A Business Case for Cloud – Not So Easy

June 30, 2015 § Leave a comment

The move to cloud is to say the least a major topic on every CxOs “keep me up at night” list. But building a business case to move to the cloud is not very straight forward. There are many factors involved and the OpEx/CapEx topic itself can be very intense (another reason I did not become an accountant). However, there are some interesting perspectives that are starting to get studied with some interesting results.

Information Services Group (ISG) has published the results of a study that shows the effect of usage in the overall cost benefit analysis of cloud. This is a challenging problem to study as the overall costs of public cloud vendors varies greatly not to mention the wide array of features included or not included in the costs. That being said, enterprises are intrigued by the “only pay for what you use” concept of public cloud. And the fact that they can off load all of the daily care and feeding of the infrastructure to the cloud vendor makes it that much more enticing. The problem is that comparing a public cloud “pay for what you use” model against internal IT where usage is not a factor is not easy.

graphSo the report takes a “standard” infrastructure configuration for an application that is typical of what you would use to “test drive” the cloud and used its deep background to estimate the monthly cost it would incur at a typical large, internally managed IT organization. I have to admit that this seems a bit arbitrary and I am not sure if the degree of variation here isn’t greater than the variability in cloud costs per vendor. However, a stake needed to be put in the ground as a control point so I guess it is as good as any.

The conclusion of the study indicated that at 55% usage the costs where at a break even point between internal IT and public cloud. Obviously there are a tremendous amounts of factors that can make this break even point vary, but what I take out of it is that there is a break even point.

What does that mean for the CxO losing sleep? To me this study again validates the hybrid cloud story. One size does not fit all and the promise of being able to turn out the lights completely on an internal data center is still unrealistic. And it also points me in a direction to pursue. What are the lower usage scenarios (dev/test, capacity overflow, DR, etc.)? How can an enterprise make use of the price points a public cloud offers for these scenarios in a seamless way? How can I do my own cost comparison and have that dashboard that keeps me on the right side of the break even point? These are all factors involved in a hybrid cloud pursuit. We now have some interesting data being collected to help us answer those questions.

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