There was a useful article posted by Phil Wainewright on the ZDNet blog this week which I thought worthy of note here. It’s all well and good for cloud practitioners to tout the cost savings that the cloud offers, but where do these savings come from? The answer turns out to be a simple matter of economies of scale, which Phil depicts succinctly with a neat diagram in his article.

The argument becomes self-evident when you start to think of IT infrastructure and application services as just another utility for businesses to tap into, like electricity or water. It’s uncontested that to have a single electricity grid to feed thousands of businesses makes more economic sense than everyone having a generator in their basement. Similarly, cloud applications and the Platform-as-a-Service model, especially when used on a significant scale, reduce each customer’s IT total cost of ownership simply due to the economies of scale of the shared service.

Have a read of Phil’s article here.