Cloud computing has enabled a new income stream and new ways to cut operations costs for service providers. This article is going to cover some basic strategies on how service providers can maximize profits by leveraging cloud computing; and how companies can leverage on cloud computing to cut operational costs.
Cloud computing as a door opener
There are two kinds of service providers for cloud computing: developers and resellers. Building/reselling a trusted application will attract more customers. For developers, revenue comes from subscriptions paid by the customers. If a cloud-based application works really well, porting it to an on-premises solution might be a possibility for some customers.
What if you are a reseller? A lot of service providers out there are system integrators, implementing third party solutions to solve customer issues. If being a SI is your company’s core business, revenue is purely commission based.
For IT consultants, selling cloud solutions exclusively is going to have major effects in profits for the company — in a bad way. However, as long as you deploy trusted solutions, gain the trust of customers, customers will be coming back for more solutions from you. This opens the door to more opportunities, maintenance contracts among them.
Testing a new market
Although the technology is advancing, server hardware is still expensive. Cloud computing can absorb some of the cost of disaster recovery solutions for customer data.
As a partner in a SI, sometimes we would like to test new solutions for customers, without incurring the extra hardware cost. This helps us avoid over-investing in a solution that has unknown return on investment (ROI). Since cloud solutions are usually on a pay-as-you-go basis, we are only paying for whatever processing resources we use. This allows us to expand dynamically without over-investing in costly hardware.
Being able to dynamically deploy new solutions, SI have a better advantage over their competitors in terms of agility in introducing new solutions to new market. This doesn’t save much on money, but this gives the SI a huge advantage of monopolizing the market.
Outsourcing to the cloud
Having a fixed operational cost every year — whether it’s managing a mail server or paying for the licenses for anti-spam — costs can be further reduced by having everything moved to the cloud. How? Let’s break it down, using a mail server as our hypothetical:
Having a mail server (or any server) requires us to hire a dedicated administrator. Management of the storage subsystem also requires professionals. Their expertise doesn’t come cheaply, as it requires a few years of experience for an employee to master the technologies. Don’t forget — it usually takes more than a single employee to be able to manage the entire infrastructure, from the network to the server applications to the firewalls/proxies.
Anti-spam/anti-virus software cost
One common pain point for email administrators is filtering viruses and spam from the email system. Attackers find new ways to exploit mail servers and anti-spam systems, and email administrators need to keep up with it.
To better manage spam and email with malware, we commonly purchase or subscribe to anti-spam services (per user or per server licensing), which will do the hard work of detecting spam on behalf of the email administrators. Cloud services include spam and antivirus protection for free, and they do a good job proactively monitoring their network for the latest spam, often leveraging information on the latest outbreaks from all their clients to stop outbreaks proactively.
Redundancy and High Availability (HA) cost
Cloud offers redundancy and HA for customers, and this feature is included as part of the cost. Implementing and maintaining a HA solution is much more complex than maintaining a single server, as this includes management of clusters, multiple physical servers, and to some extent, virtualization. The ability to manage this extra complexity requires extra expertise and resources, increasing the total cost a few notch up.
Additional costs include asset management, power, physical storage and server room infrastructure.
When you have hundreds or thousands of users to manage, keeping track of the users/licenses can be a headache.
According to some calculations, a 650 watt power supply running constantly will cost USD$671 a year for each server. With HA solutions, two or more servers are required, increasing the cost of power consumption.
Having extra servers mean extra physical storage in the server room. Extra servers also mean extra heat will be generated from the servers, hence extra electricity needed for cooling.
A proper server room will need to have raised flooring, a proper fire plan and off-site storage. You don’t need to go through all these hassles to get the proper equipment ready and setup in the server room.
Moving to the cloud does help cut operational costs while able to maintain the business agility and growth. Cloud offers so many benefits for the customers; it might be a good decision for service providers to start focusing on their products on the cloud.
What do you think about providing services through the cloud? Ping back!