Can cloud computing really decrease business costs?

Aside from the financial analysis which you should do, what is driving many of our decisions as to whether we move to the cloud is if its our "core" competence. About 18 years ago the company decide to run Outline on our own servers. We strictly did the financial analysis and it was cheaper to do it on our own. Today, we have nothing but problems and had a real challenge getting to run in our new India office. At the end of the day, it was not our core competency although the numbers seems better.

Great points. Also, keep in mind that there may be a lot of 'hidden' costs for traditional on premises software that you may or may be directly charged by your IT folks - things like data center environmentals, network device & server hardware costs, OS licensing, storage costs, IT technician costs, etc. These are costs to the organization that you'll want to build into your financial analysis.

With cloud/SaaS all costs are pretty transparent: subscription + possible data storage beyond minimums offered, premium support if needed.

There are for sure cost savings both hard and soft. In terms of hard costs you can reduce hardware expenses by going to the cloud. You also can cut down on cost of IT staff although actual incremental cost reduction depends on how big your company is. The IT guys will say it does not matter but it does. You also save time on putting in upgrades, supporting the application, customer support, etc.

Cost of maintaining and upgrading equipment for 15 years plus all IT staffing and programming salaries for the same time period.

vs.

A monthly fee + some consulting costs once in awhile.

This also depends on the stage your company is at with regards to needs for processing and data storage. In particular, if you expect potential fast growth in requirements or a volatility in your use of systems or storage, the cloud provides a level of flexibility at much lower cost than internally maintaining the hardware and support levels required for peak usage times. If you are able to use cloud solutions already on the market, that also makes a big difference by reducing IT staff costs - if you are trying to "fit into" an existing solution however, that may require a lot of customization or work around, then the costs for consulting, enhancements or support can sneak back up on you.

As Shawn points out - don't forget to factor in the 'hidden' costs - like data redundancy, backup data center facilities, business continuity planning and disaster recovery planning, facilities and data security, etc. These costs may not appear on your IT budget, but they are real - and you're either paying them or putting your company at risk.