The Economics of the Cloud

Every CIO, IT Director and IT Manager that’s interested in improving their bottom line should read the whitepaper titled

The Economics of the Cloud

Authors Rolf Harms and Michael explain why the Cloud is important and why it will transform the economics of Information Technology.

The authors further explain that the cloud brings economies of scale in:

  • Supply-Side Savings. Large-scale data centers (DCs) lower the costs per server

  • Demand-side aggregation. Aggregating demand for computing smooth overall variability, allowing server utilization rates to increase.

  • Multi-Tenancy efficiency. When changing to a multitenant application model, increasing the number of tenants (i.e., customers or users) lowers the application management and server cost per tenant.

The cloud allows for a profound change to the IT Budget.  Under the present on-premise client/server model 51% of the average IT Budget is spent on Infrastructure, 36% is spent on application maintenance costs such as update and patching labor, end-user support, and license fees paid to vendors.  This leaves only 11% of the IT budget to be spent on innovation.  89% of the budget is spent on maintenance!

The cloud will enable business to lower their operating costs, spending far less time and money on maintenance and more on innovation.