TCO & the Cloud

tco the cloud

A recent Gartner survey found that the market for cloud services is expected to reach $150B by 2013. Although cloud computing adoption started in small to medium sized companies, cloud services are rapidly gaining market share in the enterprise space.

Despite these statistics, there is still some confusion about the definition of cloud computing and even more confusion over how enterprise companies would benefit from switching to cloud solutions.  Quite often, uncertainty, and doubt prevent understanding the real benefits of cloud computing. To add to that, the media is quick to attack cloud computing’s agility, citing it as unreliable, insecure, and costly.

In the IT industry, Total Cost of Ownership (TCO) is used to calculate the total cost of purchasing (or in the case of cloud computing, subscribing to), and of operating a technology solution over its useful life. TCO provides a realistic and holistic measure of the long-term costs required to acquire and operate technology solutions.

Return on investment (ROI) is another method to evaluate and prioritize technology investments in a company. This measure is typically used to compare investments that uncover new top line revenue and growth opportunities. However, ROI tends to be more subjective in nature than TCO, because ROI looks at business benefits, which often cannot be measured as objectively as costs. Things to take into consideration:

TCO & Cloud – What are the key components?

  • Hardware, software, utilities, and labor


  • Numbers of PC’s, and servers
  • Type of firewall
  • Storage
  • Backup


  • Windows OS update
  • Office professional
  • Server software
  • Server CALS (per user)
  • Antivirus
  • Software assurance & maintenance


  • Average price for a kWh – US average: $0.1036 per kWh
  • How many kWh per device


  • Average IT staffing costs
  • Outsourced IT support


  • How much does a stolen laptop cost?
  • How much does a computer virus infection cost?
  • What is the cost of downtime?
  • Summary Cloud TCO/ROI:

Tecnology costs:

  • IT avoidance savings
  • DR
  • Telecom spend reduction

Gained efficiencies:

  • Remote agents, part time agents (lower cost infrastructure)
  • Screen Pops (reduce handle times)
  • Self-service (contact deflection)
  • Multi-media (lower cost channels)
  • Hiring processes (lower agent attrition)
  • Agent scheduling (matching agent schedules with true business demand)

SMB and mid-market enterprises need solutions that enable them to meet their business goals, help conserve capital and reduce ongoing costs. Although one size does not fit all, for many clients, cloud computing business solutions can help organizations to achieve these requirements, and provide added flexibility to scale as business demands require.


LMN 12/12/12


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