Thought Leaders In Cloud Computing: The Move To Cut Costs

In the past year or so, the Thought Leaders in Cloud Computing (TLCC) series has hosted conversations with some of the top thinkers in our industry. It has become abundantly clear based on these discussions that cloud computing has graduated from hype to a significant driver of cost savings.

As I have talked to industry leaders like Pat Toole, CIO of IBM, Mark Settle, CIO of BMC, Marc Egan, CIO of VMWare, and many others, it has become increasingly clearer that the ROI from cloud projects inside enterprises has become very serious.

The most concrete cost saving number I heard was from Diane Bryant, CIO of Intel, who has a blueprint to save $650 million over seven years. By the end of 2011, Diane expects to be halfway there.

Of course, this begs the question, what are the major components of this kind of dramatic cost savings? Virtualization is an obvious one. Our consistent coverage of VMware in the Tech Stocks series continues to provide you with a window into this world and its massive impact on IT.

A second, somewhat less obvious one that I found out about is in the domain of productivity apps moving to the cloud. Yes, all the commodity functions like email and calendaring are moving to the cloud like an avalanche. The argument is that there is no competitive advantage – absolutely nothing strategic – in having an expensive email system that lacks in cloud functionality.

I first noted this trend back in 2008, as Gmail and the Google Apps were starting to penetrate the small medium business market. In a January 2009 article, Linda Tucci wrote:

The move from IBM Lotus Version 8 to the enterprise edition of Gmail will save nearly $1 million over five years, due largely to the costs associated with a mandatory Lotus upgrade for Hamilton Beach Brands Inc. this year. The migration starts this month.

Hodge is hardly alone in exploring new email models as a cost-cutting measure. A survey of 53 firms by Forrester Research Inc. showed that 36 are considering or have considered a change in their email delivery.

Linda’s article goes on to show how Hamilton Beach Brands has used Google Apps to institute a major cost optimization:

February marks the second anniversary of Google Apps Premier Edition, the beefed-up version of the free Google Apps hosted service launched in 2002 that revolutionized consumer email. For $50 per user per year, the premier edition offers “businesses of all sizes” a communication and collaboration suite of applications that includes Gmail Web mail, shared calendaring, Google Docs, instant messaging, and Voice over Internet Protocol service.

Another theme that started in mid-market companies like Hamilton Beach Brands a few years ago of saving on server costs and moving applications to the cloud, as well as saving on the time IT people put into maintaining systems, has since percolated up to the enterprises.

To stay with IBM’s Lotus would mean, at a minimum, buying several servers (iSeries or Wintel) for Hamilton Beach field offices, Hodge said, and it took six IT people to maintain different parts of the Lotus system (the equivalent of one full-time employee a year). With Gmail, “I could redeploy those 2,000 hours over the year for other strategic projects,” he said.

Security, one concern that we heard continuously a few years ago in the cloud context has pretty much gone away. For the most part, technology buyers now believe that cloud vendors – especially the big ones like Google, Salesforce.com, and so on have much higher levels of ability to provide security than they do.

Other benefits: Google spends more on security than Hodge ever could. Google’s spam filter from Postini did a better job than his filter. He would not have to worry about storage. The archiving feature fit into the company’s records retention policy. As for availability, his team took down email once a month for maintenance, so Gmail would likely be up more, too.

And thus, you see, the math for a million dollar cost savings for a small company like Hamilton Beach, two years back.

Hodge’s team calculates that moving off Lotus Notes to Gmail will save about $500,000 in capital and operating costs over five years, and another $400,000 in labor.

This number has now ballooned to tens of millions, and in some cases hundreds of millions of dollars in larger enterprises.

In this migration movement, Google has been one of the greatest beneficiary, and Lotus Notes, the greatest sufferer. Microsoft is also benefiting from this migration. Salesforce.com doesn’t have the full productivity suite and works with Google Mail and Apps in a complementary fashion. Expect the lay of the land to evolve in a few years as Salesforce.com will likely plug those gaps with an email, calendaring and Office suite of its own. However, for now, if you are migrating from Lotus, the best bets are Google and Microsoft. Of those, Google offers the greatest cost savings.

There is one caveat in the Lotus-to-Google migration that you need to keep in mind if you are a large enterprise and have developed lots of long tail business applications on Lotus. While Google’s App Engine provides a highly scalable application platform, it doesn’t have the capability to address workflow-oriented business apps similar to the ones supported by Domino Apps. The number of apps that need to be migrated runs into the thousands for large enterprises. If a company has 8,000 apps, and even if 90% of them can be junked and rationalized it still leaves a very large number to move to cloud. The traditional approach to code using Java and Python will take ages. There is clearly a gap in Google’s offering.is supposed to provide you with the framework to seamlessly make this transition, but there is a clear gap in their functionality.

However, this gap is being successfully plugged by Indian Platform-as-a-Service (PaaS) vendor OrangeScape. Both Gartner and Forrester have underscored OrangeScape’s PaaS product as a leader. Especially in addressing the Lotus Notes-to-Google Apps migration scenario, the product is proving extremely useful.

There are few vendors who are offering migration tools for runtime migration. That is a very short sighted solution. The real need is not to migrate to a new runtime, but to migrate to a platform that allows changes to the applications as the business processes change in a Visual Paradigm similar to Lotus Notes. OrangeScape perfectly fits this scenario.

Forrest Research, in their Wave Report on “PaaS for App Development and Delivery Professionals” in the year 2011, featured OrangeScape as one of the eight vendors covered. Referring to OrangeScape as “new breed” platform vendor, Forrester’s John Rymer and Stefan Reid said:

One way to look at OrangeScape: It fills the gap in Google’s strategy for PaaS aimed at business experts. OrangeScape runs on top of Google’s cloud infrastructure and so coexists with Google Application Engine. OrangeScape’s innovation is its sophisticated spreadsheet-like tool for building application models. OrangeScape has invented a powerful approach to empower business experts to deliver applications. And its scores for architecture and tooling are very strong.

Overall, our conclusion is that in terms of cost cutting through cloud adoption in the productivity environment, the Lotus-to-Google migration is a proven strategy. Coupled with OrangeScape, Google now has the full solution to make the transition smooth and seamless.

This segment is a part in the series : Thought Leaders In Cloud Computing