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Counting the Cost of Cloud

ROI landscape changes

IT costs were always a worry, but only an occasional one. Cloud computing has changed that.

Here's how it used to be. The New System was proposed. Costs were estimated, more or less accurately, for computing resources, staff increases, maintenance contracts, consultants and outsourcing. The battle was fought, the New System was approved, the checks were signed, and everyone could forget about costs for a while and concentrate on other issues, such as making the New System actually work.

One of the essential characteristics of cloud computing is "measured service." Resource usage is measured by the byte transmitted, the byte stored, and the millisecond of processing time. Charges are broken down by the hour, and billed by the month. This can change the way people take decisions.

"The New System is really popular. It's being used much more than expected."

"Hey, that's great!"

One of the essential characteristics of cloud computing is "measured service."



Then, you might then have heard,

"But this means we are running out of capacity. Performance is degrading. Users are starting to complain."

"There's no budget for an upgrade. The users will have to lump it."


Now the conversation goes down a slightly different path.

"Our monthly compute costs are twice what we budgeted."

"We can't afford that. You must do something!"


Possible and necessary

And something will be done, either to tune the running of the system, or to pass the costs on to the users. Cloud computing is making professional day-to-day cost control of IT resource use both possible and necessary.

This starts at the planning stage. For a new cloud system, estimates should include models of how costs and revenue relate to usage. Approval is then based on an understanding of the returns on investment in likely usage scenarios. And the models form the basis of day-to-day cost control during the system's life.

Last year's Open Group “State of the Industry” cloud survey found that 55 percent of respondents thought that cloud return on investment (ROI)addressing business requirements in their organizations would be easy to evaluate and justify, but only 35 percent of respondents' organizations had mechanisms in place to do this. Clearly, the need for cost control based on an understanding of the return was not widely appreciated in the industry at that time.

For a new cloud system, estimates should include models of how costs and revenue relate to usage.



We are repeating the survey this year. It will be very interesting to see whether the picture has changed.

Participation in the survey is still open. To add your experience and help improve industry understanding of the use of cloud computing, visit: http://www.surveymonkey.com/s/TheOpenGroup_2012CloudROI

Copyright The Open Group and Interarbor Solutions, LLC, 2005-2012. All rights reserved.

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Dr. Chris Harding leads the SOA Working Group at The Open Group - an open forum of customers and suppliers of IT products and services. In addition, he is a director of the UDEF Forum and manages The Open Group?s work on semantic interoperability. He has been with The Open Group for over 10 years. Dr. Harding began his career in communications software research and development. He then spent nine years as a consultant, specializing in voice and data communications, before moving to his current role. Recognizing the importance of giving enterprises quality information at the point of use, he sees information interoperability as the next major challenge, and frequently speaks or writes on this topic. Dr. Harding has a PhD in mathematical logic, and is a member of the British Computer Society (BCS) and of the Institute of Electrical and Electronics Engineers (IEEE).

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