Counting the cost of cloud

Counting the cost of cloud

Summary: IT costs were always a worry, but only an occasional one. Cloud computing has changed that.

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TOPICS: Cloud
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This guest post comes courtesy of Chris Harding, Forum Director for SOA and Semantic Interoperability at The Open Group.

By Chris Harding

IT costs were always a worry, but only an occasional one. Cloud computing has changed that.

Here's how it used to be. The New System was proposed. Costs were estimated, more or less accurately, for computing resources, staff increases, maintenance contracts, consultants and outsourcing. The battle was fought, the New System was approved, the checks were signed, and everyone could forget about costs for a while and concentrate on other issues, such as making the New System actually work.

One of the essential characteristics of cloud computing is "measured service." Resource usage is measured by the byte transmitted, the byte stored, and the millisecond of processing time. Charges are broken down by the hour, and billed by the month. This can change the way people take decisions. [Disclosure: The Open Group is a sponsor of BriefingsDirect podcasts.]

"The New System is really popular. It's being used much more than expected."

"Hey, that's great!"

One of the essential characteristics of cloud computing is "measured service."



Then, you might then have heard,

"But this means we are running out of capacity. Performance is degrading. Users are starting to complain."

"There's no budget for an upgrade. The users will have to lump it."


Now the conversation goes down a slightly different path.

"Our monthly compute costs are twice what we budgeted."

"We can't afford that. You must do something!"


Possible and necessary

And something will be done, either to tune the running of the system, or to pass the costs on to the users. Cloud computing is making professional day-to-day cost control of IT resource use both possible and necessary.

This starts at the planning stage. For a new cloud system, estimates should include models of how costs and revenue relate to usage. Approval is then based on an understanding of the returns on investment in likely usage scenarios. And the models form the basis of day-to-day cost control during the system's life.

Last year's Open Group “State of the Industry” cloud survey found that 55 percent of respondents thought that cloud return on investment (ROI)addressing business requirements in their organizations would be easy to evaluate and justify, but only 35 percent of respondents' organizations had mechanisms in place to do this. Clearly, the need for cost control based on an understanding of the return was not widely appreciated in the industry at that time.

For a new cloud system, estimates should include models of how costs and revenue relate to usage.



We are repeating the survey this year. It will be very interesting to see whether the picture has changed.

Participation in the survey is still open. To add your experience and help improve industry understanding of the use of cloud computing, visit: http://www.surveymonkey.com/s/TheOpenGroup_2012CloudROI

This guest post comes courtesy of Chris Harding, Forum Director for SOA and Semantic Interoperability at The Open Group. Copyright The Open Group and Interarbor Solutions, LLC, 2005-2012. All rights reserved.

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4 comments
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  • ROI and the Cloud

    Excellent point that you make concerning the cloud and how that most added value initiatives are based on ROI. It's really the way this new economy has taken us in order to be profitable and to stay in business!
    jimclawson
  • Back to the beginning...

    With cloud computing, we are going back to the very dawn of computing, where individual companies couldn't afford the hardware for themselves, so they would use a computing center (or groups of companies banded together to buy a shared computer) and pay for the amount of storage and the amount of processing time they used.

    At least we don't need to deliver crates of punched cards for the data runs these days! :-D
    wright_is
  • Cloud ROI

    ROI is important, BUT what is equally important is security and accessability. It seems to me that proponents of "cloud" do not want to address these issues. Is the data totally secured? Will the data always be accessable? Hope for the best but plan for the worst folks!
    lvr181
  • Tracking ROI for Cloud is not a one-time activity

    Hello, Dana and Chris. This is E.G.Nadhan, Distinguished Technologist, HP Enterprise Services.

    Thank you, Chris, for a post on a topic that hits the point home on how things have changed when it comes to tracking cost, and therefore the returns between the traditional and cloud computing environments. I especially like your characterization of the dialog in quotes across the two scenarios -- the reaction "then" and the reaction "now" to increasing demand on the IT resources.

    Some time back, I had authored an article on the steps that CFOs can take to compute the cost of cloud computing. Your article highlights couple of the steps I had called out.

    I have shared my thoughts on this topic referencing your article in this post here: http://bit.ly/QCrI0X.

    Please check out my post at your convenience and let me know what you think.
    easwaran.nadhan@...