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Where to look for cost savings in the cloud

Where to look for cost savings in the cloud

6 ways enterprises can achieve significant cost reductions by switching to public cloud services

Credit: 101711207 © Sittikan Katchamart -

The potential to save money is by no means the only reason for moving to the cloud. Many companies cite potential benefits such as greater agility, easier scalability, and even improved security as drivers for shifting data and applications to a cloud environment.

A cloud migration can actually end up increasing expenses for companies in certain areas, especially if a lot of updates and maintenance are required. Still, there are clearly lots of ways organizations can save money by moving data, applications, development, and other components of IT to cloud-based services.

Following are six examples of how enterprises can achieve significant cost reductions via the cloud. It’s important to keep in mind that the impact on costs can vary greatly, depending on a company’s current technology infrastructure, the types of applications it runs, the cloud services being used, and other factors.

Power down the data center

For many, a move to the cloud means a shift away from on-premises data centers. That’s the case at hospitality company Wyndham Hotels & Resorts, which realized cost savings of 45 percent by shutting down a data center and migrating applications to the cloud.

After spinning off from its legacy company, Wyndham decided to exit its corporate data center, working with partner Rackspace on the migration to the cloud.

“We realized early on that we were not going to be able to completely migrate to the cloud right away, especially with some of our legacy applications,” says Scott Strickland, executive vice president and CIO at Wyndham. “Through partnering with Rackspace, we determined that a colocation strategy made sense as a launching point toward a long-term IT evolution.”

The company began by identifying “anchor applications” that could be moved to a cloud-based, software-as-a-service (SaaS) model. These applications included its central reservation system, property management system, and content management system.

“Once we moved those applications into a SaaS model, we addressed probably 50 percent of the computing power in our traditional data center,” Strickland says. “In total, we were able to move about 200 applications to the AWS [Amazon Web Services] cloud,” with the rest of the workloads being handled in a colocation facility.

Wyndham originally had about 280 applications hosted in the data center. Working with Rackspace, the company was able to retire close to 70 of those and move the remainder to the combination of colocation and AWS.

The cost savings were driven by having fewer resources tied up in managing the data center, eliminating the need for data center leases, reduced maintenance costs for operating systems and databases, reduced hardware costs, and moving into a virtual environment.

Pull the plug on traditional telecom

For some companies, especially global enterprises, telecommunications costs can be among the most significant business expenses.

Cloud communications, in which telecommunications applications are provided over the Internet, offers ways to save money. 

With the advancements of voice over Internet protocol (VoIP) over the years, voice has become part of the shift to the cloud. Companies can replace conventional business telephone equipment such as PBXs with a cloud service, and the cloud can become a platform for voice, data, and video communications.

Several trends are pushing more companies toward cloud communications. One is increasingly distributed operations across branch and home offices. Another is that organizations need to provide access to enterprise networks via more types of devices such as smartphones.

Avery Dennison, a global materials science and manufacturing company, as part of a modern telephony initiative has been gradually replacing its legacy PBX systems with a cloud-based virtual phone system.

With this effort, the company uses capital more effectively by avoiding expensive on-premises products, says Nicholas Colisto, vice president and CIO. The cost for a local PBX is more than $1.5 million, he says, and while savings varies based on individual sites, Avery Dennison has saved 25 percent to 40 percent in communications costs.

Offload storage to the cloud

Data storage volumes have been growing at a significant rate over the years, as organizations gather more information from websites, mobile devices, e-commerce transactions, social media, enterprise applications, and other sources.

With the emergence of the Internet of Things (IoT) and edge computing, the growth in data volumes is likely to become even more significant in the coming years.

Many organizations are turning to the cloud to help handle their big data initiatives. The easy scalability of the cloud makes it a potentially ideal model for data storage. But beyond scalability, the cloud can also enable companies to reduce their total storage costs.

For example, Myers-Briggs Co., a provider of people development products and services, moved the primary data storage, backup, and disaster recovery for one of its facilities into a cloud-based, on-demand storage service.

By moving storage into the cloud service, Myers-Briggs saw a reduced total cost of ownership for data storage of at least 50 percent. Not including savings from reductions in time spent managing backup, storage, and disaster recovery systems, the company anticipates saving $150,000 over five years on the cost of backup system licenses and storage capacity.

Streamline data-intensive processes

Big data analytics has become a key IT initiative at countless organizations looking to glean insights from treasure troves of data. The cloud can deliver the processing power needed to support these initiatives, which can also lead to cost savings.

Read more on the next page...

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