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A Look at the Cost of Life in the Cloud

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Part One in an ongoing series about Cloud Technologies and their Advantages

Whether you realize it or not, you’re probably rather familiar with cloud software and the benefits it provides you. Maybe you’re a Netflix subscriber, have an email address with Google, Yahoo, or the like, or maybe you’ve hailed a ride via Uber or Lyft. Anyone of these technologies would be considered a software as a service (SaaS) or “cloud” application.

For the sake of this conversation, let’s lay a groundwork for what a SaaS application is. To do this, I’ll paraphrase Jakob Thusgaard, CEO at YourSales: Outsourced SaaS Sales Worldwide, and his response to this question over on Quora:

A SaaS application is a consumer service that provided to the consumer to uses a provider’s application that runs which is running on a cloud infrastructure. The applications are commonly accessible via a web browser or mobile application. The consumer does not manage or control the underlying cloud infrastructure including network, servers, operating system, storage, or even the feature of the application itself (other than user-customizable features).   

It’s also helpful to define what we mean when we say “the cloud.” When most people refer to the cloud, they’re often referring to a centralized (within a single provider)* group of remote servers that host not only the code that runs an application, but also the data gathered from users or other inputs.

The growth of cloud applications has skyrocketed over the last decade and their acceptance in both consumer and business settings has also grown. Software as a service offers numerous advantages over traditional PC software or on-premise solutions (an application installed on a server within a company’s facilities) and those advantages are growing as these solutions become more popular.

Cost

People are often surprised by the price of software and with the rise of rather capable “free,” open source, or freemium software, this has only been exacerbated.

Of course free software is never really free. Users are often trading their personal information (facebook) or receiving ads in exchange for the use of a product (Google’s Gmail originally worked on this model). Open source software and tools are a fantastic resource, but they often lack the polish paid software commonly has (GIMP vs Adobe Photoshop). Freemium software, or software that has a free version that has limited functionality and a paid version that is more capable, can be great for beginners or those with basic needs. However, as a user gets more advanced, or their business grows, they’ll ultimately need to start paying for the full version.

Software development and hosting are not cheap. Hiring a good team of developers with the range of skills it takes to plan, code, operate, and maintain a complex software service or platform is a large task. Hosting, while becoming more affordable everyday, still has it’s fair share of expenses when it comes to running an application smoothly for a, hopefully, growing base of users.

This is not to say that the idea of a monthly or yearly license is an inherently attractive proposition, but consider the time, effort, and resources it would take to just build a complex piece of software that meets your needs. Now add to that the equipment, personnel, and time it takes to run the servers that run the software.

Those costs add up very fast and providers of SaaS applications know that. When Google first started offering corporate cloud-based email services they knew they were directly competing against on-premise email servers (most commonly Microsoft Exchange servers). Google was so confident they could beat the cost on managing your own in-house servers (IT departments are notoriously strapped for resources and budget) that they offered a calculator that did the ROI calculations for you right there in your browser. Today they have a 3rd-party tool that takes in other factors like productivity that shows the true impact of the service (which has expanded well beyond simple email).

A notable case study here, and excellent segway to the next topic, is Adobe’s Creative Cloud. Admittedly, most of their core software still runs on an actual PC due to performance requirements, but the pricing structure, user administration, and delivery of the software all happens from the cloud.

From at least Adobe CS4 to CS6, the full Creative Suite cost a user $999. Today, a license can be had for $49 per month. This means that an individual breaks even between the two options at about 20 months. If you now consider that Adobe was releasing new versions of their software about once a year, you’re actually coming out ahead if you were a user who upgraded that often or didn’t because of the large sum required to purchase the next version with it’s new features, functionality, and performance benefits. While licensing may seem frustrating at the onset, Adobe is a great example of the long term benefits the sales model can have for customers. 

If you’re still unsure and continue to find the future forecast of the cloud, well, cloudy, then follow along as we delve into other topics here that impact the technology in the future.

 

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Matt M

Matt is currently Product Manager on DicksonOne, where he has the chance to develop both SaaS and hardware components for Dickson. The tech space wasn’t always his focus, though, and he draws constantly on his background in advertising to apply a broad perspective to solving problems and build solutions.

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