So, what are the benefits of cloud computing and why are organizations adopting these services? First and foremost for many is potential cost reduction and amortization. With a cloud computing solution, the customer does not have a big upfront capital expenditure for hardware, software licenses and implementation services. Nor do customers have the ongoing expense of administering the hardware and infrastructure software (e.g. patches). Instead, most cloud computing solutions offer a subscription or pay-as-you-go model, so customers pay a smaller recurring operating expense based only what they used which includes the hardware, software, and administration. This is particularly valuable in cases where an organization has unpredictable or fluctuating service demand. Instead of trying to perfectly predict demand and then potentially overprovision an in-house solution to meet the peak need ‘guestimate’, cloud computing customers simply increase or decrease their cloud computing service usage and payments to match exact point in time needs.

Another related benefit is overcoming an organizations data center capacity constraints and costs. Many Skytap customers tell us they are experiencing extreme data center capacity limitations. Their data centers are so full, that they need to remove a server for any server they add. Even many organizations working with hosting providers, tell us that their hosters have severe capacity constraints and can’t guarantee the space they need to grow.On top of this, power and cooling costs are skyrocketing and organizations need to be increasingly cognizant of how “green” they are and their carbon footprint. Customers working with a cloud computing solution avoid most of these issues and offload them to their cloud vendor. Moreover, cloud computing vendors, like Skytap, have a strong vested interest in building energy-efficient and eco-efficient data centers to reduce costs and attract customers.

Some of the biggest benefits for many customers are time to value and reduced risk compared to an in-house implementation. Most organizations want their solution up and running quickly so they can begin seeing the value. The time, expense and risk in developing and implementing an internal solution can be very extensive and adds no value until deployed. With cloud computing, customers typically see value almost immediately. Risk is significantly reduced since the vendor already has the solution running. And the vendor’s success is directly tied to customer success since customers can simply cancel their subscription if they are not happy or seeing value.

The benefits are pretty compelling, but customers do have some concerns about adopting cloud computing. In my next post, I’ll discuss some of the key customer barriers to adoption

Let us know what you think. What are the biggest benefits you see or expect to see from cloud computing and SaaS?