Unicon is publishing an article on ways of approaching decision-making about adopting cloud and/or managed services. The article will be broken down into segments. The segments will cover elements including: strategic, financial, architecture, security, process, and people.
We continue the series this week by publishing the financial segment of the article.
The Financial Element
Often enough we find that the reason we are having a discussion about cloud is due to financial pressures or even "the CFO/CBO is making me.” While one could conduct a purely financially driven analysis based on TCO and/or ROI, actually quantifying service and security related risks in financial terms is hard at best. Never the less, the economics of the solution are still very important. One should build a cost model to gain a clear picture of the costs and compare it to the present or other alternative solutions.
A factor unique to cloud financial modeling is the ability to factor in variations in demand which result in highly variable needs for compute infrastructure. Education often sees substantial swings in demand across the academic year and cloud solutions that ramp resources up and down based on demand can result in cost savings. On the other hand, we have seen large deployments with generally even, predictable loads for which the financial model for a three year capital acquisition actually made more sense - the supporting infrastructure already existed (data center and related infrastructure, systems administration staff) and had adequate capacity.
For mission-critical applications, considering disaster recovery (DR)/business continuity plan (BCP) requirements can substantially impact costs. Many cloud solutions have strong offerings from which DR/BCP solutions can be built. Related to the financial benefits of dynamic capacity mentioned above, DR solutions where few to no instances are actually provisioned until needed can substantially improve the cost to maintain a DR capacity. Note, however, that the capabilities of cloud providers vary widely with respect to the building blocks for a DR plan. In the architecture section, we will touch briefly on some of these issues.
Lastly, there are a number of purely financial considerations that will be unique to each business or institution. Will de-commissioning existing infrastructure result in a write-down on existing assets or can those be re-purposed? Also, for organizations that rely heavily on capital investments and depreciation, moving to a cost structure where IT costs are expenses against the operating budget can have a substantial impact on cash flow. Be sure to engage finance and budget managers on these topics.
Every week for the next four weeks Unicon will publish another segment of this article. Please check back for the next segment, which will cover the architecture element.