How a Cloud Infrastructure Can Save or Make You Money

How a Cloud Infrastructure Can Save or Make You Money

Before you left click that mouse to go to that other “work related” page, wait a few seconds while I explain what I’m talking about.  While there is a ton of hyped up, blown out and super hyperventilated information out there about how the cloud makes your life better, reduces your workload and ultimately makes your coffee and butters your toast, not much is said about how the cloud can help your company save or make money. Real money…not that kinda-sorta-maybe-coulda money, but real put-it-in-the-bank money.

Before I start my explanation, first let me say that there is no such thing as a free lunch and no one gets something for nothing.  The cloud, like any other technology or methodology in IT, requires CAPEX investment in order to be effectively utilized and have the desired benefits…and ultimately drive OPEX costs down over time (within the ROI horizon) or provide efficiencies that increase revenues.  No hocus-pocus, no magic…it takes careful thought and some hard work but, yes Virginia, revenue benefits and cost savings do exist in the cloud.  Of course you must calculate savings after all implementation expenses are accounted for…things like hardware and software acquisition costs, personnel and space requirements, training, etc.

Second, I am going to frame this discussion based on an internal, private cloud only (but many of the same characteristics exist for other types of clouds), as I just don’t have the space to explicitly differentiate here.

Third, I am going to compare costs based on a relatively mature “traditional” datacenter against the same datacenter but with a cloud infrastructure implemented and running in a steady-state. A traditional datacenter, in my view, is partially (<30%) virtualized with little to no automation or orchestration and is moderately managed from a holistic perspective.

Fourth, and my last condition before I begin my explanation, I am using the NIST definition of a cloud infrastructure (so no fancy bells and whistles) found here: http://www.nist.gov/itl/csd/cloud-102511.cfm.

OK, we’re all straight now, right?  Excellent. So how I’ll lay out the rest of this post is that I will first describe a couple of scenarios that exist in a traditional datacenter and then I’ll explain how they would be done in a cloud infrastructure. Last, I’ll point to where the revenue benefits are found or where costs are typically saved.

Time to Market/Value

  1. Traditional:
    1. A business owner or LOB owner decides they need an application built that will provide a new revenue stream to the organization so they describe, to a Business Analyst, what they want the application to do in the form of business requirements.
    2. The Business Analyst then takes those requirements and translates them to functional requirements (iterating with the Business as to end results required) and then uses those as the basis for the technical requirements which describe the supporting hardware and software (COTS or purpose built).
    3. A Technical Analyst or developer uses the technical requirements and produces a series of hardware and software specifications for the procurement of the hardware or software resources required to support the requested application.
    4. Once completed, a cost analysis is done to determine the acquisition costs of the hardware, any COTS software, an estimate of in-house developed software, testing and QA of the application, and the eventual rollout.
    5. The business analyst then takes that cost analysis and creates an ROI/TCO business case which the Business owner or LOB owner then takes to Senior Management to get the application approved.
    6. Upon approval, the application is assigned a project number and the entire package is turned over to Procurement who will then write and farm out an RFP, or, check an approved vendor list, or otherwise go through their processes in order to acquire the hardware and software resources.
    7. Approximately 8 to 16 weeks from the beginning of the process, the equipment is on the dock and shortly thereafter racked and stacked waiting for the Developer group to begin work on the application.
  1. Cloud:
    1. A business owner or LOB owner decides they need an application built that will provide a new revenue stream to the organization so they describe, to a Business Analyst, what they want the application to do to in the form of business requirements.
    2. The Business Analyst then takes those requirements and translates them to functional requirements (iterating with the Business
      as to end results required) and then uses those as the basis for the technical requirements which describe the supporting hardware and software.
    3. A Technical Analyst or developer uses the technical requirements and produces a series of hardware and software configurations required to support the requested application.
    4. Once completed, a cost analysis is done to determine the start-up and monthly utilization costs (chargeback details), an estimate of any in-house developed software, testing/QA, and the eventual rollout of the application.
    5. The business analyst then takes that cost analysis and creates an ROI/TCO business case which the Business owner or LOB owner
      then takes to Senior Management to get the application approved.
    6. Upon approval notification, the Developer group accesses a self-service portal where they select the required resources from a Service Catalog.  The resources are ready within a few hours.
    7. Approximately 3 to 6 weeks from the beginning of the process (up to 10 weeks earlier than a traditional datacenter), the computing resources are waiting for the Developer group to begin work on the application.
  1. Savings/Benefit:
    1. If the potential revenue from the proposed application is $250,000 a week (an arbitrary, round number), then having that application ready up to 10 weeks earlier means an additional $2,500,000in revenue.
    2. NOTE: The greater the disparity of resource availability, traditional versus cloud infrastructure, the greater the potential benefit.

