1. An White Paper
A Walk in the Clouds
The Cost Savings Potential of Outsourcing “To the Cloud”
Abstract: Capital costs related to technology are now in focus more than ever. This paper
explores cloudsourcing portions of IT infrastructure, as a strategic component in reducing
both operating and capital expenses by up to 40% and 50% respectively. The
advantages and disadvantages of this approach are evaluated along with different
scenarios under which cloudsourcing can reduce cost, complexity and concern.
Introduction
It is estimated a data center initially costs approximately $1,000.00 per square foot on
average. This means a tiny 1,000 square foot data center costs approximately
$1,000,000.00 before any technology infrastructure is added. According to research by
Gartner, once you add the infrastructure initial investments costs frequently more than
double.
This initial capital required to build and outfit a data center pales in comparison to the on-
going costs to run and staff the facility. For many, the idea of enormous capital outlays to
support IT infrastructure is tenuous at best, especially when technology is only faintly
related to the organization’s core mission. The reality of increased dependency on
technology to interact with customers, clients, and audiences is difficult to ignore.
Cloudourcing IT needs can lead to overhead and labor cost savings, as well as a
renewed focus on your core mission. Should your organization spend tens or even
hundreds of millions of dollars on infrastructure for everyday applications, or is it time to
take a walk in the clouds?
A Walk in the Clouds
The Cost Savings Potential of Outsourcing “To The Cloud”

2. An White Paper
What is Cloud Computing?
The National Institute of Standards and Technology (NIST) defines Cloud Computing as
an all-encompassing model for enabling convenient, on-demand network access to a
shared pool of configurable computing resources that can be quickly adjusted and
released with minimal effort or interaction.
More than just “Buzz Words”
While there are many things that fit within the scope of the definition, they all fit one of
three service models:
Software as a Service
 Everything behind the application is abstracted from the end user
and maintained by the provider
 Application itself becomes the focal point
Platform as a Service
 Underlying components such as programming language support,
databases, and operating systems are maintained by the
provider
 The end user is able to create or deploy their own applications
Infrastructure as a Service
 Virtual server or other device is provided to end user
 The end user can load their own platform and application(s) onto
the server
With a combination of these service models and delivery methods an organization can
free itself from the high capital and operating costs traditionally inherent in leveraging
technology as an integral part of core business processes.
Though the term Cloud Computing is generated from the accepted diagram image for the
internet, which is in the shape of a cloud, it can take on very different imagery.
Organizations can take all of the physical concerns of information technology and put
them out of mind or in the clouds. Essentially, they get computing that works, allowing
focus to shift back to the organization’s core mission.
From a cost savings perspective, a switch to cloud computing can lead to reductions in
capital expenditures and labor, as well as increased responsiveness to help meet your
organization’s IT needs. In short, Cloud Computing truly is more than just buzz words.
A Walk in the Clouds
The Cost Savings Potential of Outsourcing “To The Cloud”

3. An White Paper
What are the Benefits of Cloud Computing?
Reduction in Capital Expenditures
Consider the costs associated with a small, liberal arts college building a data center,
versus the cost to cloudsource a portion of IT infrastructure with IHETS. In the first year
the initial capital expenditures to build and outfit a data center coupled with recurring
operating costs (system administration, software, support contacts, etc.) tie up significant
resources, particularly for an organization whose central mission is to educate students,
not to provide IT services.
The initial cost savings realized through reducing infrastructure requirements can be
substantial. In the above scenario, cloudsourcing roughly half of the needed servers can
result in a 50% reduction in datacenter space needed, thus reducing capital expenditures
by an equivalent amount. Software licenses for critical enterprise applications can be
expensive, and cloudsourcing away from on-site proprietary solutions can represent
significant cost savings. The provider’s expertise keeps the application in top form, and
the client gets the same quality, robust system at only 20-50% of the cost.
With a smaller initial outlay, that small liberal arts college could receive the applications,
platforms, and infrastructure needed for education without investing so heavily in capital-
intensive physical infrastructure. Again, “Why spend additional money for IT infrastructure
when it is not part of our core mission?” The savings can be repurposed for instructional
technology that truly enhances the educational experience, rather than backend IT
infrastructure and labor which is not visible to students and faculty.
A Walk in the Clouds
The Cost Savings Potential of Outsourcing “To The Cloud”

