By Bernard Golden
Nov. 3, 2016
A different type of issue that the study highlights indirectly is the question of IT costs. The study defined a set configuration, assigned costs to the various components making up the configuration, and used that to compare against public cloud costs. In real-world settings, enterprise IT groups have very, very poor cost tracking and assignment.
In fact, the morass of IT cost tracking was highlighted by Michael Dell himself when he proclaimed the superiority of on-premises infrastructure by comparing the $5,000 cost of a physical server to the $45,000 cost of the equivalent on AWS, completely ignoring the other (expensive) resources required to operate that $5,000 server. This kind of thinking is rampant in the industry and reflects the lack (or indeed, comprehension) of using Activity Based Costing, which has been a best practice in the manufacturing sector for over 35 years.
Despite all the heat and noise raised by 451’s study, I fall back to the conclusions I reached in my previous post. Most IT organizations, despite their lack of true cost management tools, will, in the long run, intuit the economic unviability of private clouds, except in a few particular circumstances (e.g., data sovereignty).
This will cause, over time, the migration of most application deployments into public cloud environments. On-premises infrastructure will inevitably shrink to a fraction of what is currently installed, with much pain realized by the legacy vendor/on-premises infrastructure staff coalition as this dynamic plays out.