Friday, March 6, 2009

Fud buster Friday #30 - The Cloud Will Save us Money

Let me start by saying if you are committed in a relationship, either stick with it or drop it.

2009 will go down as the year, in the US at least, where everything changed, from the President to your bank and your bank account or job or home or life in general.

Evidently the companies of the world are choosing to drop long time relationships in favor of what some see as short term crutches and it is upsetting quite a few companies, the ones still in existence.

100,000 GSK employees are going to the Cloud. 100,000 in various price points too.
How many of these lucky people will also get to work from home? After all if you are going to do this, why not go all out? Commercial Realtors you are about to get FUBAR(look it up).

85,000 x $15 = $1,275,000 a month
15,000 x $3 = $45,000 a month

So for about $1.3 Million dollars a month or $15.6 million a year they will get online version of everything Microsoft can offer.

Now surely someone said we are already paying Microsoft about $1000 per employee for Windows, Office, plus Lotus costs for email and well sure this looks good.

But hold on, what are all these employees going to use for accessing the web? Linux machines? That would make perfect sense, but no, the SAME machines they have now will still be in use. Saving money? not yet.

Also all those small offices are going to need more bandwidth or if GSK goes whole hog to let everyone work from home hopefully they are picking up the tab for the internet bill. if so, let's imagine 40% of the company works form home.
40,000 x $50(average per month)= $2 million a month or $24 million a year.
This doesn't include the real bandwidth which may be added at corporate.

So at $40 million a year this is saving them money? Right. they expect to shave off 30% of their costs over time. How? Once you start with a host the costs only escalate. Have you ever seen them go down? I didn't think so.

So let's say GSK is smart enough to lock in some pricing growth limits, like $1 for higher users or a quarter for the lower ones that's still quite a chunk of change in year 2 and going further.

Wait, don't forget there are admins for all this. I don't see any of them losing jobs soon. Microsoft is going to manage their user base? I don't think so.

So that cost doesn't go away. IT Support also is not going away although maybe they cut a deal for that as well.

And classically, what happens when you lose the connection at the wrong moment? What is the BC plan? Business Continuity can be costly to or is Microsoft making GSK pay for a complete redundant data center on both sides of the ocean?

Maybe GSK's costs are much more than this, and I know this is not even all the possible items on laundry list of costs(security, disk space, integration to their back office solutions), and a deal like this is probably being underwritten by Microsoft in one form or another.

A smarter way to look at their environment could have saved them even more money. But they needed that money for the day the try to get off the Microsoft hosting.