Table of content• 80-20 rule of IT• Opportunity cost• CapEx to OpEx• Total Cost of Ownership• Time is money
80-20 rule of IT • Gartner estimate that 80% to total IT expenditure80% Application maintenance goes to maintenance. • 20% of the time and effort goes20% Core technology Operation Servers Data Center into providing applications to end users. TheGartner Report http://www.gartner.com/it/page.jsp?id=497088 real added-value
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
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 Reesehttp://broadcast.oreilly.com/2008/10/the-economics-of-cloud-c.html for more information about the economics of Cloud Computingsee also http://gigaom.com/201%6/06/lazy-hazy-crazy-the-10-laws-of- behavioral-cloudonomics/
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
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.