African business edging closer to establishing the true cost of cloud

The choice to adopt cloud technology for African business has to make business sense. However, tallying the real cost of such a move has proven to be a near impossible exercise according to one expert at the ITWeb 2017 Cloud Summit hosted in Johannesburg today.

George Etheredge. ICT Research Analyst, Frost & Sullivan, Africa says while African businesses are closer to determining the true cost of migrating onto the cloud, there is still much to do.

"Generally businesses look at return on investment but when it comes to cloud we are looking at functionally identical systems ...things that are going to do the same thing - for example a cloud CRM system or an on-premise cloud system, they do the exact same thing and the revenue potential is the same, and so by looking at return on investment you would be overcomplicating things. All you should actually be interested in is the cost because the systems do the same thing and so the measurement tool should be a determination of the total cost of ownership."

Etheredge advises that in terms of economics a foregone benefit would count as a cost in such an evaluation as benefits offered by the cloud (that on-premise does not provide) would count as a cost for the latter and vice versa.

"Choosing whichever is cheaper only gives you an accurate reflection of the situation if you have properly captured all costs and benefits. The mistake people often make in their comparison of on-premise and cloud is that people think that the cost of on-premise is captured after the setup costs and they forget to account for maintenance costs, downtime etc. On the other hand even the most detailed models fail to capture the key benefits of cloud like the business benefits of agility, scalability, or even the potential costs of security. These should be brought in so that we can have a true reflection of the cost and benefits for the business."

Etheredge says the well known lack of scalability in the choice of a subscription model as opposed to one of ownership implies a business or opportunity cost - especially because a business will need to access the advantages of scalability during volatile economic times.

He adds that a system that is not agile can result in time to market delays and that security, which is usually the main barrier to cloud adoption in business, should a process that works out the costs and probability of an attack as well as the impact such an attack would cost in terms of a business's reputation.

Etheredge believes security constitutes a threat for both cloud and on-premise systems.

"It is impossible to capture all the costs and benefits, but a more accurate comparison is going to be more beneficial than a less accurate one. It is also one thing to talk about scalability and agility and all of that, but can businesses actually estimate what those are? For scalability I think there is quite a good chance. I should also be able to work out the costs of lost business. For agility, if you are releasing a new product you can probably estimate how much it would cost in terms of time to market. If it is a new and very innovative product, that can be more difficult," he says.

"For security a five-minute Google search would be useful, but most people are not interested in the average cost of a breach ... but more interested in what would be their costs as a business individually and that is going to be far more difficult to estimate. We may have trouble in measuring all these costs and benefits but the right thing is to acknowledge that they exist and to have them in mind as businesses when choosing between cloud and on-premise systems."

Etheredge is of the view that bandwidth and electricity are among the main costs to consider in Africa, in addition to business continuity.

"Every country has some form of business risk although there will be slightly different factors and variations per country. If you look for instance at bandwidth you are going to pay more in Nigeria and Kenya than in South Africa because of the bandwidth you need. I think we are getting closer to figuring the costs as best we can as more busineeses get onto the cloud."