Cloud Financials and Benefits

Inroduction

With 2012 seeing a repositioning of CFO's and Finance Officers concerns towards strengthening balance sheets and defensive balance sheet strategies, Cloud computing is in a perfect position capitalise on a move to const and budget control.

The public cloud allows organisations to lower capital expenditure and move to operational expenditure by spreading cost over a term, rather than an upfront payment then writing off cost through depreciation. So costs can be lowered whilst cash flow can be increased as more effective budget control can be implemented.

When total cost is considered (Office/Data Centre Space, utilisation, energy, management time, operational staffing, upgrades and technology refreshes etc) utility cloud provisioning of IT services is comparable and advantageous when compared with traditional IT services.

Why Move to the Cloud

Return on Investment and Total Cost of Operation:

Benefit One

The Cloud promises a utility model for consumption of processing power an therefore offers the host consumer the ability to pay for usage where supply = demand.

Traditional growth and response from IT departments has meant that resources always had to be ahead of the demand curve or else service levels and delivery would be affected.

However, this also means that there is a great deal of wasted resources if the peak subsides. As shown in Red.

Server Refreshes also have to be taken on a regular basis and this can impact licensing especially Oracle as moving from Dual Core Legacy Servers to Quad Core Servers can double the metrics used to determine the licensing costs and support.

With the Cloud the Demand Curve = Supply

Because resources match the demand placed on the system waste is reduced and only processing power is applied when it is required. This means that idle time  (non peak time) is no longer catered for as in the traditional server model.

This has Green benefits as energy consumption is greatly reduced.

Benefit Two

There is another benefit for Organisations that have defined usage patterns for their internal systems environments.

These have typically been described as non production training or development environments, however middle tier application servers could experience fluctuations in demand ie UK Retail hours peak at lunchtime but flatline at 3 a.m in the morning. 

Thius allows organisations to switch services on and off so that during off peak hours resourcs aren't consumed. If organiations can limit access to set hours 8 hours per day 9 to 5 or 12 hours 8 til 8 savings of 66% or 50% can be achieved respectively on a 24 Hour cycle.

 

66% Savings On Resources and consumption Can Be Saved

 

In summary the Cloud can offer specific savings through the granular application of resources to meet with demand.

Also by identifying which environments can be switched on and off means that significant costs can be saved in terms of hardware and energy.

Cloud Storage ROI

>Cloud storage: Calculating ROI Webcast discussing the ROI between Cloud and traditional services.

TCO and ROI Articles and Resources

ROI Article Published 2011 

Overview Cloud TCO Article (Full article can be purchased for $795)

Forbes Write Up on Cloud TCO November 2011