IT organizations that have successfully made the transition to the cloud enjoy significantly lower IT costs than industry peers who continue to operate large data centers and host most of their applications on premises, an Avasant Computer Economics study on the benefits of cloud computing found.
In the midst of an accelerating investment in cloud-based applications and infrastructure, Avasant Computer Economics compared spending by IT organizations that rely mostly on software-as-a-service for their applications with companies that support more traditional IT infrastructure. As shown in Figure 2 from the study, The Economic and Strategic Benefits of Cloud Computing, cloud users on average spend 21% less on IT as a percentage of revenue and 16% less on IT on a per-user basis than other organizations in their sectors.
The study confirmed the results of a groundbreaking 2014 study by Computer Economics, which came to a similar conclusion: While subscribing to given SaaS applications may appear more expensive than hosting the same applications on premises, real cost savings are achieved by organizations that are able to shed personnel and infrastructure by aggressively transitioning to a cloud-computing model.
The study also examines strategic benefits. “The business value for me is in not having to hire IT staff to work in the data center,” an IT executive in the high-tech sector commented in his response to the survey. “Better to have them closer to the customer, shifting IT personnel spending from systems and database administration to business analysts or project managers so that they can focus on delivering business value where it counts.”
In the full study, we identify 13 respondents by industry, size, and cloud portfolios. We compare their high-level IT spending metrics against our industry benchmarks. We examine how their spending mix differs from traditional organizations and show how such organizations spend more on innovation than their peers. We conclude with recommendations on developing a strategic road map for full migration to the cloud.
This Research Byte is a brief overview of our management advisory on this subject, The Economic and Strategic Benefits of Cloud Computing. The full report is available at no charge for Avasant clients, or it may be purchased by non-clients directly from our website (click for pricing).
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