Is Cloud Computing Profitable?

Vivek Tiwari, runs a cloud computing firm

In many cases, cloud computing isn’t really as profitable to the service provider as it is to the customer.

Costs involved for the service provider –

  • The service provider’s location plays an important role in deciding the costs involved. In general, the infrastructure operational costs are higher in Tier-I cities than in Tier-II cities, but scaling becomes an obstacle in Tier-II cities because of the limited talent pool.
  • Other costs include the costs of connectivity (leased lines), CPUs, RAMs, cores, physical servers, periodic hard/software upgrades and storage costs. While these are obvious costs to be considered, the costs of regulation, licensing, compliance, safety, cooling, power, wiring, contracts are others to be considered — again, these depend heavily on the location.
  • Component costs vary too. For instance, a 2400 lbs TRIPP 42U cabinet would cost about $950 in the United States, while the same would cost at least ₹75,000 (≈$1150) in India, transportation excluded.

While these are the CSP’s costs to be maintained. The fields under cloud computing are dominated by the biggies (AWS, Microsoft, IBM etc.). Unless you’re not offering something exclusive at a competitive pricing, a client is more likely to go with one of the biggies.

Amazon leads the market. They may have lost the crown to Microsoft in terms of revenue but stands as a mountain when it comes to worldwide market share. Others, including Google and IBM, still have a long race to run.

This is where your profit substantially decreases.

The biggies are fighting among themselves. There’s a war going on, the war for lowest pricing, more than satisfactory services, and for bagging the highest of market shares.

The reason is simple — the one who leads the cloud services industry will lead the future.

While cloud-dependent apps and platforms are already becoming an integral part of our day-to-day lives, presently evolving technologies like AI and IoT will be heavily dependent on cloud as well.

This is the reason why these companies are burning billions of dollars today, to make folds in the future.

Between this war of the mammoths, small enterprises and startups are getting crushed while the customer gets the highest benefits.

A study of Nebula’s downfall should help understand this better. The startup built its platform on OpenStack and was seen as a contender who’d give the biggies a run for their money. They raised millions of dollars, even got investors like Ram Shriram (Google early investor/founding member) to put their money in.

Sadly, they failed to maintain costs, ran out of money, and had to close down in a couple of years from when it was included in the list of ‘10 Hot Cloud Companies to Watch’.

All-in-all, here’s your recipe to make a profitable business out of cloud computing –

  • Analyse your regional market. Don’t go worldwide overnight, start locally. How many CSPs are already in your region? How many companies are that would require your services? Attend seminars, meet people from the IT industry, know what services they have been using already and the pros and cons.
  • It’s about surviving at the start. Setting up your own infrastructure will not only require huge investments, but also the vast amount of time and resources. Unless you don’t have connections in the industry already, finding your first few clients will be a tough job. Prepare a solid business plan, don’t get eaten up.
  • Choose the location carefully. Of course, you don’t want your data centre to be gone with a quake. Choose the location strategically, disaster preparedness should be the foremost point while selecting one. Do consider power outages, especially if you’re from a developing country where blackouts can be of hours.
  • Don’t get locked out. Your business should never depend on one or two clients. No matter how lucrative your services are, your clients are always looking for someone who’d do the same job for a lesser price (that’s how it works, isn’t it?). Also, always map the actual server utilisation.
  • Become a reseller. If you don’t have any experience in the field or lack the financials, it’s better to become a reseller rather than an actual infrastructure owner. This is your easiest way to get into the industry, make good connections, make good money. You’ll get a grasp of the demand in your region.

Read Vivek Tiwari‘s answer to How is cloud computing profitable? on Quora

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