Cloud may still be young, but already it seems it has a nemesis; not perhaps in the form of a (James) Bond like super-villain, but more in the form of a persistent financial advisor – Total Cost of Ownership aka TCO.

It seems, in fact, that Cloud can no longer enjoy the glorious limelight of infinite scalability, compute on demand, pay-per-use and global availability without the thorn of TCO being irritatingly and increasingly forcefully jabbed into its fluffy side…

So should our hero, the Cloud, care?  The essence of the TCO gripe is, of course, that while the Cloud does bring great benefits in scale and availability, there’s growing evidence that if you look purely at the cost of completing different types of media services over say, a three or five year period, then actually more traditional, on-premise, capex based approaches will offer a better deal.  First blood to Blofeld.

But are things really that simple?  Firstly, let’s look beyond cost.  TCO at this point may well look smug and dismissive, but the reality of non-linear, with its more dynamic, unpredictable volumes, necessitates an operating model that can accommodate vastly more scalable operations – without pre-conditions or commitments.  Of course you can create the environment to accommodate scalability by investing in excess capacity, but in reality, is this something that we have the appetite for anymore – when volumes are so unpredictable, where capex is at such a premium, and where the econometrics of the scale public and private cloud providers will be nigh-on impossible to match/better?

Next let’s look at why TCO is, at this precise time, potentially favouring traditional approaches.  For me it’s a question of maturity and vendor inertia.  While cloud is technically quite mature (although not completely!), commercially, it has some way to go – both in terms of core compute and storage, and also in terms of the cloud application and data transfer products.  On the latter side, it’s important to recognise that SaaS based or on-demand models present a challenge to vendors that have traditionally provisioned bundled hardware and software solutions.  It means less predictability in revenue and typically less cash up front – so this community is understandably cautious about embracing the world of Cloud wholesale.  But importantly, this isn’t to say they won’t. In fact, in virtually all cases, they are.  It’s more a question of how long the commercial drag effect will last until more competitive Cloud pricing models emerge.

And lastly, let’s also maybe challenge TCO on its own turf. In many of the debates on this topic, pricing/costing will be presented as fully loaded for the cloud, and only represent the cost of equipment and operations for on-prem.  This of course assumes that the on-prem option has facilities to house the equipment, has the capex to buy up-front, has the financial appetite to amortise assets and so-on.  Increasingly, this is not necessarily the case.

So, we’re at an interesting point in the evolution of the Cloud, and the reality is that to dismiss the TCO arguments of on-premise models would be foolish.  In fact, I’d argue the opposite.  We need to bring on the debate to drive the commercial evolution of Cloud based solutions.  Ultimately, it’s an evolution that’s of benefit to us all – be it in increasing the breadth of viable use cases for the Cloud, or even increasing the price pressure on traditional models.

Kris Hardiman, Head of Product Marketing