Introduction to Cloud Computing Economics.pptx
- 2. Introduction to Cloud Economics • Cloud economics refers to the cost structure, financial benefits, and value proposition of cloud computing services. • Cloud delivers cost-effective solutions through flexible pricing models and efficient resource utilization. • Key to Success: Proper cost management, optimizing usage, and leveraging cloud-native tools can drive significant savings. • Next Steps: Assess cloud ROI, implement cost tracking tools, and optimize workloads for better financial outcomes.
- 3. Calculating Cloud ROI • ROI Formula: • Net Benefits: Cost savings + Productivity improvements + Revenue growth. • Investment: Total cloud costs (infrastructure, services, security, personnel).
- 4. Scenario: Cloud Adoption in a Supermarket • A mid-sized Supermarket company is considering moving its e-commerce platform and IT infrastructure to the cloud. The company expects to see significant cost savings, improved scalability, and operational efficiency from this move. Initial Cloud Investment (Costs) Cloud Infrastructure (IaaS, PaaS): $200/year Cloud Security Tools: $75/year Migration and Setup Costs: $100 (one-time) Cloud Management Personnel: $80/year Total Investment (T): T=200+75+100+80=455 USD/year Net Benefits of Cloud Adoption (Returns) 1. Cost Savings: Reduced On-Premise Data Center Costs: $100/year (no hardware, cooling, energy, and physical space costs). Reduced IT Maintenance Costs: $40/year (fewer on premise staff and manual upgrades). Total Savings: 100+40=140 USD/year 2. Productivity improvements : Improved Employee Efficiency: Cloud tools enable 20% faster deployments, leading to a $55/year increase in productivity. 3.Revenue Growth from Scalability: Ability to handle peak shopping seasons results in a revenue increase of $100/year. 4. Total Benefits (B): Cost savings + Productivity improvements + Revenue growth. B=140+155=295 USD/year
- 5. ROI Calculation ROI=(295/455)*100 =64.83% • The Supermarket company achieves an ROI of 64.83 % in the first year after moving to the cloud. • This shows that for every dollar invested in cloud computing, the company gains approximately 64.83 cents in net benefits.
- 6. Cloud Cost Components • Infrastructure Costs: Computer, storage, and networking resources. • Operational Costs: Maintenance, management, and support of cloud environments. • Security Costs: Tools and services for securing data and applications in the cloud. • Compliance and Governance: Costs associated with meeting regulatory requirements.
- 7. Cloud Pricing Models • Pay-as-you-go (PAYG): Pay for the exact usage of resources (e.g., AWS, Azure). • Subscription-based: Fixed price for predefined services over a period (e.g., SaaS). • Reserved Instances: Pre-purchase cloud resources for a lower price (cost-effective for long-term use). • Spot Pricing: Purchase unused cloud capacity at a discount (ideal for non-critical workloads).
- 8. Cost Management Tools • AWS Cost Explorer: For tracking and managing AWS costs. • Azure Cost Management: Provides detailed cost insights for Azure services. • Google Cloud Billing: Tools for budgeting and monitoring Google Cloud costs. • Third-party Tools: CloudHealth, CloudCheckr, and others for multi- cloud cost management.
- 9. Optimizing Cloud Costs • Right-sizing Resources: Adjusting resources to match actual usage (e.g., scaling down unused instances). • Auto-scaling: Automatically adjusting capacity based on demand. • Reserved Instances and Savings Plans: Pre-pay for lower rates. • Workload Placement: Choosing the most cost-effective cloud provider or region.
- 10. Cloud vs On-Premises Cost Comparison • CapEx vs OpEx: Cloud shifts capital expenditure (CapEx) to operational expenditure (OpEx). • Reduced IT Infrastructure Costs: No need to maintain physical data centers. • Elasticity: Scale resources up or down as needed, avoiding over- provisioning. • Total Cost of Ownership (TCO): Cloud reduces overall IT spend, especially for small to medium enterprises (SMEs).
- 11. Business Value of Cloud • Speed to Market: Faster deployment of applications and services. • Global Reach: Access to global infrastructure without investing in data centers. • Innovation: Leverage cloud-native services like AI, ML, and IoT without upfront investment. • Agility: Quickly adapt to changing business needs with cloud scalability.
- 12. Challenges in Cloud Economics • Unpredictable Costs: Fluctuations in usage can lead to unexpected expenses. • Shadow IT: Unmonitored cloud services can lead to inefficiencies and security risks. • Vendor Lock-in: Long-term commitments to one provider may reduce flexibility. • Skill Requirements: Organizations need skilled professionals to manage cloud resources efficiently.
Editor's Notes
- #3: Cloud Return on Investment (ROI) Definition: ROI measures the profitability of cloud investments relative to the costs invited. Key Components: Cost savings, productivity gains, scalability, innovation.
- #5: Over time, as the one-time migration cost is amortized, the ROI is expected to increase significantly, especially as the company leverages cloud scalability and increased efficiency for higher revenues.