There are also jurisdictional issues, particularly with regard to taxation, within the United States. Laws differ from state to state on whether certain types of software-as-a-service accessed over the Web are subject to sales tax, and in some cases it only matters where the servers hosting the application, and not its end users, are located.
In short, bear in mind what the Wright Brothers had to learn the hard way: escaping the bonds of earth for the realm of the cloud is much more difficult than it appears.
David McCann is senior editor for technology at CFO.
Winding Down the Data Center
“Out with the old” poses a new challenge.
All the hype around cloud computing may have you champing at the bit to garage-sale your data-center gear and go completely virtual. But it is important to manage your expectations, because even if you are intent on a very aggressive cloud strategy it will likely take a while.
The potentially significant savings are likely to materialize only as your hardware becomes fully depreciated, or when an increase in computing demand means that you otherwise would consider incurring a sizable capital expense for new gear.
Even then, the decision is often not purely financial. For example, an effort to move processes to the cloud that are currently being run by complex, customized applications might be hamstrung by interoperability, migration, and other technical issues. Even without any such roadblocks, migrating from in-house servers to a cloud provider may take months, notes Helen Tang, worldwide lead on data-center transformation for Hewlett-Packard.
That’s because companies will still need to conduct an inventory of servers and what applications run on them, and wipe them clean of data. Then the issue becomes whether to sell them in the secondary market or repurpose them (some insurance companies, for example, are repurposing servers to store the ever-growing loads of sensitive customer data that the companies don’t want hosted in the cloud).
Some servers may be too old to offer much resale value, but when HP downsized its own internal data center, a project completed two years ago, it found that 90% of its 21,000 redundant servers still had some worth. (Ironically, the growth of demand for cloud computing may produce a glut in the market for used servers, which could send prices plunging.)
Tang suggests that companies track current prices carefully, because they do fluctuate, and time sales accordingly. She also warns that for large companies, the logistics involved in unloading thousands of servers can be formidable. — D.M.