 Hardware Acquisition

  1. Traditional:
    1. A business owner or LOB owner decides they need an application built that will provide a new revenue stream to the organization so they describe, to a Business Analyst, what they want the application to do in the form of business requirements.
    2. The Business Analyst then takes those requirements and translates them to functional requirements (iterating with the Business as to end results required) and then uses those as the basis for the technical requirements which describe the supporting hardware and software (COTS or purpose built).
    3. A Technical Analyst or developer uses the technical requirements and produces a series of hardware and software specifications for the procurement of the hardware or software resources required to support the requested application.  The hardware specifications are based on the predicted PEAKload of the application PLUS a margin of safety (overhead) to ensure application stability over time.
    4. That safety margin could be between 15% and 30% which effectively means that the procurement of the equipment is always aligned to the worst case scenario (peak processing/peak bandwidth/peak I/O) so for every application, the most expensive hardware configuration has to be specified.
  1. Cloud:
    1. A business owner or LOB owner decides they need an application built that will provide a new revenue stream to the organization so they describe, to a Business Analyst, what they want the application to do in the form of business requirements.
    2. The Business Analyst then takes those requirements and translates them to functional requirements (iterating with the Business as to end results required) and then uses those as the basis for the technical requirements which describe the supporting hardware and software (COTS or purpose built).
    3. A Technical Analyst or developer uses the technical requirements and produces a series of hardware and software configurations required to support the requested application.
    4. The required configurations for the cloud infrastructure compute resources are documented and given to the developer group.
  2. Savings/Benefit:
    1. Because the hardware resources within the cloud infrastructure are abstracted and managed apart from the actual hardware, equipment specifications no longer drive procurement decisions.
    2. The standard becomes the lowest-cost, highest quality commodity class of server versus the individually spec’d purpose built(highest cost) class of server thus saving approximately 15%-50 of ongoing server hardware costs.
    3. NOTE: I mentioned this earlier but think it needs to be said again: savings become “real” after all cloud infrastructure implementation costs are recovered.

These are just two examples of where an internal cloud can specifically help an organization derive direct revenue benefit or cost savings (there are many more). But, as always, it depends on your environment, what you want to do, how much you want to spend, and how long you want to take to get there.  The best thing to do is ask your favorite cloud infrastructure specialist today (um, pick me, pick me!!) to help you determine if this journey to the cloud is right for you!

Contribution By Trevor Williamson / Journey To The Cloud

Follow Us!

CloudTweaks

Established in 2009, CloudTweaks.com is recognized as one of the leading authorities in cloud computing information. Most of the excellent CloudTweaks articles are provided by our own paid writers, with a small percentage provided by guest authors from around the globe, including CEOs, CIOs, Technology bloggers and Cloud enthusiasts. Our goal is to continue to build a growing community offering the best in-depth articles, interviews, event listings, whitepapers, infographics and much more...
Follow Us!

Sorry, comments are closed for this post.

Join Our Newsletter

Receive updates each week on news, tips, events, comics and much more...

Can I Contribute To CloudTweaks?

Yes, much of our focus in 2015 will be on working with other influencers in a collaborative manner. If you're a technology influencer looking to collaborate with CloudTweaks – a globally recognized leader in cloud computing information – drop us an email with “tech influencer” in the subject line.

What is the 12/12 Program?

This program is designed to better handle the thousands of requests we receive from people looking to submit articles. The 12/12 program is the commitment of 12 articles delivered over a 12-month period.  

Wait! What if I just want to submit one article?

Our popular pay as you go sponsorship program provides the flexibility to submit as you wish and is designed for all budgets.

