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Does cloud computing reduce IT staffing and costs?

The given wisdom is that cloud computing decreases IT costs and improves employee productivity. But evidence suggests that the benefits of the cloud aren't so clear-cut.

Tom Nolle

When IT operations are outsourced to the cloud, the major benefit is a reduction in staffing and costs, right? Not according to enterprises. They are clear that IT cost containment or reduction is not their primary goal, and this is true for firms planning cloud computing initiatives and for those that are partially committed. In fact, while statistics on impact are still sparse, evidence suggests that cloud computing generates a slight increase in IT staffing even when public cloud resources are used. For private cloud implementations, staffing requirements appear to be higher, but user satisfaction with application performance is much higher, and capital costs are normally lower.

Enterprises have consistently viewed the goal of IT investment as an improvement in productivity for line departments for the obvious reason that most organizations have far more labor cost in their primary operations groups than in IT. Surveys of enterprises also show that the productivity focus is growing rather than declining and that enterprises view the customization of the information tools available to employees as the primary way in which IT is likely to improve productivity.

Enterprises' goals for cloud computing are less firmly established, and the question of whether enterprises will buy cloud technology from outsourcers or deploy it in "private" clouds is particularly fuzzy. Not surprisingly, so are the expectations about how cloud computing might affect IT operations and staffing. There are two primary questions:

  1. What IT activity is needed to use cloud computing: as a service, as an internal IT architecture, or both? The popular view is that no incremental work is needed, and this is not likely to be true.
  2. If computing tasks were outsourced to the cloud, would IT staffing requirements be reduced? The stock response is yes, but that's not likely to be true either.

The real benefits of cloud computing
The real answers to these questions can come only from an examination of the justification for cloud computing and how it would be deployed.

Enterprises' majority of cloud computing applications focus on episodic "utility computing" applications that arise from special business or regulatory requirements. Some of the poster-child applications, in fact, relate to tasks such as data analysis for pharmaceutical trials that are clearly demands for specialized computing resources that even large enterprises are unable to justify in-house. Enterprises report that these are most often commissioned directly by line departments and have no real impact on internal IT organizations. These applications are characterized by the fact that they are not by nature integrated with normal IT processes and applications. Some enterprises liken it to borrowing a computer for a day.

Cloud computing has two possible drivers as an element of a company's IT strategy and not just a supplemental utility computing strategy. An IT organization may consider cloud computing to reformulate the way it organizes and assigns computing resources to applications, or line departments may consider cloud computing to enhance productivity.

And while nothing about cloud computing per se enhances productivity, some of the paradigms that facilitate the use of cloud computing in mainstream enterprise IT can also support productivity improvements. The clearest examples are the support of a mashup model of employee information presentation, an improvement in availability of IT tools, and rapid accommodation of extemporaneous application requirements at low incremental cost. The fact is that all these require IT projects and thus represent a net increase in IT commitment at least for the duration of the project. Fewer than 10% of enterprises have any experience with a cloud-driven IT strategy, but those that report an increase in IT support and manpower costs of about 4%, and none report a desire to reduce those costs as a project objective.

IT organizations with experience in cloud computing have reported that the most significant factor in managing IT costs in connection with cloud computing applications is substituting proactive support for reactive support of line department computing needs. There are three key dimensions to this:

  1. Cloud computing enables organizations to quickly outsource project computing needs to the cloud to be responsive to department activity levels. If this capability is optimized, project cycles are shorter and can minimize ad hoc solutions to address a lack of internal IT capacity, which can create management and support problems.
  2. The use of generalized IT resources -- cloud resources -- to support applications rather than fixating on specific servers shifts IT management's focus to capacity planning and meeting service-level agreements with line departments rather than incident management. This is a more effective use of resources, and it increases satisfaction with IT among line organizations.
  3. Enterprises can gain higher availability through proper use of cloud computing, which significantly reduces IT outages and the associated problems with supporting operations through these outages.

While enterprises' experience with cloud computing projects is still limited, there is significant information to support the conclusion that employing cloud computing as a supplement to data center computing can be successful. There is also evidence that a combination of public and private cloud computing resources may be the optimal solution company-wide and for the IT department as well.

span color="red" style="color: red;">Tom Nolle, is president of CIMI Corporation, a strategic consulting firm specializing in telecommunications and data communications since 1982. He is a member of the IEEE, ACM, Telemanagement Forum, and the IPsphere Forum, and is the publisher of Netwatcher, a journal in advanced telecommunications strategy issues.

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