Digital Themes

Cloud economics

Cloud economics refers to the financial decisions that businesses must make when considering a cloud migration.

Switching to the cloud is not a small undertaking. Before taking the plunge, businesses make a number of decisions. They’ll consider the benefits of a private cloud, a public cloud, or a mixture of both (e.g., a hybrid model.) They might use a pricing calculator, like the ones provided by Amazon, Microsoft, or Google, to calculate major expected costs and compare pricing models. They will also decide if they want to depart fully from an on-premises data center.

The total cost of migrating to the cloud will vary from business to business, and companies should take their unique needs into account. Businesses with more data and applications will naturally be spending more. Additionally, different migration strategies will come with different price tags.

When considering a cloud migration, businesses often have to adjust their ways of thinking. Typically, a cloud migration means investing in the operating expenses (OpEx) associated with a pay-as-you-go model, and less in capital expenditures (CapEx). A CapEx to OpEx switch might not feel natural to companies that are accustomed to traditional ways of working.

A cloud economist, therefore, can be an invaluable help. Besides helping with a total cost of ownership (TCO) analysis, a cloud economist can relay the long-term benefits and cost savings related to a cloud infrastructure (e.g., cloud scalability, cloud elasticity, and increased agility). A cloud economist will also communicate the hidden costs of a cloud migration. These costs might involve underutilization, vendor lock-in (the inability to switch from one cloud provider to another), and overprovisioning (paying for more than what’s needed). Ultimately, a cloud economist will assist with cloud cost optimization. 

Understanding the economics of cloud computing can be key to success. Businesses that are well-educated about cloud migration will avoid common pitfalls and blind spots, and a strong cost-benefit analysis will unlock a number of benefits:

  • Smarter utilization of cloud resources (no overutilization or underutilization)
  • A better understanding of all capital expenditures (CapEx) and operating expenses (OpEx) attached to moving to the cloud
  • Greater confidence in the chosen cloud service provider (CSP)
  • Lower chances of vendor lock-in related to dissatisfaction with the CSP 
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