Cloud Infrastructure – The Actual Cost of Cloud Manufacturing
By: Dan Johnson
For any company considering a move to the cloud, it doesn’t take long for the conversation to turn to cost. After all, moving to the cloud is a smart, money-saving move for just about any organization, even complex manufacturing operations, but there are costs involved. In fact, moving to cloud is perhaps the one area where an admission of ignorance regarding cost is far smarter than making assumptions.
Unlike the early days of cloud computing when costs were simpler – essentially swapping out servers and software – today things are a little more complicated. Companies need to look past simple capex and opex costs and a little more closely at things such as IT operational services and support, process automation, virtualization, and business processes.
To understand the real costs of migrating a manufacturing business to the cloud – cloud manufacturing -- you have to put it in context with on-premise system costs.
There are primarily three basic elements that comprise an on-premise IT system:
- Infrastructure: this is the hardware of an IT ecosystem, including such components as servers, routers, cabling, workstations, and firmware. To use a house-building analogy, it is the system foundation.
- Platform: this is the database and middleware that forms the IT plumbing and wiring, helping to pump data through the infrastructure.
- Software: Applications are the furnishings and appliances that run the household and make it functional.
Each of these three components must be purchased, installed, and integrated to create a fully-functional IT environment. In addition, personnel must be hired and trained to operate and maintain it all.
Moving to a cloud infrastructure (in this case, we’re referring to the entire, integrated IT system, not just the foundation of it) provides savings across all three elements. Utilizing SaaS ERP for cloud manufacturing can save as much as 75 percent of out-of-pocket infrastructure and platform expenses when you look at the cost of purchasing and upgrading the hardware necessary to install, operate, and support an on-premise IT system.
Software costs, however, are approximately the same when compared over a five-year period. The overall cost of the initial license and support fees for on-premise ERP software and the subscription and support costs of SaaS ERP, over five years, are generally a wash.
Where there is considerable additional savings, though, is in implementation. Manufacturing enterprises that utilize SaaS ERP often save as much as 50 percent in implementation costs over on-premise software. Further savings, especially for larger enterprises, can be realized in reduced headcount as datacenter functions move off premise and into the cloud.
As a cloud infrastructure and cloud computing free manufacturers from the burden of implementing, upgrading, and operating an on-premise IT ecosystem, the newfound flexibility and agility provided by the cloud leaves them poised for innovation and new business opportunities.