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Cloud Isn't Always the Best Option for Insurers—Here's Why

Joe McKendrick
Insurance Experts' Forum, April 6, 2010

One of the most compelling movements to sweep the IT world in years is cloud computing, which seems to offer incredibly cheap computing power and application access. However, don't be lead down the wrong path by the low, up-front numbers, one industry observer cautions.

John Kreisa, director of industry solutions at Mark Logic, says cloud offers compelling advantages, but still must be carefully considered before moving into it.

“It's import to carefully evaluate the costs of using this new technology,” he advises. “In some cases, IT managers don’t properly analyze the implications of deploying a new technology versus the benefits it will bring to a company and its end-users.”

That's because cloud computing is surrounded by so much hype these days. “The truth is that cloud computing is not the best option at all times,” Kreisa advises. For example, there are hidden costs that may be buried beneath the cheap proposition cloud offers, he cautions. “One of the most common misconceptions, which applies not only to the insurance industry, but to users in other industries as well, is the belief that cloud computing is a cheaper technology to be implemented and deployed.” 

Hidden costs may be buried within requirements related to data transfer, upload and download of data, and exchange of data between cloud-based infrastructures, Kreisa explains. The management and administrative costs of these functions could even make a cloud deployment more expensive than on premise deployments, he adds. “Be sure to fully understand all of the details and costs for your deployments."

I've seen similar revelations with the open source model in recent times. While I'm a big fan of open source, most of the costs of maintaining software in the enterprise relate to governance, maintenance and integration—up-front licensing fees are but one part of the picture. This is a lesson that needs to be examined when considering cloud for the enterprise as well.

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at joe@mckendrickresearch.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

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