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Cloud Computing Savings - Real or Imaginary?

The venerable management consulting firm, McKinsey & Company, released a thought-provoking analysis yesterday on cloud computing economics. The piece has generated a fair bit of attention because it’s been taken to mean that migration to cloud platforms is actually more expensive than what large companies currently spend on their own datacenters.

As usual, the problem is not in the analysis or the research but in the question that is being asked. The question that the McKinsey analysis answers is about the comparative economics between running your datacenter on your own hardware vs. running it on Amazon’s hardware (offered as a service). We aren’t going to question their analysis or numbers (we’ll leave that to experts like Vinnie Mirchandani), but we also don’t think this really answers the question about what cloud platforms can do for a business.

Cloud platforms exist at three levels
At the lowest level, infrastructure-as-a-service is purely computational power for rent, which is what services like EC2 offer. It abstracts the physical infrastructure but you still need to do the work of mounting a database and an app server on the infrastructure, building and maintaining your app, etc. Therefore, the only savings are those that come from the delta between how efficient your datacenters are vs. those that Amazon runs. As you talk about large, well-managed datacenters that are operating at scale, it’s plausible that savings are not significant.

It’s at the next level, Platform as a Service, and beyond, that we start to see significant savings. Once you move up the stack to PaaS, there are significant savings because you no longer need to run a datacenter (physical or virtual as in the Amazon case) or maintain infrastructure software (database and app servers). Within our 150+ customers, we see savings of over 30% on operating costs and 2-3x improvements in time-to-market when building on cloud platforms. For example, for a publishing client, we built a custom application that automated the entire publishing process in less than 6 months. Their estimate for doing this using on-premise platforms was over 3 years. In terms of ongoing cost/productivity improvements, they have estimated a 50-75% reduction in the time and effort it takes to add new products. Additionally, since the application is built on the platform, upgrades are seamless and the platform gets better over time, all for no additional cost.

At the highest level of the stack, the benefits get multiplied further, since you get all the benefits of PaaS, plus you get freed from 22% maintenance and costly (to implement) upgrades every 3-5 years. The savings have been well documented: 25-40% in terms of implementation costs (by freeing yourself from the clutches of the dreaded Globals SIs) and operating cost savings, e.g.,50%+ savings running your mail on Google vs. Exchange.

Cloud platforms provide savings at each layer of the stack, and McKinsey’s analysis focuses on just the lowest levels of the stack, thus missing most of the savings potential.
Salesforce - 12
We have seen the benefits of cloud platforms first-hand at over 150 customers, including companies like Avago, Genentech, Japan Post, Qualcomm, Starbucks and Dolby. Once customers experience the benefits of cloud platforms - quantifiable savings, rapid time to value and innovation that drives the business, they seldom want to go back. This is why 90%+ of customers plan to increase their spending on cloud platforms. In these economic times, there is no greater vote of confidence for cloud platforms than that!

Balakrishna Narasimhan - Appirio

Dreamfactory offers a new set of utlities for Salesforce users

DreamFactory Utilities for AppExchange is now available for all Salesforce users. ‘Utilities’ is designed specifically for Salesforce system admins and integrators to make their lives, and the lives of other users a whole lot easier.

Utilities includes three essentials apps:

• SnapShot – save hours of time on meta data manipulation
1. Take an Object SnapShot and visually browse the schema of any Salesforce ORG, including standard objects, custom objects, fields, picklists and more
2. Take a Profile SnapShot and visually browse the user profile information of any Salesforce ORG, including Field Level Security, Object Permissions, Record Types, etc.

• Monarch – move your data anywhere, share it with anyone
1. Moves and merges data, allows users to securely move, share data with others, or port it to QuickBase, Cisco Connect or an Excel sheet for extended collaboration
2. Backing up data is costly on Salesforce – with Monarch users can move data over to Amazon, where it can be stored a lot less expensively

• Tabletop -Browse, visualize and drill down on data sets. Create as many views as you want and selectively share these views with other departments, partners and customers

The Salesforce Education department has licensed SnapShot and DreamFactory Utilities as part of its training program for new customers, and Salesforce’s internal Global Professional Services is using SnapShot as a pilot program currently.