451 Alliance members ranked 10 key attributes in order of the influence they have on choosing a provider of hosting and cloud services. They clearly identified cost and reliability as the most important drivers.
Value for Money/Cost was selected by 61.7% of members, and Service Reliability (uptime/performance) was selected by 60.4%, beating out other attributes by a wide margin. Customer Support came third at 29.4%.
We conducted in-depth interviews (hour-long discussions) with 451 Alliance members, and the results reinforce the idea that cost is the most important driver in vendor selection for hosting and cloud services. These valuable discussions also highlight the fact that cost comparison between applications or infrastructure running on-premises and those running in service provider environments is a complex, difficult puzzle. An apples-to-apples comparison of cost is effectively impossible.
As IT professionals make their decisions around adoption, attempting to measure the impact of hosting and cloud services can lead them down the road from absolute cost toward a more complicated, but still quantifiable, measure of value.
Comparing Cost with Value
Projecting the cost of operating a specific project internally is fairly straightforward. It is generally made up of a combination of hardware costs; software licenses; resources like power, space and network capacity; and human resources for designing, building and operating the system. The cost of a hosted service is also a fairly straightforward number most of the time, although per month, per-user or per-capacity can sometimes be hard to predict.
Value is more difficult to calculate. It is related to the subtle ways cost underlies other metrics for evaluating a hosted or cloud service. The value of security is related to the cost of a breach, loss of data (and therefore trust, and likely customers as well), and possible regulatory sanctions or penalties.
Value (security) = cost of trust lost + cost of reputation loss (customers lost + new opportunities lost)
Similarly, the value of performance is connected to the measurable cost of downtime. The value of compatibility is connected to the cost of reengineering existing systems, the cost of expertise and the sunk cost of existing licenses.
While your IT department may be great at creating value internally, it is also possible that you are underestimating the potential for hosting and cloud services to create value for your business.
Managed Services and the Case for Value
A cost comparison between executing a new project internally versus a hosted or managed service is possible. It can be much more difficult to calculate the value of a managed service versus an existing system that is already handled on-premises, with internal IT resources.
However, our study results indicate an overall shift toward the use of more vendor-supplied managed services and security services. This suggests managed infrastructure and application providers are succeeding in communicating the value of these services.
Your role is to make your measure of value known. Tell prospective hosting and cloud vendors what your concept of value looks like. Is it a straight cost comparison? A guaranteed level of uptime or security? Is it freeing your valuable operations team from simple, repetitive tasks? Access to expertise you don’t have in-house? The ability to bring in additional services via partnership, or manage integration with your existing systems? However you may define value, make that the basis on which you evaluate their services, and strive to make that clear to your service provider.