Computing can add so much value to an organization that simply focusing on cost savings is silly.

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.

1 Comment
  • Agreed Ben. The comparison is flawed because the two options don’t have the same starting point.

    What’s missing? How long would it take to acquire, build, set up and staff a working data centre to get it to the comparison point with Amazon? Would capital approval be granted for that? What is the time-to-value for whatever they’re trying to achieve? What if the business environment changes one year later and asset utilization drops to uncompetitive levels – will the investment be written down?

    With Amazon you have the option to turn on a dime, realize ROI and stop tomorrow if the world changes.

    At the risk of caricaturing the point, it’s as if you’re trying to build a cost model for someone buying (or should I say building) one’s own car because under certain very specific conditions – assumed to be long-term and unchanging – it would be cheaper than renting a car.

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