Estimating the Value of Cloud Services

In a business world that does not forgive inefficiencies, the concept of value for the business becomes increasingly important and decisive in making executive decisions. Analyze the adoption of a technology or computer concept like cloud computing services, involves assessing their real value to the organization, whatever the valuation models, such as ROI (return on investment), ROA (Return on Assets), value the opportunity and so on.

Of course the value of technology depends directly on the importance of technology to business results. How quickly an application should be implemented to allow the creation of a new service or support the launch of a new product? The rate imposed by globalization and the Internet does not accept delays as found in the time of batch applications or client-server.

New technologies, speed and choices

Unfortunately most companies are not prepared to meet the demands at that speed. Allocating computing resources is not in the traditional models we have adopted to manage the technology infrastructure, a simple task.

Often it is necessary to enter into a process of selection and purchase of new dedicated servers. Other times, even when servers are available, you need an exhausting work of preparing the environment.

The infrastructure management models adopted by companies like Google, allow you to manage massive data centers automatically and efficiently. Why not use this model in enterprise data centers?

Models and solutions from the cloud providers

Consider the viewpoint of financial executives, the CFO (Chief Financial Officer). CFOs are keen to solutions such as cloud computing model and its pay-as-you-go “because this model exchange capital investment (Capex and Capital Expenditure) for opex (operating expense). The result is a cash flow, which is much better than the traditional model.

The CFO does not need to sign any checks before being able to have the computing power. Instead, he signs the checks as they consume computing resources.

The financial risk is also much lower, because, with the traditional model he spent the advance money on technology without knowing whether the result is even expected. In the cloud model, financial risk is monthly (use and pay) and he can more closely monitor how the money is being spent. Moreover, there is no depreciation of the asset. Finally, the CFO’s point of view, cloud is the model of your dreams.

Eliminating financial risks and benefits knowing

Although the economic appeal of cloud, converting capital expenditure (capex) in operational expenditure (opex) is very strong, the model of pay per use “pay as you go” quite adequately capture the economic benefit of the proposal.

The hours of computing acquired by a cloud can be distributed unevenly, i.e., we can use 80 hours of server today and tomorrow only 5, and pay only 85 hours.

In summary, the elasticity super provision eliminates the risk of excess or scaling (that generates under-utilization of resources) and sub provision (scaling down the requirements, creating bottlenecks) are differentiating factors and drivers of Cloud services.

Demand and possibilities

The ability to allocate resources and remove dynamically, in real time, to reconcile the demand with their resources adequately.

A simple example shows the benefit of elasticity. Suppose we estimate a demand in the peak period in 500 servers, but on the other hand, we also have a period of little use when we need only 100 servers.

The average use will be situated around a capacity of 300 servers per day, or 300 x 24, 7200 server times / day. But the cost of the servers, due to scaling the peak, is 500 x 24 or 12,000 servers per day. A factor 1.7 is higher than necessary.

In the cloud model, you pay only what was actually consumed. Gains can be substantial.

Another example. Suppose that 10% of users who receive poor service are online shoppers who drop out of the transaction and leave the basket, leaving the store. Business opportunities are lost.

The shop estimated a peak of 400,000 users (1000 users per server x 400 servers), but promotion has pushed demand to 500,000 users trying to access the site. In excess of 100,000 users who received a bad service, by our estimate, 10% or 10,000 have abandoned the transaction.

If this access profile is maintained, the store will be losing 10,000 transactions per hour, for a long time. In addition, negative ads, common in the Internet world, you can remove any new buyers.

In the model of cloud, the capacity fluctuates according to demand. There will be 500 servers when the store has 500,000 users, 400 servers when 400,000 users and 100 servers when only 100,000 users are accessing the store.

Do not lose customers and you pay only for what the shop demanded resources. That is, IT spending is directly related to the revenue of the business.

Economy in investments and according to the customer profile

Furthermore, as there is payment for the use, applications with different profiles of performance are collected in a much more appropriate. An example: an application that requires intensive CPU activity is low and I / O will be charged primarily by the cost of CPU time. Have another application, intensive I / O, will be billed by the volume of MBs transferred to and from the cloud.

There is another benefit of the Cloud hosting model through which it passes unnoticed: technological developments mean that the life of a machine as a server is relatively short. In a few years or months, a new server, with lower operating costs (such as energy and space) hits the market. In the traditional model, the cost of replacing the machines can be relatively high, preventing many companies from obtaining these benefits due to high capex required.

In the cloud , the provider (they have massive data centers) may replace equipment more easily and pass on these gains to customers due to competition in the market.

Let’s look at another positive point: the model of cloud company removes all the hassle and expense of administering all the technological stuff that usually is not their core business.

Operate and maintain a plethora of servers takes time and money. Offsetting this service to the cloud provider, the company concentrates its activities in IT in the business.