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Economics of Cloud Computing
 

Economics of Cloud Computing

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Economics of Cloud Computing

Economics of Cloud Computing

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  • For example, you face the problem of having only limited resources with which to fulfil your wants and needs, as a result, you must make certain choices
  • Cloud Computing is a force that helps flip this ratio and gives IT departments the ability to spend 80% of their time on core business processes, like business application design. It’s for this reason, the ability to go from 20% of time and money dedicated to core business processes to 80%, that the economics of Cloud Computing is so compelling. Nowhere is the current model’s inefficiency more evident than in the opportunity costs that organizations pay to manage their own computing needs.

Economics of Cloud Computing Economics of Cloud Computing Presentation Transcript

  • Economics of Cloud Computing http://clean-clouds.com Visit Researcher’s Blog - http://clean-clouds.com
  • Economics• Economics is the study of what constitutes balanced human behaviour in the attempt to fulfil needs and wants.• Economics has always been a powerful force in driving industry transformations and as more and more customers evaluate cloud computing investments that will significantly affect ROI. Source: Unknown / Missing Visit Researcher’s Blog - http://clean-clouds.com
  • Economics of the Cloud • Field of study concerned with Cloud computing • Deals with the production, distribution, and consumption of IT services. • Scope not limited to Cloud Computing paradigm’s Financial Benefits. • It is more about choices Cloud customers make • To inquire into why? • Economics of the Cloud should show the way and should not confuse the adopters. Source: Unknown / Missing Visit Researcher’s Blog - http://clean-clouds.com
  • Scarcity • For an Industry, limited resources include – Capital Apps Apps – Labor force Dev Test Prod ENVs Dev Test Prod ENVs – Technology • For an organization, resourcesHR Marketing include - Compute - Storage - Networking Apps Apps App Dev Test Prod ENVs Dev Test Prod ENVsFinance IT Visit Researcher’s Blog - http://clean-clouds.com
  • Resource Utilization Capacity UtilizationWaste of 85% 85% 85% 85%ResourcesMaximum 15% 15% 15% 15%Utilization App App App App OS OS OS OS (Linux) (Linux) (Windows) (Windows) H/W H/W H/W H/W HR Marketing Finance ITTotal 100% 100% 100% 100%Capacity Visit Researcher’s Blog - http://clean-clouds.com
  • Virtualization-Resource Utilization 60% 15% 15% 15% 15% App App App App Guest OS Guest OS Guest OS Guest OS (Linux) (Linux) (Windows) (Windows) H/W H/W H/W H/W HR Marketing Finance IT Virtual Machine Monitor (VMM) / Hypervisor HardwareTotalCapacity 100% Visit Researcher’s Blog - http://clean-clouds.com
  • Journey towards Cloud 4 3Resource Utilization 2 Cloud Computing 1 Virtualization Server Consolidation Dedicated Servers Time Visit Researcher’s Blog - http://clean-clouds.com
  • Immediate Benefits Visit Researcher’s Blog - http://clean-clouds.com
  • Opportunity Cost Decrease in• Opportunity cost is the cost of any some critical activity measured in terms of the values that value of the next best alternative used to be foregone (that is not chosen). gained with On Premise• Opportunity cost is a key concept in Computing economics, and has been described as expressing "the basic relationship between scarcity and choice".• The opportunity cost of moving to Increase in cloud computing is supreme because some values; it entails a commitment in ‘sunk costs’: those are costs that Business value strengthen the business enterprise. of Cloud Computing is significantly higher than that of On Premise Visit Researcher’s Blog - http://clean-clouds.com
  • Pareto Principle Application Management Application Management 20% Business Focus Agility Infrastructure/Platform Creativity 80% Management Innovations Platforms 80% Business Focus OS Server Resources Infrastructure/Platform Management 20% Data Center Cloud ResourcesTraditional Environment Cloud Environment Visit Researcher’s Blog - http://clean-clouds.com
  • Economic Impact• Fundamental contribution to promote growth and competition Agility• Economic impact of an innovation Economic in the hardware-software field Benefits Creativity – Profound effect on the market structure of many sectors – On the global macroeconomic Economics performance in the next years. of the Cloud Trade off Innovation• Macro and microeconomics are the two vantage points from which the Cloud economy is observed. Benefits Social Impact – Understanding of cloud phenomena – More informed decisions while using cloud computing Visit Researcher’s Blog - http://clean-clouds.com
  • Agility• Engineering resource availability – Rapid provisioning of computing resources; – Quick deployment of applications Source: VMware – Agility in new product development, Testing & Deployment• Business response to changing conditions or opportunity Visit Researcher’s Blog - http://clean-clouds.com
