The most recent Nemertes UCC TCO study reveals that the ability to refocus IT on strategic initiatives and agility could be more important than cost savings when it comes to driving businesses to the cloud.
Most people assume that cloud is the only way forward for their business in this modern environment, and for many, that is the case. However, it’s always a good idea to look at the hard evidence when it comes to making important business decisions.
The Costs of Cloud
When the cloud first emerged, the largest selling point was that it could save companies money. However, that’s not necessarily true. Ultimately, companies that move to the cloud for UCC (unified collaboration and communications), find that their first-year costs increase by around 47%. Those costs include operational, implementation, and capital costs. After the first year, costs grow 87% higher overall, according to the 12th annual study by Nemertes.
However, it’s worth noting that smaller companies moving to the cloud (those with fewer than 50 employees), did see some cost savings. On the other hand, larger companies moving towards hosted and UCaaS solutions saw cost increases. The data suggests that everything from subscriptions, to staffing, network transportation, and security audits are driving these cost increases.
Though we’ve long been told that a move to the cloud can reduce staff, the truth is that most companies keep hold of staff, and maintain their overall staffing costs. After all, IT personnel are often spread too thin, to begin with.
What’s the Truth about Staffing?
Results vary based on the company side, but there are consistencies. For instance, in all cases, the break-fix area decreases. However, managing partner relationships and interacting with business units increases. Programs to expand adoption and user awareness increase for large companies, and decrease for small businesses. Overall, it seems that staffing increases by 4%. For larger companies with over 2,500 employees, that number goes to 45%, whereas small companies with fewer than 500 employees experience a 20% decrease.
Importantly, staffing is just one piece of the puzzle. Alongside concerns regarding people, companies also need to pay monthly subscriptions for the cloud services they weren’t paying for previously. Additionally, 38.2% of companies say that network costs increase by 23.4% because more traffic moves over the WAN. In contrast, 27.5% suggest that their costs decreased by up to 18.3%.
Supporting data also suggests that operational costs start to drop when companies use performance management tools and tools for operational management.
So, What Now?
Despite the fact that the cost situation might not be what many thought it would be when shifting to the cloud, most companies should still be evaluating their architecture and services. There have been changes in the factors driving people to the cloud. For instance, in 2016, when companies were asked what’s pushing them to the cloud 49% cited cost reduction. However, that number has dropped to 33% this year.
Cost could be the reason, however, that 15% of companies aren’t considering cloud at all this year, a number that’s boosted from 9% last year. However, if organisations can go into the cloud decision-making process with realistic expectations, they should see success.