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July 2011 | Outsourcing Blog | BPO Industry Updates and Articles

Shifting to the Cloud

by: Karen Cayamanda

Wednesday, July 20, 2011 | Comments (0)

Category: Outsourcing Research / Trends

Tips for Shifting to the Cloud

Cloud services are being touted as an economical option in deploying assets and services. Cloud service providers present multiple choices for clients that can be further customized for specific needs. However, Cloud service providers have varying pricing structures, due in part to the nature of their companies and their services.

Interested in shifting to the Cloud? Take note of these tips from outsourcing consultancy firm TPI:

1. Existing contracts must contain clauses for penalty-free migration to the Cloud. Update the agreement to contain exit clauses that require your contractor to help facilitate the migration of data and applications to the Cloud.

2. Cloud hosting deals are different in terms and structure from outsourcing deals. According to TPI, there are three types of Cloud service providers:

•    Traditional service providers offering Cloud services, i.e. IBM, HPES, CSC, etc.
•    Newcomers who provide infrastructure as a service, i.e. Rackspace, Navisite, Terramark, SFDC, Workday, etc.
•    Traditional consumer companies entering the enterprise space such as Microsoft, Google and Amazon. Each has its own terms and subscription models due to their backgrounds.

3. Cloud migration also means shifting from capital expenses (CAPEX) to operating expense (OPEX). Assets will not depreciate anymore, since there are no assets to maintain. However, a company must plan well and forecast its budget to make sure that they operate within allocated costs.

4. Cloud services are more transparent, but pricing structures among cloud service providers tend to be inconsistent. Some Cloud services are public, others are private, and some offer hybrid options. One provider may offer fees by processors used, or costs by CPU hours used.

5. Pricing terms, such as total cost of ownership (TCO) and base services fees, must be clarified before any Cloud service deal is closed. Cloud computing models are usually difficult to contextualize in a formal business case analysis, since no standard pricing exists among service providers. Initial cost estimates do not cover expenses that may be incurred along the way. These costs may include:

  • Service and technical resources
  • Migration costs
  • Additional network bandwidth
  • Book value of stranded assets and software
  • Amortization of applications
  • Additional staff for new contracts
  • Minimum volume commitments
  • Cost of partial termination

Make sure to cover all your bases in shifting business processes to the Cloud. Terms and pricing schemes vary among service providers due to the differing nature of their businesses.