4. An White Paper
Reduction in Operating Costs
A marked reduction in operating costs is another benefit to Cloud Computing. The liberal
arts college example above allows resources to shift away from system administration,
software and hardware support contracts, maintenance fees, and network concerns to
other activities. The ability to save an additional 20-40% on operating costs can be a
second, cost savings windfall of cloudsourcing. The learning management scenario
above can be further enhanced by connecting with other applications such as a hosted e-
portfolio system. The hosted systems only need instructional designers to help derive
maximum benefit for faculty and students.
Consider a mid-sized, non-profit organization with 30-100 employees and only a few
mission-critical enterprise application needs. Keeping these systems running is often the
responsibility of a single staff person whose primary role is not related to IT.
This person often lacks training in
information security, exposing
critical systems to attack. A cloud
provider takes on the responsibility
of updating software, ensuring
reliability, and taking primary
responsibility for the systems and
platforms. Where the mid-size, non-
profit organization may not be able
to justify hiring an additional
employee, cloudsourcing might be
the answer.
Increased Agility
Cloudsourcing allows an organization to quickly scale IT infrastructure up or down
depending on given needs. An organization can work with a cloud host to gain access to,
and have any given application up and running within two to three days allowing them to
respond quickly to changes in demand.
A cloudsourcing provider allows an organization to focus on fixing the IT problem at hand,
rather than all of the ancillary problems that often accompany tech support such as
application upgrades or hardware procurement. Time-sensitive IT issues can take several
days to resolve when working within a traditional model. A cloud model allows your
organization to access a support system capable of streamlining this process.
A Walk in the Clouds
The Cost Savings Potential of Outsourcing “To The Cloud”

5. An White Paper
What are the Drawbacks to Cloud Computing?
Security Risks
Security is an acknowledged risk in Cloud Computing and cloud hosts take specialized
approaches in security software (i.e. authorization levels for access) to protect data from
malicious attacks.
As more companies turn to cloudsourcing, the risk of compromise from internal security
threats and social engineering rise. Large cloud providers may be less apt to know
normal usage patterns for an organization or slower to respond in the event of a disaster
situation. This presents another benefit to working with a smaller cloud host such as
IHETS, where the focus is on individual customer security. Retaining a trusted provider
with the ability to acquiesce to the security and protection your data needs can be an
important step in mitigating security risks.
Control over Applications
Another cited fear for running applications in the cloud is the amount of control and
flexibility your organization maintains over their applications. The reality is that choosing
the correct cloud host for your organization is the best way to address this issue.
As applications can only be added to the cloud after approval by the host, education-
focused organizations may tire of collaborating with cloud giants that are more focused
on the needs of large businesses. Working with a smaller, industry focused cloud
provider, such as IHETS can allow your business to receive the applications you need,
with the expertise that specialized applications demand. A learning management system
is very different from a corporate ERP system, and should be treated accordingly.
Reliability
Early mistakes in Cloud Computing, such as two incidents in 2008 in which the company
struggled to get services back online for their network, have led to increased knowledge
and specialization in Cloud Computing. Hosts can now minimize damage through
disaster recovery and back up plans that prevent applications from failing when a single
server in the cloud fails. As the masses flock to Cloud Computing, the number of
companies on any given platform will rise significantly, creating an increased workload for
the system. However, most IT companies are prepared for the influx thanks to industry
forecasting.
A Walk in the Clouds
The Cost Savings Potential of Outsourcing “To The Cloud”

6. An White Paper
Conclusion
How Can I Balance Risks with Cost Savings?
Cloud Computing represents significant opportunities for IT to deliver the results that
businesses need to remain competitive in a difficult economy. One IDC survey found that
more than 50% of organizations who made the switch to Cloud Computing did so in
response to cost cutting needs.
In the face of budgetary constraints it is important to determine whether your organization
actually needs IT infrastructure in order to provide their services or if your IT needs can
be outsourced. Can your organization benefit from a leaner approach to Information
Technology infrastructure?
Several solutions are available for companies looking to save time and reduce
complexity. Collaborating with a trusted third-party provider, such as IHETS, to discover
the ways that technology can help your organization create cost savings solutions is a
helpful first step to a walk in the clouds.
References
The information contained in this paper represents the compilation of multiple resources, articles,
surveys, and in-person interviews. Most specific numbers and statistics provided can be
referenced to the following sources:
Foley, John. "10 Cloud Computing Predictions For 2009." InformationWeek. 24 Jan. 2010. Web.
<http://www.informationweek.com/news/services/saas/showArticle.jhtml?articleID=212901104&pgno=1&queryT
ext=&isPrev=>.
"IDC - Press Release." IDC. 06 Mar. 2009. Web.
<http://www.idc.com/getdoc.jsp?sessionId=&containerId=prMY21726709&sessionId=0H1H1IJSJVWKSCQJAFI
CFFAKBEAUMIWD>.
Mell, Peter, and Tim Grance. "National Institute of Standards and Technology, Information Technology Laboratory." Cloud
Computing. 10 July 2009.
A Walk in the Clouds
The Cost Savings Potential of Outsourcing “To The Cloud”