  • Agility• The agility benefits of cloud computing overshadow the purely cost saving benefits. – It enhances a company’s ability to bring new products to market – Improves its capability to expand geographically Source: The European Business Review Visit Researcher’s Blog - http://clean-clouds.com
  • Creativity & Innovation• Continuous examination of opportunities without spending a lot of money and lot of time. Source: Unknown / Missing Visit Researcher’s Blog - http://clean-clouds.com
  • Creativity & Innovation• Enable new business formation and new product development creates what could be called multinational small and medium businesses (SMBs). Source: http://www.eoi.es Visit Researcher’s Blog - http://clean-clouds.com
  • Creativity & Innovation Government Education & Health Agriculture, Banking, Fin ance & Forestry & Business Fishing Services Cloud Computing Energy & Transport & Communica- Utilities tions Distribution, Manu - Retail & facturing Hotels Visit Researcher’s Blog - http://clean-clouds.com
  • Social Impact• “Green” IT• Global Collaboration• Services to be delivered to developing nations which have limited access to IT• Employment impacts – Indirect and induced economic activity that arises from the result of the cost‐saving and business development impacts – Direct employment impacts resulting from business creation.• Perfect competition is characterized by many buyers and sellers, many products that are similar in nature and, as a result, many substitutes. E.g. VMware, Microsoft and Eucalyptus in Private Cloud Visit Researcher’s Blog - http://clean-clouds.com
  • Benefits• Economies of Scale • Speed and Flexibility of• Multi-Tenancy business Changes• Capacity Utilization – On Demand self service• “Zero” capex model – Automation• Long term TCO of the IT – Standardization paradigm that support – Elasticity business – Pay per Use Model• Support for new business – Reduced time to market models which were • Complete focus on Business constrained by the resources in the past • Efficiency in global – Big data processing communication and collaboration• Competitive Advantages Visit Researcher’s Blog - http://clean-clouds.com
  • Trade off• Security • Privacy and Data• Loss of Control Confidentiality• Availability • Shift in Liability• Reliability • Regulatory Compliance• Speed • Transparent Infrastructure• Cost Scalability• Learning Curve • Application Deployment Mechanisms• Quality of support • Economic Modeling of new• Change in organization Market culture • Portability for Legacy IT in• Interoperability and Clouds Standards Visit Researcher’s Blog - http://clean-clouds.com
  • Economic BenefitsSource: Microsoft Visit Researcher’s Blog - http://clean-clouds.com
  • Economic Benefits Source: Unknown / Missing Visit Researcher’s Blog - http://clean-clouds.com
  • Comparison of Basic Cost Savings Variables for Public and Private Sector Cloud Customers Visit Researcher’s Blog - http://clean-clouds.comhttp://safegov.org/2011/11/1/government-decision-making-the-economics-of-cloud-computing
  • Value Model Visit Researcher’s Blog - http://clean-clouds.com
  • Business Models for CloudModels ExamplesCommunications, Conversations Telephony, MicroblogsCorrespondences search and dating sitesCollaboration, Competition, on-line gaming, vertical market sites, on-line auctionsCommerceClearing On-line paymentsConversion audio and video bridging, currency servicesCommunity Social networking sitesCrowd sourcing On-line movie rental / streaming sites, news or tagging sites with popularity voting or recommendation engines.Commons - Collections online book or patent databasesContinuous Cross-Device Access, Web mail or photos accessible from your laptop or your smart phone, orContinuous Cross-Network Access anyone else’s, if you choose.Cost Electricity, cheaper to buy from the grid than run a nuclear power plant in your back yardComparative Advantage - Context vs. Core Outsourcing HR, CRM, tax prep, or stock picking via a mutual fund.Capabilities and Competencies proprietary search algorithms and heuristicsCelerity software, platform, or infrastructure as a serviceCustomer Experience - Convenience Content and application delivery networks.Consistency - Currency - Change Control - Any SaaS service.CoordinationCheckpoints Network-based firewalls, anti-DDoS, email filtering for anti-virus or anti- spam. Visit Researcher’s Blog - http://clean-clouds.comChokepoints Network traffic management, in digital networks, air traffic networks
  • Country impact on timeframeIndia 7% 36% 43% 14% 14Japan 0% 9% 9% 82% 11China 25% 13% 38% 25% 8 JCI 9% 21% 30% 39% 33 < 12 12 – 24 Total < 6 months 2 – 3 years OVUM Research months months number Visit Researcher’s Blog - http://clean-clouds.com
  • Cloud Adoption Trends By Industry Visit Researcher’s Blog - http://clean-clouds.com
  • Cloud Adopters Visit Researcher’s Blog - http://clean-clouds.com
