Clouds, outsourcing and risks ...

Cloud based technologies are, as we know, outsourcing by another name.

Outsourcing in IT is often touted as a means of getting costs under some sort of control, by turning a lot of capital expenditure into operational expenditure:

Essentially this means that capital expenditure, these large lumps of budget that traditionally went into buying new servers and new storage can be smoothed into operational expenditure, in other words normal running costs.

This has a lot of advantages, the major one being predictability, and as long as you follow Mr Micawbers’s dictum on income versus expenditure, everything should be tickety boo:

"Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

- Charles Dickens - David Copperfield

Large capital expenditures are a pain. Money has to found, fought for, accounted for, complex tender exercises and evaluations held, all of which cost money to carry out and all of which serve to reduce the agility of the organisation.

Basically they don’t sit well with the twenty first century model of a flexible, agile and responsive organisation.

Even more so with outsourcing services like email - no need to worry about a whole raft of things, including how to recruit and pay for the staff who look after the services.

Outsourced email, webmail, are easy to use, self supporting and instead of being highly technical become commodity services.

The same with outsourcing your compute and storage. While it’s not true to say that Azure or AWS are so simple that the cat can configure them, you do certainly need a lot less in terms of server administrators or storage managers. You do have a risk of sprawl, especially if you have a lot of cost centres and no centralised review process, but that’s essentially a financial management problem.

In fact with outsourced services and storage, you find yourself in a situation where increasingly IT delivery is a financial management problem rather than a technical management problem.

This has advantages:

• standard services are delivered in a cost effective and standard way
  
• costs are more easily contained
  
• expenditure patterns are predictable which improves long term planning
  

and risks:

• loss of in house expertise
  
• increasing inability to deploy innovative services
  
• loss of the ability to assess suitability of competing services
  

Now I don’t want to get all doom and gloom. There’s a lot to be said for outsourcing commodity services - my pet example is desktop pc maintenance - in these days where they are basically highly reliable appliances they don’t go wrong very often.

Depending on the failure rate it can be considerably more cost effective either buy a maintenance service, or even, gasp, just plain on replacing them when they fail than employing a couple of maintenance technicians at $70k a year plus on costs.

But there also needs to be an understanding in any outsourcing exercise that you are also losing in house expertise.

For maintaining commodity devices it possibly doesn’t matter. For something strategic, like your data archiving, you probably need to start thinking about risk analysis and what you would do if you needed a change of direction ….