Business Value of Cloud Computing

Jun 01, 2022

In this presentation, we'll examine the pay-as-you-go model of cloud services and how this model helps to improve the business value of the cloud for most any organization.

In this presentation, we'll more closely examine the pay-as-you-go model of cloud services and how this model helps to improve the business value of the cloud for most any organization. So, to begin, the pay-as-you-go model is often compared to a utility billing method such as power, water or natural gas. In that, you're only charged for the resources that you actually consume. Now this might sound somewhat difficult to determine when you consider that cloud services aren't as tangible as something like water or power, but cloud providers do implement the same type of metering on their services so that a bill can be generated that breaks down the usage of each resource so that you can be charged accordingly.

But there are certain things to be mindful of. For example, if a virtual machine is started, you're charged from the moment it starts running to the moment you shut it down. In other words, even if no one is using that particular server, you'll still be charged. Much like if you leave a room with the light on, you're still being charged for the power it draws, even though no one is in the room. Now, this usually isn't much of an issue for services that have been fully configured, but it's something to bear in mind when testing or developing new solutions. If you have a lab, for example, then services that are only in the development stages could be shut down at the end of the day to help keep costs down. Now the overall cost model of a pay-as-you-go service could include two components, subscription-based costs and as just mentioned, consumption based costs.

Now this simply means that some services may be available through a subscription, which typically means that they have a flat rate payment structure rather than one based on consumption. Now there may be different levels or tiers of any given subscription. But the primary difference is that subscription-based services aren't metered. A common day-to-day example of that might be a mobile phone plan, which could certainly just be based on consumption. In other words, you pay for exactly what you use in terms of talktime or data consumption, but a provider might also offer an unlimited plan for a set rate each month. In which case you pay the same amount every month, regardless of how much time or data is used. Now, this will depend on the service and the provider, but it's not uncommon to find both models available from any given provider.

So, in terms of the business value, we as customers are able to scale existing resources in any direction, customize resources as much as we like and provision new resources at any time. All without needing to acquire any actual infrastructure. And with the knowledge that we aren't going to be charged for anything that isn't used. Which translates into much better usage of the physical resources, particularly when compared to traditional on-premises solutions, because if and/or when we have to purchase all of the infrastructure, it's very difficult to know how effectively that infrastructure is actually being utilized, and we often end up paying for a lot that is not actually used. Now, that said, we as cloud service customers never really have to concern ourselves with physical infrastructure. It's up to the provider to acquire and manage all of the physical components.

But by metering the usage of each customer in conjunction with monitoring its performance capabilities, providers can make much more effective and efficient use of that infrastructure. Because, of course, it's being used by many different customers, all of whom share the costs. So, by utilizing those resources to their full capacity, it helps to keep the overall cost down for all of us as customers. So, with respect to the overall business value, cloud services can offer cost savings in many situations over on-premises solutions. Resource efficiency is increased, which translates into a lower cost of service and less waste. Cost avoidance refers to not having to purchase any physical infrastructure to create new solutions, and because all of the necessary infrastructure is already in place at the provider, businesses can improve their agility and flexibility in terms of creating new solutions without having to wait for purchases to arrive and then wait even more for implementation and configuration before any of it is ready to be used.

The infrastructure of the cloud is always ready to be used at any time. In addition, the expenditure model of an organization can begin to shift from what is known as capital expenditures or a CapEx model to an operational expense or an OpEx model, which effectively means that there are fewer upfront costs associated with creating any type of solution. By using cloud services, you can begin immediately resulting in a much faster time to market without having to purchase anything other than the resources you'll consume. And not only can projects be created more quickly, they can also be terminated with little to no concern for commitment. Because again, the pay-as-you-go model also means that you don't pay for what you aren't using. So, any and all of resources associated with a terminated project or service can simply be decommissioned at any time, and you immediately stop paying for them. Lastly, cloud services can help an organization to reduce or avoid costly operational issues because many of the services that are available through cloud providers are very standardized and reliable and can be used for many different services repetitively, for example, storage services. Almost any type of solution, requires the ability to access data.

But with cloud services, you may not have to create different types of storage services for each solution like you might have to do in an on-premises environment. The same base services can be used over and over again, which again, not only helps to keep the cost down, but it also helps to reduce errors or defects with services that might otherwise have to be customized every time they're used. Overall, the business value of using cloud services can be a significant benefit to many organizations, but I should finish up by stating that this is not always the case. It will depend on the specific needs of your organization as well as the state of your organization in terms of what you might already have for on-premises solutions and your overall operational model. Some cloud services can still be very costly and it might not always make sense to migrate any given solution to the cloud. Particularly, if you've already invested a significant amount of time, money, and resources into that solution. So, like many things, it will come down to the specific situation, so be sure to consider all factors before assuming that the cloud will represent a better business value to your organization.