Cloud Hosting – A Business Case

A week or so back, I posted a case study where a company called Imageloop
managed to save 2/3rds of their fixed monthly costs by moving from web hosting
to cloud hosting. The idea of tapping into the cloud for hosting purposes always
had a strong business case even though many small businesses are not aware of such an advantage.

Two weeks back I asked a question in Twitter

The response to this tweet ranged from people saying that going with a data
center is much cheaper than hosting on a Cloud infrastructure like AWS to people
wondering if any startup will ever reach the size of Google or Microsoft. In
fact, it is a big myth that Cloud infrastructure costs more than a startup
building its own data center(s).

Few days after this discussion on Twitter, Kent Langley of nScaled sent me a whitepaper on
the same topic. I thought I will talk about it in this space as it is pertinent
to the point I am trying to make here. This whitepaper talks about how SaaS
vendors can use Cloud Computing, instead of their own data center or co-location
or managed hosting, to benefit from cost savings to security to scalability.
They make a complete business case to host SaaS applications on the Cloud
instead of traditional hosting methods.

SaaS vendors can have the following advantages by using Cloud hosting

• Huge cost savings which can be transferred to R&D and/or also as cost
  savings to customers
• Lower barrier to entry and hence higher opportunities for startups of any
  size to jump in
• Easy to scale during peak demands
• Faster provisioning of newer resources
• Better performance

According to the nScaled Whitepaper, the cost savings in Cloud hosting,
compared to co-location, can run as high as 53%, a whopping number in the
startup dynamics. It only makes a good business case to use Cloud hosting and
any arguments against it on the cost front is simply meaningless. In a highly
competitive market, any company that saves 53% in their costs over their
competitors is bound to be a success.

I strongly recommend you to get the whitepaper from nScaled and go through the numbers to
understand the cost advantage of Cloud hosting over traditional hosting methods.
I don’t see a case where traditional hosting can ever offer such huge cost
savings but if you know of any case study, feel free to add it to the comments
and I will be glad to take a look at it.