Appirio: We guarantee cloud computing will save companies $1M

Even though cloud computing is a hot topic right now, not every company is eager to dump their existing hardware and move all of their computing online. But Appirio, a startup backed by well-known venture firm Sequoia Capital, plans to give businesses a little more incentive to make the leap.

Ryan Nichols, Appirio’s vice president of “cloudsourcing” and cloud strategy, said that with the San Mateo, Calif. startup’s help, switching to the cloud should save companies at least $1 million a year. If it doesn’t, Appirio will pay off the difference by providing its services for free.

The company started out by offering services and applications that help businesses move some of their work into their cloud, for example by switching from traditional sales software to Salesforce.com’s online applications. With its recent cloudsourcing initiative, Appirio wants businesses to “go all in” with cloud computing, Nichols said, ditching their traditional IT entirely. The company offers consultation, custom application development, and other products and services to make that happen.

To illustrate a typical transition, Nichols described Appirio’s work moving a marketing services company into the cloud. Over a period of three years, the company plans to switch from traditional applications to a combination of Salesforce, Google Apps, WorkDay for human resources, and a customized app built by Appirio on Salesforce’s Force.com platform. Within two years, the company should already save enough money to make up for all the costs of the switch.

Nichols added that he’s “totally confident” in the guarantee, based on Appirio’s experience moving almost 200 companies move into the cloud. At the same time, the deal should make CEOs for whom the savings are “not immediately obvious” feel more confident about the move.

There’s some fine print, of course. For one thing, participating companies need to spend at least $5 million a year on IT — if your expenses are lower, the switch won’t save you as much. And the guarantee only works if you’re switching to “public cloud” services like those offered by Salesforce and Google, not private clouds. That’s when companies adopt some similar technology, but run it on their own private infrastructure.

“Most of the time, when a company asks about the private cloud, we talk about what is useful about the cloud, and what exactly is cloud computing,” Nichols said. “Then they come to an understanding that you can’t get these sorts of benefits from a data center with a fancy name.”

Appirio has raised a total fo $16.7 million from Sequoia and GSV Capital.