The cloud is a technology that has truly arrived in the business world. Its use is becoming ubiquitous — almost a necessity — as companies struggle to keep up with ever-expanding demand for greater digital bandwidth and data storage. Recent industry research by Flexera shows that most businesses are incorporating cloud computing, whole or in part, into their IT enterprise strategy. Cloud spending forecasts also demonstrate the upward trend. According to Gartner, public cloud end-user spending will hit nearly $500 billion in 2022. That represents a 22 percent increase over the $410.9 billion in 2021. By 2023, Gartner forecasts end-user spending to reach nearly $600 billion.
While it’s clear that businesses are increasingly adopting cloud computing, a basic question about cloud strategy remains — is it better to keep cloud hosting in-house or to outsource?
There are pros and cons to each, but budget restrictions, compliance issues, and staffing are three key areas that often shift businesses toward outsourcing. Keep in mind that while moving to the cloud may sound lofty, it’s much more grounded in down-to-earth issues like cost, space availability, and security. Remember, the cloud isn’t really in the sky; it’s in someone else’s data center.
Here are four items to consider when deciding whether to outsource cloud hosting:
Cost – Businesses that want to keep their cloud environment within their walls may be in for a rude awakening when it comes to costs. A large upfront investment for hardware and software will be needed for in-house hosting. This hefty expense can be tough for many businesses to absorb, which leads to one of the major attractions of cloud outsourcing — lower cost, or more accurately in many cases, a more predictable cost. Rather than laying out thousands of dollars to purchase their own equipment, companies can choose to outsource via an OpEx model — offered by many cloud providers — in which customers pay a fixed, recurring (usually monthly) cost for cloud hosting and storage. Of course, the “rude awakening” we mentioned earlier can also be said for public cloud costs, which are notoriously higher than many companies anticipate. That’s a major reason why so many enterprises are choosing a colocation or hybrid model; it’s the Goldilocks approach on cost.
Another important area to keep in mind are energy costs. With power rates rising in many parts of the country, the additional expense to operate the servers and applications needed to run an in-house data center can be considerable. Outsourcing enables companies to tap into the pooled energy resources, and typically lower energy costs, offered by cloud providers.
Staffing – Building, maintaining, and monitoring an in-house data center is no easy task, and it’s getting harder. Cloud architecture is a complex process and requires specialized skills. It’s important to routinely consider whether your IT team has the internal expertise to continue handling ongoing data migration, maintenance, and management.
Even if your company has an IT person or two with such knowledge, is it the best use of resources to devote all their time to maintaining an IT environment in-house as opposed to other business initiatives? This is often a dealbreaker for small and mid-size companies, which may not have the bandwidth for a dedicated cloud position. By outsourcing cloud hosting, businesses have access to a large pool of experts employed by the cloud provider.
Compliance – Many organizations have IT compliance requirements, set by the government or their industry associations, related to the protection of consumer privacy and to guard against fraud, theft, and other illegal activities involving business data. The most common is probably HIPAA, while publicly traded companies must comply with mandates of the Sarbanes-Oxley (SOX) Act, enacted in 2002 to provide greater oversight of corporate financial reporting. However, IT executives across industries know there are dozens more. Ensuring that your organization has the required cloud compliance certifications is key and can be time-consuming, particularly since some certifications require annual renewal. This is another factor that prompts organizations to choose cloud outsourcing. The service provider is responsible for ensuring cloud compliance certifications which also cover their hosted organizations. Outsourcing not only data center management, but also the compliance-related responsibilities that come with it, becomes more and more attractive to businesses every day.
Security and Reliability – Does your organization have the tight physical and systems security that would be common to large cloud hosting companies? Cybersecurity is a growing concern worldwide, so it’s important to provide the best protection possible for your IT infrastructure. Also, keep in mind one of the most critical factors of all – reliability. Most cloud providers have invested considerable time and money to ensure high uptime for their service. Does your organization have failover addressed and can it quickly respond to a service outage? If not, cloud outsourcing may be the right choice for your company.
Selecting a Cloud Provider
When looking for a cloud provider, consider a company with significant experience in cloud consulting and developing tailored, security- and compliance-centric environments. LightEdge has proven expertise in successfully planning and implementing a variety of cloud strategies for organizations large and small.
Click here to learn more about how LightEdge can help your organization adopt a successful cloud strategy.