Moving Apps To The Cloud Saves Money, Users Say

March 10, 2014 Timothy Prickett Morgan

Whether or not moving applications to the cloud actually saves money or not is one of those arguments that is not going to go away any time soon. And like most things, the true answer to the question is: Well, that depends.

Frustrated by that answer, the analysts at Computer Economics got on the horn and found some companies that have moved their applications–lock, stock, and barrel–from on premises to a variety of software as a service (SaaS) alternatives. The company did detailed interviews on seven customers, including two manufacturers, a life sciences organization, a wholesale distributor, a systems integrator, and an online content provider. The companies ranged in size from $50 million to $550 million in annual revenues and had between 135 and 860 employees. In other words, they were typical midrange shops, at least by those metrics.

The savings that companies saw were not necessarily as high as you might think, but as you can see from this report highlight, they were not zero, either. The data that Computer Economics reveals publicly shows that for IT operational spending (as opposed to capital spending), the percent of IT spending as a percent of revenue for these companies fell by 16.3 percent averaged across the seven companies, and on a per user basis, IT operational spending fell by 18.5 percent.

The summary doesn’t provide details about IT hardware and software spending cost levels, but apparently this also drops. This cuts against conventional wisdom, which holds that cloud is always more expensive than on-premises gear, and especially so for the very largest companies with very sophisticated IT operations and deep skills. It would be interesting to see data on before and after capital and operational spending for IT for a broader set of companies, and in particular, companies engaged in brick and mortar businesses such as manufacturing and distribution. Online companies are, by their very nature, already more sophisticated, so having an online content provider in the mix skews things.