Cloud computing is probably the biggest business around these days -- it has become a $100-billion-a-year industry. And there's a chance companies are paying way too much for it.
That's the conclusion drawn by Sarah Wang and Martin Casado, partners with Silicon Valley powerhouse Andreessen Horowitz Capital Management[1], who say the costs of cloud on a business can be staggering. "While cloud clearly delivers on its promise early on in a company's journey, the pressure it puts on margins can start to outweigh the benefits, as a company scales and growth slows," they wrote in a recent analysis[2].
Of course, while cost savings in merely the early benefit of cloud, which is presumably subsumed by the flexibility and agility cloud resources provide. Wang and Casado acknowledge as much. "This shift is driven by an incredibly powerful value proposition — infrastructure available immediately, at exactly the scale needed by the business — driving efficiencies both in operations and economics. The cloud also helps cultivate innovation as company resources are freed up to focus on new products and growth."
The catch is, as companies throw out their on-premises assets and build their applications on top of cloud services, it's too late by the time they recognize the weighty costs. A rewrite or the significant restructuring needed to dramatically improve efficiency can take years, and is often considered a non-starter," they state.
Wang and Casado point out that "some companies have taken the dramatic step of 'repatriating' the majority of workloads, or in other cases adopting a hybrid approach. Those who have done this have reported significant cost savings." However, they caution, repatriating applications from the cloud back to on-premises environments can be a difficult and expensive task.
Still, the