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.