The real value of Cloud Computing
You hear a lot about Cloud Computing delivering lower costs, but as a cloud provider myself, even despite offering competitive rates I often get the reaction from potential customers, "I could buy a server and manage it for less than that!" And, to some extent they're right: a server and a little of your time on the side to manage it is usually a lot less expensive than cloud computing. Of course, most customers aren't familiar with the true cost of providing a reliable computing service, which includes redundant server and networking technology, power costs, data center costs, etc. so that if they actually tried to provide their own service, the cost would be significantly higher than their off-the-cuff estimates. But managed colocated servers, which include most of those costs, are still usually less expensive than cloud computing. So why do customers sign up for the cloud?
The answer is... services. The cloud, by separating enterprises from their servers and offering universal (secured) access to the servers, allows cloud providers or third parties to bundle the computing with value-added services starting with simple management and going all the way up to full outsourced IT operations, which can make a little startup company look like a large enterprise by providing application architecture expertise, highly reliable software deployment, and live site management.
This combination of scalable computing and services is what truly lowers the technological and cost barriers to entry in the web-facing application market. The biggest savings comes in the form of reduced capital (from utility billing) and staffing investments (due to sharing the wide variety of skillsets with other customers) needed to reach enterprise-class service delivery standards necessary to run a SaaS business. This is truly the breakthrough that Cloud Computing offers, allowing anyone with an idea and a little programming skill to operate a commercially viable website such as a SaaS service. It also means that there will be a host of other cloud providers other than the Big Three providing both computing and services with unique offerings tailored to meet a wide variety of needs.
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