It once made sense to run consolidation programs that were solely focused on virtualization. That time is over. To really reduce IT costs, data center consolidation means moving most to the cloud, and virtualizing only those that are better run in-house. If you only think about virtualization when you think of consolidation, you will miss opportunities to save.

The vast majority of enterprise applications can be virtualized, but the problem is virtualization is focused on reducing capital expenses (Capex). This approach can only take you so far, and should be reserved for applications like Oracle and SAP ERP systems, financial systems, and mainframe applications that are more difficult to move to the cloud.

But most applications that can be virtualized can also live in the cloud, meaning even greater opportunities for savings. The real determinant of cloud readiness comes from the way in which the application achieves fault-tolerance. If the application is dependent on the underlying hardware to be fault-tolerant, it is not a good fit for . If the application is built to be fault-tolerant aside from the underlying hardware (that is, it is built to be distributed to protect against hardware failure), it can move to the cloud.

Additionally, any application that can be delivered in-house as a service or is Web-based can also start saving you money if you move it to the cloud. That includes popular applications such as SharePoint and many Web-based applications. There is no reason to consume precious internal infrastructure when there is a more flexible option in the cloud. For large enterprises, SharePoint can be better deployed in a private cloud than in a multi-tenant cloud more suited to smaller, noncustomized deployments.