Deploying applications in the cloud is never going to be cheaper than deploying on-premise infrastructure, but the service benefits of cloud computing make the cost of adopting it worthwhile.

Speaking at the Apps World summit in London yesterday, Martin Saunders, product director at Claranet said: “People understand that cloud isn’t cheaper. It is always going to be cheaper for a company to buy a server, stick it in server room and run it themselves. But I think if that’s all you’re focusing on then you’re very much missing the point of what this thing is all about, because it’s a service. It’s not just about buying infrastructure and hardware.”

Saunders said that people often compare the cost of running a server on premise to the cost of running a server in the cloud, and conclude that the cost of the on-premise server can be written off in three years, whereas the cloud server will be an on-going expense.

However, he said that the labour and power costs of operating an in-house server 24/7 are often left out of these calculations, as well as the staff training and personnel required.

Ron Fraser, CTO of cloud services at Microsoft, added that cloud was traditionally sold as a cost-saving mechanism, and the cloud strategy belonged to the CIO. Now most of the conversations that vendors have around cloud computing are with chief marketing officers and chief financial officers.

“There’s two personalities to cloud. There’s the internal perspective, which is all about potential cost savings, risk assessments, and how you manage your portfolio apps. And there’s also an external perspective, which is driven by the economics the cloud brings in,” he said.

“If nothing else, the fundamental shift that cloud brings is a democratisation of access to the economies of scale. You can be a small company, and you can access the same globally diversified, resilient infrastructure that an IBM or a JP Morgan can have at the same unit price point.”

Fraser said that this is levelling the competitive landscape in a lot of markets, meaning that very small companies can take on incumbents, unencumbered by legacy systems, legacy processes and legacy policies and risk assessment procedures.

The costs associated with cloud are coming under increasing scrutiny as the European Commission embarks on a new strategy to speed up and increase the use of cloud computing in the region.

The EC claims that 80 percent of organisations adopting cloud computing achieve cost savings of at least 10-20%, and intends the new strategy to create 2.5 million new jobs and boost GDP by €160 billion (£127bn) by 2020.

However, TechMarketView analyst Anthony Miller questions where the predicted growth in revenues and jobs (based on figures from IDC) are going to come from, given that cloud technologies are – almost by their very definition – deflationary.

“Our own forecasts for the UK market suggest that spending on software and IT services will decline in real terms (i.e. excluding inflation) until 2015 and then will remain pretty much flat (plus or minus) till the end of the decade,” he said.

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