CXO

Cloud users redirect cash saved to business innovation, staffing

Businesses are taking cloud savings and reinvesting them in other parts of the business including innovation and new staff, according to research.

Companies are using the pay-as-you-go cloud model to cut IT costs and reinvest in product innovation, according to research.

The study, by hosting company Rackspace and Manchester Business School, said that 58 percent of the UK businesses they surveyed had been able to reduce their IT costs by replacing their in-house hardware with a cloud solution.

The average annual cost saving being achieved by the 1300 businesses using the cloud is £316,000, according to the research, with some businesses saving more than £5m.

The survey claimed 46 percent of businesses included in the study save more than £16,000 per year by using cloud, while 31 percent save more than £31,000 per year.

Because it is effectively a rental model, cloud computing shifts IT costs from upfront to a subscription model. In some cases this can work out more costly over the long-term and the researchers said for some larger companies this had lead them to chose a hybrid approach – the cloud for some services while retaining in-house infrastructure for others.

But for SMEs the lure of the cloud is particularly strong because they are able to compete with bigger companies at a fraction of the upfront IT cost in terms of buying infrastructure or hiring specialist staff.

Half of respondents said they are using the money saved to fund product and service, while 15 percent of respondents said they were creating new positions as a result of their cloud investments.

Speaking at the launch of the report, Dr Brian Nicholson of Manchester Business School, said the thing that stood out in the results was the willingness in the US to adopt the cloud. "There was a big contrast with the US where the sample was saving more, reinvesting more and making more profits," he said.

But companies still need to tread carefully when it comes to costs, said Nigel Beighton, international VP for Rackspace: "One of the things about moving to pay-as-you-go is that people do need to be aware of what they're spending," said Beighton. "The cloud offers huge advantage as long as you understand what you are spending and you control it."

About

Sam Shead is at his happiest with a new piece of technology in his hands or nailing down an exclusive story. In the past he's written for The Engineer and the Daily Mail, covering emerging technology in electronics, energy, defence, materials, aerosp...

3 comments
sdjcs
sdjcs

I agree with the first two posters... where do we ever see rental/lease models to save money over outright purchases? There may be some confusion... cloud services can reduce a company's cash outlay, and perhaps that frees up cash that enables a company to do other things they wouldn't normally be able to do, or at least not in the short term. However, over the long term, a company will spend more on cloud services than traditional IT services. But perhaps the cash outlay savings allows a faster track to additional revenues that are in turn used to grow the business faster such that the longer-term cost of cloud services can be justified. Don't get me wrong, I realize that cloud services have other benefits over traditional systems, but generally speaking, reduced costs are not one of them.

TRgscratch
TRgscratch

"I was going to have to spend 250k. but the "rent" is only 10k per month, and, since I'm only going to be here 12 months, I'll only spend 120k. what should I spend the big savings on? I know: my bonus for saving money!"

info
info

I could have sworn I ALWAYS ended up paying more for renting something than when I just bought it outright... Pah. Must just be my imagination. And maybe it's just my lack of business acumen, but to me, if you spend $100k... $100k is SPENT. When you say, "We're not spending it on internal capital resources anymore, these are now operating costs, so they don't count," to me it seems like you're in total denial that you've actually spent anything (except to the people you've paid the money to). Then taking the 'savings' and spending it in other places, is like spending money you don't have! Why not just get the extra money and throw it at product development ANYWAY? But then, I live in a tiny little house because I've never believed in spending make-believe money that I don't actually HAVE.