The course is part of this learning path
This module focuses on the business implications of the cloud by looking at the cost considerations, the important security and legal factors and the implications for people management.
The objectives of this course are to provide you with and understanding of:
- The key cost and cost-management implications of cloud services.
- The important implications for organizations in relation to contracts, strategy, structures and personnel.
- The opportunities for organizations in deploying cloud services in relation to managing people, staff development and mobility.
The course is aimed at anybody who needs a basic understanding of what the cloud is, how it works and the important considerations for using it.
Although not essential, before you complete this course it would be helpful if you have a basic understanding of server hardware components and what a data center is.
We welcome all feedback and suggestions - please contact us at email@example.com to let us know what you think.
The cost model for cloud services is very different to more traditional in-house IT provision and there are implications for budgeting and cost management. Let’s have a look at the main ones.
CapEx to OpEx
Cloud services are accounted for through operational expenditure which is the day-to-day operating costs of a business. This is different to in-house IT costs of things like hardware and software which are capital expenditure items, meaning they’re treated differently for accounting purposes and need to be budgeted for differently.
With cloud services there are no assets to purchase so there’s nothing that depreciates over time. And, because the model allows cloud resources to be scaled up or down to meet demand, it can be a very cost-effective way of managing IT services.
There are also very few up-front costs in the cloud, although some providers allow pre-payment for some of their services. This means an organization commits to consuming an agreed number of resources which they pay for regardless of whether they use them or not, generally at a discounted rate. This is still counted as operational expenditure.
Fixed vs variable cost
Because in-house IT infrastructures and services are set for a period of time to meet the IT strategy requirements, organizations know their fixed costs for things like running the data center, buying hardware and software, and ongoing systems maintenance. Then there are things like periodic technology refreshes, license upgrades and support fees. These costs are generally visible and predictable.
Cloud services are different. Because of utility pricing and on-demand resources, monthly expenditure is variable and can fluctuate. If the services are for a ‘steady-state’ application – say a customer relationship management system – with a fairly static number of users and consistent usage, the cost can be pretty well anticipated and unlikely to change much.
But, for applications where there’s a high variation in the number and frequency of users, the cost fluctuation will be much greater. However, cloud service providers publish price lists so it’s still possible to predict the likely costs based on forecast demand for the services.
So, accurately costing complex cloud deployments can be difficult, but this has to be weighed against the benefits of on-demand services and cost reductions if service requirements decrease.
With cloud services, it’s simple to provision and deploy resources. Because of this though, it’s easy to forget about unused resources which can, in effect, lie around doing nothing apart from incurring cost.
This a real concern for cloud customers. Respondents to RightScale's 2019 State of the Cloud survey identified ‘Controlling and understanding costs’ as one of their highest priorities and estimated that, on average, their bill was 30% higher than it needed to be.
So, the cloud is about having strong policies and processes in place to govern who can create resources, when they can create them and who needs to authorize their provision. Systems also need to be implemented to ensure that unutilized and underutilized resources are managed and ‘turned off’ when they’re not needed.
This is related to the economies of scale of cloud services and, although it doesn’t directly financially benefit the organization, it provides an overall environmental benefit because of the way the cloud services are structured.
Cloud services operate through a common infrastructure which means that multiple customers are running on the same IT infrastructure. If Customer A needs more resources at certain times, Customer B needs them at different times and Customer C has different requirements again, their combined requirements can be aggregated – along with all the other customers – so the overall provision can be ‘flattened’.
This means that the power consumption requirements are significantly lower than if those hundreds of thousands of customers were running their own data centers.
About the Author
Daniel Ives has worked in the IT industry since leaving university in 1992, holding roles including support, analysis, development, project management and training. He has worked predominantly with Windows and uses a variety of programming languages and databases.
Daniel has been training full-time since 2001 and with QA since the beginning of 2006.
Daniel has been involved in the creation of numerous courses, the tailoring of courses and the design and delivery of graduate training programs for companies in the logistics, finance and public sectors.
Previous major projects with QA include Visual Studio pre-release events around Europe on behalf of Microsoft, providing input and advice to Microsoft at the beta stage of development of several of their .NET courses.
In industry, Daniel was involved in the manufacturing and logistics areas. He built a computer simulation of a £20million manufacturing plant during construction to assist in equipment purchasing decisions and chaired a performance measurement and enhancement project which resulted in a 2% improvement in delivery performance (on time and in full).