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How to Adjust an Economic Model in Cloud Computing

A number of other considerations may alter the economics of cloud computing migration. All of them are strategic in nature. Amend the economic model to accommodate them.

Private cloud computing and allocation costs

In most cases, picking up an application and moving it to the cloud isn’t simple. Most likely there will be some configuration work and some testing done first. In addition, that application may not be well designed for the highly distributed nature of the cloud environment in its current form and it may need to be rewritten. This is another cost that needs to be taken into consideration when deciding whether to move an application into the cloud.

The same cost factors apply where there’s a private cloud, but how the IT department assesses the costs of the private cloud is a matter of policy. The private cloud may be built as a staging area for moving applications to the cloud, or as a way to move workloads to a more efficient, automated environment. Many companies will leverage their existing hardware, software, and networking assets as the foundation for a private cloud.

Cloud computing service levels and compliance costs

It’s unlikely that a cloud service will provide exactly the same service level that the data center has provided for an application. There will either be a hidden cost or benefit. In order to put a value on this, you need to estimate the cost to the business of the application being unavailable. This can then added (or subtracted) as a further cost factor involved in moving the application to the cloud.

Compliance (external or internal) can also be thought about as a service level cost. It may be necessary to get the cloud service audited to see that it meets the appropriate compliance requirements, which may relate to IT security or recovery procedures or any other such IT activity that must obey compliance standards.

Cloud computing strategic considerations and costs

The IT context of your organization and its strategic direction need to be taken into account when deciding how any cloud costing model is applied. There are two important points worth paying attention to here:

  • Data center capacity: Many organizations are running out of data center space. If they do run out of space, there’s likely to be a massive cost in getting extra space. Thus, for some organizations, freeing up space in the data center creates capacity that’s more valuable than it might otherwise appear (because it will delay or even eliminate the need for additional data center space).

  • Application grouping: Because of the advent and widespread adoption of service oriented architecture, the interdependence of application services has increased. For technical integration and performance reasons, it may be impractical to think of applications on an individual basis, and instead to group them together when considering cloud migration.

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