Contributors

Ten Tips For Successful Business Intelligence Implementation

Ten Tips For Successful Business Intelligence Implementation

Ten Tips for Successful Business Intelligence Implementation The cost of Business Intelligence (BI) software goes far beyond the purchase price. Time spent researching, implementing, and maintaining your BI investment can snowball quickly and mistakes are often expensive. Your time is valuable – save it by learning from other businesses’ experiences. We’ve compiled the top ten

Knots And Cloud Service Providers

Knots And Cloud Service Providers

How Do These Two Compare? In Boy Scouts, I learned how to tie knots. The quickest knot you can tie is the slipknot. It’s very effective for connecting one thing to another via the rope you have. It was used in setting up tents, mooring boats to docks temporarily and lifting your food up into

What Ever Happened To Google Glass?

What Ever Happened To Google Glass?

What Ever Happened to Google Glass? It was supposed to be the next big thing in tech so where did it go? Last year you could not go anywhere without hearing about some insane new use for the product and now it seems to have vanished in a plume of smoke. A Lackluster Rollout Back

Posted on by

Big Data

To Have and Have Not: Big Data Initiatives In Developing Countries

To Have and Have Not: Big Data Initiatives In Developing Countries

Big Data Initiatives In Developing Countries The poor of the developing countries are becoming increasingly connected, to the point where they too are part of the Big Data revolution that’s happening across the globe. It didn’t come with laptops, though, as some supposed it would. Whereas it costs a fortune to connect broadband to a

Big Data In Your Garden: Initiatives For Better Understanding Nature

Big Data In Your Garden: Initiatives For Better Understanding Nature

Big Data in Your Garden Big Data and IoT initiatives are springing up all across the globe, making cities, protesters–and just about everything else–smarter. However, thus far there’s been little attention paid to the interactions between these bizarre technologies and living things other than humans. Biology, that is, human biology is one field where Big

Who Holds the Key to the City: Big Data and City Management

Who Holds the Key to the City: Big Data and City Management

Big Data and City Management Cities like New York, Madrid, and especially Rio de Janeiro are augmented with Big Data-powered initiatives that range from combating crime with predictive analytics (New York & Madrid) to providing real-time data for improved management. Although Big Data is no panacea and is mainly used in conjunction with a greater

Internet of Things

Where’s the Capital of the Internet of Things?

Where’s the Capital of the Internet of Things?

Where’s the Capital? We all know the capitals of fashion are London, New York and Paris, while the capital of film is Hollywood (or Bollywood!) – but what’s the new capital of the internet? Specifically, the internet of things? The answer – according to new research by Ozy – might surprise you. It’s not Tokyo, Seoul,

Smart Cities – How Big Data Is Changing The Power Grid

Smart Cities – How Big Data Is Changing The Power Grid

Smart Cities And Big Data As Anthony Townsend argues in his SMART CITIES, even though the communications industry has changed beyond recognition since its inception, the way we consume power has remained stubbornly anachronistic. The rules of physics are, of course, partially to blame, for making grid networks harder to decentralize, as opposed to communication

Aggregated News

Popular News Sources

Microsoft to enter the STRUGGLE of the Human Wrist

Microsoft to enter the STRUGGLE of the Human Wrist

It’s not just a thumb war, it’s total digit war The battle for the future of the human wrist entered a new phase on Monday after it was claimed that tech goliath Microsoft is planning to release its own wearable computer in the coming weeks.…Read the source article at The Register About Latest Posts Follow

Standards Organization ISO Takes on Cloud Computing Standards

Standards Organization ISO Takes on Cloud Computing Standards

Given the quality differences in different cloud services and issues of compatibility, ISO, the world’s best known standards body has issued two standards related to cloud computing…. Read the source article at Web Host Industry Review About Latest Posts Follow Us!CloudTweaksEstablished in 2009, CloudTweaks.com is recognized as one of the leading authorities in cloud computing

IBM Paying $1.5 Billion to Shed Its Chip Division

IBM Paying $1.5 Billion to Shed Its Chip Division

IBM will pay $1.5 billion to Globalfoundries in order to shed its costly chip division. IBM will make payments to the chipmaker over three years, but it took a $4.7 billion charge for the third quarter when it reported earnings Monday. Read the source article at Mashable About Latest Posts Follow Us!CloudTweaksEstablished in 2009, CloudTweaks.com is