  • Laws of Cloudonomics• Cloudonomics Law #1: Utility services cost less even though they cost more. Although utilities cost more when they are used, they cost nothing when they are not. Consequently, customers save money by replacing fixed infrastructure with Clouds when workloads are spiky, specifically when the peak-to-average ratio is greater than the utility premium.• Cloudonomics Law #2: On-demand trumps forecasting. Forecasting is often wrong, the ability to up and down scale to meet unpredictable demand spikes allows for revenue and cost optimality.• Cloudonomics Law #3: The peak of the sum is never greater than the sum of the peaks. Enterprises deploy capacity to handle their peak demands. Under this strategy, the total capacity deployed is the sum of these individual peaks. However, since clouds can reallocate resources across many enterprises with different peak periods, a cloud needs to deploy less capacity.• Cloudonomics Law #4: Aggregate demand is smoother than individual. Aggregating demand from multiple customers tends to smooth out variation. Therefore, Clouds get higher utilization, enabling better economics.• Cloudonomics Law #5: Average unit costs are reduced by distributing fixed costs over more units of output. Larger cloud providers can therefore achieve some economies of scale. Visit Researcher’s Blog - http://clean-clouds.com
  • Laws of Cloudonomics• Cloudonomics Law #6: Superiority in numbers is the most important factor in the result of a combat (Clausewitz). Service providers have the scale to fight rogue attacks.• Cloudonomics Law #7: Space-time is a continuum. Organizations derive competitive advantage from responding to changing business conditions faster than the competition. With Cloud scalability, for the same cost, a business can accelerate its information processing and decision-making.• Cloudonomics Law #8: Dispersion is the inverse square of latency. Reduced latency is increasingly essential to modern applications. A Cloud Computing provider is able to provide more nodes, and hence reduced latency, than an enterprise would want to deploy.• Cloudonomics Law #9: Don’t put all your eggs in one basket. The reliability of a system increases with the addition of redundant, geographically dispersed components such as data centers. Cloud Computing vendors have the scale and diversity to do so.• Cloudonomics Law #10: An object at rest tends to stay at rest. A data center is a very large object. Private data centers tend to remain in locations for reasons such as where the company was founded, or where they got a good deal on property. A Cloud service provider can locate greenfield sites optimally. Visit Researcher’s Blog - http://clean-clouds.com
  • Additional Slides Visit Researcher’s Blog - http://clean-clouds.com
  • Cloud: Boon for SMBs• SMBs – Academia – Start-ups to corporations – Technology providers – Pay-as-you-go/grow model Visit Researcher’s Blog - http://clean-clouds.com
  • Business Processes and Paradigm Shift• On-premises to On cloud• Development• Testing• New applications for the cloud• Hosting and supporting cloud applications Visit Researcher’s Blog - http://clean-clouds.com
  • Business Drivers• To slash IT costs and technology costs• Business Process Improvement – To Standardize Applications and the Business Operations• Business Intelligence out of Big Data Processing• Availability• Cost Benefit of going for a Operating Expense (OpEx) based approach vs Capital expenditure (CapEx) based approach in traditional IT• Time-to-Market improvement• Fast scale-up or scale-down of resources, with utility-based pricing model• Simple, Efficient, Agile, on-demand provisioning of all “data center resources”• Innovations in technology• Proficient Resource management• Competitive Advantage: The ability to do development and testing, better, faster, or at lower cost than the competitor.• Environmental Benefits Visit Researcher’s Blog - http://clean-clouds.com
  • Mobile Cloud Computing• Emerging trend is a shift from Cloud computing to Flexible Cloud computing and that is, “Mobile Cloud Computing- Salesforce.com• ABI Research forecasts that the number of mobile cloud computing subscribers worldwide will grow rapidly over the next 5 years; rising from 42.8 million subscribers in 2008, (approximately 1.1% of all mobile subscribers) to just over 998 million in 2014 (nearly 19%). Visit Researcher’s Blog - http://clean-clouds.com
  • Industry wise Cloud Adoption Visit Researcher’s Blog - http://clean-clouds.com
  • Cloud-Fit Applications and VerticalsBanking & Investment •Front Office:CRM, Demand Generation Services •Enterprise Services:HR, Procurement •Channel Mgmt: Advertising,Placement, Display, Search Media •Content Mgmt:3D Rendering, Content Delivery Energy & Utilities •Energy Supply:ETRM(small/single commodity) •Administration& Finance: Grants Management Government •Public Safety & Justice:Crime analysis •Corporate: F & A (payroll) Healthcare •Clinical: Physician EMR •Front Office:CRM, Distributor Portals •Core: Document Management Insurance •Enterprise Services:HR, Procurement •Infrastructure: Storage •Business Applications: CRM Manufacturing •Corporate: Web Teleconferencing Retail •E-Commerce •Cargo portals ,Maintenance, repair & overhaul, Transportation management systems, On-line travel Transportation shopping, booking, ticketing, Loyalty management Import/export management •Procure to Pay: SupplierMgmt Wholesale Trade •Supply Chain Exec/Optimization: Global Trade Mgmt, Transportation Mgmt Visit Researcher’s Blog - http://clean-clouds.com
  • Inhibitors Visit Researcher’s Blog - http://clean-clouds.com
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