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How Cloud Computing Decreases IT Costs

One of the main benefits of IT hosting or cloud computing is that it can lower the IT costs of businesses that do not currently make extensive use of hosted IT solutions.

IT hosting is where an IT hosting company implements an IT solution such as an application, virtual desktop, or virtual server on a server in one of its datacenters, and then rents out the IT solution to a customer, usually on a per-hour or per-month basis. The customer accesses the solution via the Internet. The hosted version of the solution appears and performs the same as a locally-installed version—for example, a hosted version of Microsoft Word 2013 has the same interface and all of the same features as a version of Microsoft Word 2013 installed on your PC.

Hosted IT solutions can either be self-service solutions that you purchase and deploy on your own via an online signup process, like Google Apps or Salesforce CRM, or they can be solutions that an IT hosting company has to deploy for you individually.

The main alternatives to hosting your IT solutions with an IT hosting company are to host them yourself on your own physical servers at your office or to give up on having a centralized IT infrastructure altogether and install your applications directly onto employees’ workstations and allow them to store all of their files on their devices’ hard drives. Both of these are usually referred to as having an “onsite” or “in-house” IT infrastructure.

The main reasons that IT hosting or cloud computing is more cost-efficient than onsite IT are:

You only have to pay for the portion of the physical server that you use. Virtualization software allows hosting providers to securely and privately host multiple IT solutions for multiple different customers on the same physical server. This lowers costs in two ways: first, it minimizes the hosting provider’s hardware costs, because it allows the hosting provider to host the maximum amount of IT solutions on the minimum number of servers, and these savings can be passed on to the customer; second, customers only have to pay for the portion of the physical server that they use, which is a lot more cost-efficient than, for example, purchasing a $1,000+ onsite physical server and then hosting a solution on it that only uses 25 percent of the server’s resources.

The hosting providers have less human administrators per solution than an in-house IT department. Because the management of IT solutions is mostly automated and doesn’t require a lot of direct human oversight or interaction, hosting providers can manage the IT solutions of hundreds or thousands of businesses while dedicating far less human administrators per solution than in-house IT departments. So instead of paying an in-house IT administrator $50,000-$100,000+ per year to manage your IT, you pay a much smaller amount (a fraction of your monthly IT hosting bill) to have a team of IT hosting experts manage your solutions just as effectively (if not more effectively).

You can access hosted IT solutions from low-cost devices. IT hosting decreases your hardware costs not only by allowing you to securely share a single physical server with other hosting provider customers, but also by allowing your users to access their IT solutions from low-cost devices such as thin clients or older, lower-quality PCs. The performance of your hosted solutions won’t be affected by the low quality of these devices, since these devices don’t actually perform the processing for these solutions—the hosting provider’s servers do. Your employees can also access their hosted solutions from their personal devices, including laptops, tablets, or smartphones that they bring with them to the office, or any devices that they have at home. Allowing Bring Your Own Device (BYOD) with hosted solutions would reduce your end-user hardware costs for participating employees to $0, and would do so without decreasing the security or manageability of your IT.

Hosting providers are better at preventing costly IT disasters than in-house IT departments. IT hosting companies are generally better than in-house IT departments at preventing security breaches, data loss, and downtime. This is because IT hosting companies can afford to implement advanced security, data loss prevention, and disaster recovery measures, including high-end firewalls and network monitoring software, RAID arrays, N+1 redundancy, and offsite data backups, while most in-house IT departments cannot. Security breaches, data loss incidents, and downtime can result in costs in the millions due to bank account theft, lost customers, lost sales, lost productivity, lawsuits, and fines.