Enterprise executives are always facing new challenges when it comes to running their IT operations. Today, this is especially true as the number and demand for new cloud applications spurs a corresponding complexity of service delivery models.

More and more, IT departments are choosing a hybrid model that incorporates several options: developing “born-in-cloud” applications, selecting certain external applications to be hosted in a Software-as-a-Service (SaaS) environment, and modifying existing applications that then must be hosted either on premises or in the cloud.

In the end, IT executives must ensure that each application meets the business needs and computing architecture policies of the company. To do so, IT leaders must apply a set of high-level evaluation questions:

1. Does the application meet the business need?

Whether the application is acquired from an external provider, a modified version of a legacy application or a new application, its primary goal should be to meet the needs of the business. Significant cost savings can come from the discipline of eliminating legacy applications that no longer serve their intended purpose.

2. How long does it take to develop or modify an existing application?

Is the timeframe consistent with the business plan timeline to exploit the market opportunity? On-premise solutions require time to acquire, install and test hardware, prepare the facility for installation, load the software and test.

3. Is the application a smart financial choice?

When hosting applications on-premises, an enterprise incurs higher capital expenditure than it would if it used cloud-based options. However, the price of cloud services are largely tied to usage, as seen in the ISG Cloud Computing Index Report, so depending on the configuration, it’s possible that a company would save money if it runs an application which needs computing capacity for a sustained period (i.e. high utilization for long periods) on its own infrastructure just as it might if it were to run an application that experiences seasonal fluctuation in demand for services on a cloud-based model.

4. How can we best integrate the application into our IT environment?

No piece of the computing puzzle can function in isolation. Each application must be integrated with other parts of the organization. The operational activities and financial management of a traditional IT environment are different than those in a cloud environment. An organization may need to consider a redesign of its structure to cater to both cloud and legacy applications.

5. How can we ensure security and compliance?

Each organization has its own specific security and compliance requirements. Since security is essential to the success of cloud providers, general opinion is that they will have invested in highly skilled security personnel and infrastructure. Many experts now consider security in a cloud environment to be as tight or tighter than a traditional IT environment.

6. What is the total cost of ownership (TCO)?

A full TCO analysis will include the cost of:

• Power: In addition to facility costs, on-premises options must take into account the expenses associated with power to run and cool the servers. In the cloud delivery model, these costs are included in the provider’s rate.

• Hardware upgrades: On-premise budgets must allocate for the cost of technology refreshes and the future purchase of hardware to support growth. In the cloud, the provider’s rate will include costs associated with technology refreshes and hardware upgrades.

• Network/bandwidth: In on-premises models, the majority of network costs go toward internal network infrastructure, including switches and cabling for bandwidth inside office walls. Offloading heavy workloads to the cloud will call for a bigger pipe and higher bandwidth cost.

• Service integration: The integration of the cloud environment with the rest of the IT organization may require revised processes and organizational structure, a cost that may be easy to overlook.

• Data integration: Any new application will depend on data from multiple sources or feed data to other applications. The cost of this integration will differ depending on the configuration.

• Application development and modification: The costs of “cloudifying” an existing application and integrating it with other applications must be considered. Developing a new application to meet the business needs is also an option, though it may be a more expensive one.

• Operational support: Whether the application is run in an in-house environment or in the cloud, operational support will be needed. Cloud service providers typically take care of the majority of the infrastructure support and the cost is included in their rates.

• Monitoring and reporting: Basic monitoring and reporting provided by cloud service providers may fall short of customer’s expectations. Additional cost may come in the form of software or advanced monitoring and reporting services that are added to the cloud solution.

• Training: Although training is needed for both delivery options, additional training may be needed for a cloud environment because the end user will interface directly with the cloud environment and be responsible for provisioning tasks.

Cloud computing can offer solutions that are highly beneficial, agile, elastic and adaptable. As discussed above, however, the age of the cloud brings its own set of questions.

(About the author: Ravi Shankar is a principal consultant at Information Services Group)