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How to avoid the perils of virtualization and cloud stall

Thor Olavsrud | April 11, 2012
Virtualization and cloud computing offer the promise of cost savings, efficiency and flexibility, but organizations must plan their transitions carefully or risk finding themselves stuck with a bundle of sunk costs and no path forward.

"I'm always amazed that the commentary with the cloud is that you don't need IT anymore," he says, noting that cloud services often change the focus of IT, but they don't eliminate the need. Organizations still need to keep their networks up and running, their security working and they will need to integrate their new cloud services with business processes to realize its value.

"That integration effort can be complicated, depending on the maturity of the cloud service provider and the offering they have," Hurley says.

Another potential chokepoint, and one frequently overlooked, is the depreciation schedule for servers and other hardware.

"We're spending a lot of time helping the channel understand the financial implications of going to the cloud," Hurley says. "If the IT department the year before spent $500,000 for servers and other hardware to run your CRM, if you decide not to use that hardware anymore, the CFO is going to have to accelerate that write off."

For some firms it will make financial sense to go forward to the cloud despite these issues, Hurley says, and other firms that run the numbers will find that it is better to wait and leverage their existing technology for a few years before taking the leap. In any case, the best practice is to analyze the costs and benefits before taking action.

"In that ROI analysis, you might be pointing out all the savings, but you're also going to have to buy bigger pipes for the bandwidth to the Internet," Hurley says. "And what about all that hardware and software the company just bought for you last year? It may be that the ROI still works. But make sure. The stall factor happens when there are surprises."



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