An introduction to Cloud Computing, based on the material from Rackspace’s, CloudU Certification. Chapter 2 : Cloudonomics

1. CLOUD DISCOVERY
AN INTRODUCTION TO CLOUD COMPUTING
Chapter 2: Cloudonomics
By: Alain Charpentier

2. Table of content
• 80-20 rule of IT
• Opportunity cost
• CapEx to OpEx
• Total Cost of Ownership
• Time is money

3. 80-20 rule of IT
• Gartner estimate
that 80% to total
IT expenditure
80% Application
maintenance
goes to
maintenance.
• 20% of the time
and effort goes
20% Core technology
Operation
Servers
Data Center
into providing
applications to
end users. The
Gartner Report http://www.gartner.com/it/page.jsp?id=497088
real added-value

4. Opportunity cost
• Cloud Computing is an opportunity of flipping the ratio.
• By giving IT department the ability of spending 80% of
their time on core business process.
80% Value added
activities
20% Non value added
activities

5. CapEx to OpEx
• Traditional IT has been very capital intensive.
• The OpEx model gives the flexibility to terminate cost at will.
• Individual Business Unit can tie their expendature directly to
demand.
Internal IT Managed Service The Cloud
Capital
$40,000 $0 $0
Investment
Setup Costs $1,000 $5,000 $1,000
Monthly Services $0 $4,000 $2,400
Monthly labor $3,200 $0 $1,000
Cost over three
$149,000 $129,000 $106,000
years
Saving Gained 0% 13% 29%
Estimated costs of infrastructure for two application servers, two database servers and a load balancer across internal,
managed and Cloud deployment models. Source O’Reilly Media: George Reese
http://broadcast.oreilly.com/2008/10/the-economics-of-cloud-c.html for more information about the economics of Cloud Computing
see also http://gigaom.com/201%6/06/lazy-hazy-crazy-the-10-laws-of- behavioral-cloudonomics/

6. Total Cost of Ownership
• Direct cost comparaison between on-premise options and Cloud Computing are
difficult.
• In-house costs often fail to take into account all the direct cost (power, floor space,
storage), the indirect cost (running the server, network and storage) and the
overhead of owning a server (procurement, over and under capacity)
Under capacity,
unhappy customer
Over capacity,
Capacity sleeping capital
CapEx
Cloud Capacity
Classic Capacity
Demand
Time

7. Time is money
• A recurring theme is the fact that Cloud Computing
enables organization to focus on their core business
• For IT department, having more time to explore new
product offering, to more effectively broker the various
Cloud providers, add immensily more value to the
enterprise than managing the maintenance of the existing
infrastructure.

8. QUESTIONS ?