By Joe Weinman, worldwide lead, Communications, Media, and Entertainment Industry Solutions, HP
What are the correct metrics to value the cloud?
Cost reduction is the obvious one, but not necessarily the most important one. Other means of valuation can include enhanced business agility, revenue growth, risk reduction, better compliance or an improved customer experience. Various combinations of these can vary in importance by layer:
Cost-benefits—where they add up, where they don’t
On the cost side, one widespread belief is that that public cloud providers have unmatchable economies of scale. As self-evident as such conventional wisdom may appear, there is inconsistent data to support it. Unit cost differentials depend on a wide variety of factors: your own current benchmark costs, data transport costs, licensing costs for software, application architecture and so forth.
The same building blocks—such as containerized data centers—are being made available to cloud providers as well as enterprises by the major hardware vendors, including HP. Cloud management and virtualization software is available to both public cloud providers and enterprises, either from the major software vendors, again including HP, or in some cases, via open source initiatives.
Moreover, there is a fundamental fallacy in only considering unit costs. A large driver of the cost benefit to using clouds is not necessarily due to unit cost advantages, but due to the fact that, unlike fixed cost, dedicated infrastructure, there is no charge when the service is not being used. Consequently, an economic optimum can exist, even if the unit cost of cloud services is higher than that of enterprise data centers, either utilizing a pure cloud solution for highly variable workloads, or utilizing a hybrid solution for those workloads that have a consistent baseline level but also occasional spikes.
Delivering on the cloud promise
One thing is clear: We are in the midst of yet another radical transformation of the business and technology of IT.
It is incumbent upon all of us in the field to continue to evaluate, plan and implement judicious use of private cloud, public cloud and/or hybrid approaches to maximize the multi-dimensional benefits inherent in the promise of the cloud.
To be continued...at Interop Las Vegas
I and other participants in this exciting, rapidly emerging industry will be speaking at Interop Las Vegas. I hope to see you there.
Interop session details
Enterprise Cloud Summit – Public Clouds
Sunday, May 8, 2011, 8:30 am – 4:30 pm
Room: South Seas B
An Update on Cloud Economics
In this discussion, Brian Butte of PWC and HP's Joe Weinman, author of the influential Cloudonomics blog, discuss the economics of utility computing and public clouds.
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