Will the Data Center Cost Model Get Disrupted by Cloud?

It looks like enterprises are in love with the cloud today. They can get elastic computing resources when they want, where they want, and on a pay-as-you-go basis.

This last aspect is a big factor for many cloud users, allowing them to turn their usage on or off and account for their cloud consumption as operational expenses rather than capital investment.

By comparison, the data center cost model may not seem so flexible. Data center leases and numerous colocation agreements are built on longer, fixed periods of time. Will the cost model for data centers stand up to the onslaught of cloud service providers, or is it time to rethink value, financials, and pricing? Before rushing to redo your pricing and business model spreadsheet, here are six factors to consider.

1. Do data center operators and colocation service providers serve the same customers as cloud computing service providers? The freedom and flexibility of the cloud attract non-IT department users eager to meet needs with instantly available resources. On the other hand, IT departments may find cloud solutions lacking the control they need and prefer a data center solution.
2. Legacy systems still abound in enterprises and organizations, and cloud providers often cannot accommodate such systems. In this case, the right external solutions will be data center or colocation leasing.
3. Cloud cost models do not always work out to be less expensive than those of traditional solutions. It is still important for customers to sit down with a calculator and make a cost comparison for the volume and duration of the data and processing power concerned. As usage grows, some cloud models end up more expensive.
4. Cloud computing is still based on offering “chunks” of data center resources to customers, albeit with massive virtualization and automation to keep costs and prices down. If lower prices are an issue, automation of certain services in a data center could help better align data center pricing with cloud provider pricing.
5. Better and more personalized service may help protect your current data center cost model. Even “Shadow IT” users, those non-IT department users who see the cloud as their business savior, may find they need more than the push-button, recorded message, 100% human-free cloud interfaces.
6. Finally, the offense may be a good form of defense as well. If cloud providers seek to tempt IT departments and CIOs to make a switch, remember that colocation business opportunities are growing at the low end. Retail colocation offerings on a slot-by-slot basis may make as much sense to small and medium businesses as set up in the cloud.

Overall, the data center cost model can be conserved by clearly identifying the customers served, their needs, and what data centers and colocation providers can do better than the cloud. Or tweaked. Or revamped. But now you have a choice instead of being pushed one way or the other.

Also, see

• Comparing Cloud Service Providers vs. Colocation Providers
• How Data Centers Attract Mid-Size Cloud Prospects
• Offline Marketing for Data Centers, Cloud Services, and Mission Critical

Has your data center cost model or marketing changed significantly recently? Tell us about your motivations for making those changes with a line or two in the space for comments below.