Thinking Cloud: IT as a Cost Per Unit
The beauty of the cloud is its ephemeral nature. See how you can quantify a business case for the cloud with some tips for putting figures on unforeseen costs.
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There was a very interesting conversation at an event I attended the other day. The focus was around getting to the cloud. Questions that came up were the usual ones that you would expect, including the classic, “What is the ROI with the public cloud?”
What’s the ROI for Your Environment Today?
Measuring ROI for your data center can be challenging because of all the moving parts. You may think of cost in the context of the number of servers you have, and the amount of storage you’ve bought, plus the networking gear, and you can keep going down the hardware path that way. Add software to the mix to bring the overall costs up to the more realistic numbers, and you’re getting closer. Now, add in the number of people that you have managing the environment. It’s a lot of pieces already, some of which are difficult to have quantitative understanding of at any given time.
That may seem like it, but you may not have included the real estate costs, cooling and power costs, and other environmental costs that come into play when operating a data center. Those become even more challenging to quantify. They are also some of the more important parts of the cost analysis, because we are eliminating those from the mix when we look towards the public cloud as a place to land our workloads.
Let’s get all of those numbers together and see what we have. That is the cost side of the equation. The next, and most important step, is figuring out the true costs in comparison to the revenue that your IT services are generating. That part of the analysis is going to differ from business to business. This is where we have to break it down in common language so that we can figure out the true cost of IT.
Cost Per Unit in Your Units
A transit company named Metrolinx uses a metric to define their overall operational cost per unit as the dollars spent per seat, per kilometer. That number aligns with their business because it also lets them define the revenue in the same way. Revenue is income per seat, per kilometer. Measuring ROI is simpler when you have the same measurement units on both sides of the equation.
Your unit is a transaction. We don’t necessarily have a defined cost per transaction today, but if you seek out the real measurement of the value that your business generates as revenue per unit, you can understand the cost of IT. That gives you the ability to look towards resources like the public cloud, SaaS applications (e.g. SalesForce, LeanKit, Asana, Atlassian), and per unit priced platforms. The cost is now directly measurable against the cost of operating your existing IT.
This is a big task. One that I’ve had to do in the past with success, and with many challenges. When asked once about the cost of migrating to a co-location facility for a data center, the proposed per month pricing seems way out of reasonable range. It took a little bit of digging into the true costs of running your IT organization.
People Costs in the Cloud
Be careful when you’re calculating out the people costs as a part of your overall IT cost. There are people costs when you move to the public cloud for hosting infrastructure. Whether it’s in whole, or in part, the migration, building, and maintaining of cloud infrastructure is still a real people effort that has to be accounted for.
Some may even say that the cost of maintaining cloud infrastructure can be more costly than on-premises infrastructure. That’s a different conversation altogether that we will cover in another post. There are distinctly different skills required to understand the AWS, Google Cloud, or Azure infrastructure options. This is the reason that we have to be careful around how we cost out the people effort required to add public cloud to the portfolio.
Think about your cost per unit that can be a good measure for your business and IT expenses. Finagling the minor aspects of the cost will let you hone in on the ultimate number, but it’s key that you have a good baseline before you get to the analysis phase on embracing public cloud.
You can’t hit a target that when you don’t know what the target is.
Published at DZone with permission of Eric Wright, DZone MVB. See the original article here.
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