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Cloud Economics

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34 views12 pages

Cloud Economics

Uploaded by

atakilti
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
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Cloud Economics

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.
Calculating Cloud ROI
• ROI Formula:

• Net Benefits: Cost savings + Productivity improvements + Revenue


growth.
• Investment: Total cloud costs (infrastructure, services, security,
personnel).
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) Net Benefits of Cloud Adoption (Returns)
 Cloud Infrastructure (IaaS, PaaS): $200/year 1. Cost Savings:
 Cloud Security Tools: $75/year  Reduced On-Premise Data Center Costs: $100/year (no hardware,
 Migration and Setup Costs: $100 (one-time) cooling, energy, and physical space costs).
 Cloud Management Personnel: $80/year  Reduced IT Maintenance Costs: $40/year (fewer on premise staff
and manual upgrades).
Total Investment (T):  Total Savings: 100+40=140 USD/year
T=200+75+100+80=455 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
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.
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.
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).
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.
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.
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).
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.
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.

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