Hello, and welcome to this lecture.

One of the reasons behind your move to the cloud would've most likely been financial. It's no secret as to how the costings against on-premise and the outer resources within the cloud compare, with cloud resources being significantly cheaper.

This allows for far cheaper flexibility, scalability, and capacity within your organization. This is largely do the large economy of scale that the public cloud providers can implement. However, let's take a look at some of the other less-obvious financial impacts of migrating services to the cloud.

Capex to Opex.

Cloud implementation offers advantages against on-premise, especially around your organization's Capex spend. To be clear, when additional resources are required, you will need to purchase the following as a Capex spend.

The host hardware, host upgrades such as additional storage, memory, and CPU, software, licenses, maintenance, new racking, and cabling. However, all of these are removed as a Capex expense within cloud computing.

As with cloud computing, you're not investing long-term into physical assets where the cost is spread over its useful life. Instead you are paying for short-term resources required to meet ongoing operational business requirements and are therefore classed as Opex costs.

When you have invested Capex into a resource, you are then fixed with that asset. Even if it fails, you still have to pay for it. Compare that to the Opex cost of cloud resources, you only pay for it when you're using it and you can upgrade at any point or stop using the resource altogether and your costs will cease.

Also you need to bear in mind that these Capex costs are not the only costs associated to new resources. There are also costs from the data center, such as space, power, calling, and maintenance, which all adds to the overall expense of the resource.

Again, these hidden costs are not applicable when utilizing cloud infrastructure, as all of those costs are the responsibility of the vendor, which can use economies of scale to keep these costs very low in the resources you need.

Cloud billing.

Your cloud environment can be architected in such a way that billing of services can be split and shared, for example between divisions, departments, and customers, giving greater cost association and tracking. Charges are based on consumption and so the business area is not to be paying over and above for what is utilized. Remember, we only pay for what we use.

Billing and utilization reports can be generated for each customer that are utilizing cloud services. Internally, this helps with departmental budgetary requirements.

Dependent on vendor, the finance team can be granted access to the cloud portal to allow them to directly create these reports and analyze the data, giving them full responsibility of managing all cloud finance accounts.

IT budget changes.

The budget allocation within the IT department will see a shift with regards to the budget spend on software, hardware, and support services. The budget spend for hardware will certainly decrease, as no hardware is required for cloud services, whilst at the same time reducing Capex cost in this area.

Supported services, such as staffing to manage, operate, and maintain that infrastructure will also decrease. However, the budget for software will rise, as this will incur the cost for all cloud services running.

To assist with the management of these costs, there are a number of cloud calculators available online, some offered by the cloud vendors themselves, such as a simple monthly calculator offered by Amazon web services, AWS.

HR costs.

As we explained in one of the previous lectures, there will be changes to roles and responsibilities. New positions may be created and old ones may become redundant. Generally, with a larger-scale cloud adoption and migration, the amount of personnel reduces, as many of the management and administrative function of the services are handed over to the cloud provider.

Severance and redundancy pay may have to be factored in, along with the recruitment costs of specialized cloud talent to fill any gaps within your workforce until the knowledge and expertise has been developed within the organization.

Improved efficiencies.

During the change of business dynamics lecture, I explained that a new approach and requirement would be needed for process and procedures. These new and improved processes must be more efficient than those previous, and must create an enhanced communication framework between other internal departments creating greater collaboration.

This will also increase employee productivity and morale through ease of procedures, essentially providing greater touring and better support to their working day. These efficiencies all lead to better management of time, resulting in better cost management of the overall workforce.

Rapid go-to market.

If you are operating within a business where you're bringing new products, applications, or services to market, then the cloud offers a great advantage in helping you complete this over a standard on-premise solution.

Using cloud resources to achieve this, and by bringing your product quicker to your customer, allows your organization to develop the next range of new products and releases even faster. This rapid turn-around of products and updates allows your business to grow at an increased rate from a revenue perspective.

This brings us to the end of this lecture, and next I will be talking about the different contractual business obligations when moving to the cloud.