BITSoftware / Blog

When it comes to the cost of the cloud, it is important to analyze all cloud`s models:  Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS). Those three different service models for the delivery of cloud computing provide companies with the ability to mix and match the best service model to the business needs of their organization, based on requirements and payment options and depending on the vertical industry and specific applications portfolio.

Then choose the model or combination of models that offers you the most benefits at the lowest cost. Because each model has its own costs, based on a various factors, from storage space needed to monthly traffic. To arrive at a total pricing for a cloud service, user organizations must take note of individual service elements that a provider bills for and how these are calculated. For instance, does the provider bill based on within server traffic, storage space needed, server CPU time or a combination of these factors along with other elements?

Another important factor in determining the total cost is the type of service required: dedicated server to running applications in the cloud, cloud-based backup or basic hosted storage. The easiest way to break down pricing is to focus on the primary services offered, because most cloud providers split their services into three areas: servers in the cloud, storage in the cloud, sites and applications in the cloud.

You must know that there are two pricing models for cloud computing services: pay as you use or subscription based pricing. Under first pricing model, customers are charged based on their usage and consumption of a service. This pricing structure makes users fully aware of the cost of doing business and consuming a resource, since the cost comes out of their pockets, or, in the enterprise world, their own budgets. The second model is the simplest pricing option, where the customer is billed on a fixed monthly basis. For example, a virtual machine can be offered at a fixed cost per month. The consumer is billed the same amount every month without consideration for actual usage.

To determine a pricing model that provides profit to a company that uses cloud services, it is necessary to know the direct and indirect costs of providing these services. Costs can be initial or ongoing. Initial costs, also known as capital expenditures, or CapEx, include the costs to acquire assets such as hardware and facilities (power and cooling infrastructure, server, network, and storage hardware, software licenses, including operating system and application software, cables, etc). Ongoing costs (OpEx) include all costs for keeping the business or facility running, such as: payroll, facilities, hardware and software maintenance, backend cost, etc.

When you calculate the monthly cost for cloud computing deployment, you must take into account both capital and operational expenditures. For capital expense cost items, the cost of each item needs to be amortized over the life of the item. By combining the OpEx with CapEx, the total monthly costs of the cloud deployment can be determined.

If you have a limited budget, work with projects or cannot predict which resources you’ll need over a longer period, then you choose “the pay as you use” pricing model. If you require more control over the hosting budget and want to use the cloud for a longer period, you must choose the subscription based pricing.

Sources: Cloud Spend Management, Google Tools, ComputerWorld, PC World, Cloud Tweak, Cisco Systems

Do you use webmail? Or Gmail / Yahoo! Mail / Hotmail, etc? Do you communicate by messenger, whether it’s GTalk, Live Messenger, Yahoo, Skype or others? Then it means that you are in „cloud”. Messenger is the simplest example of cloud: an application that uses an instant communication service hosted on a server about which you know nothing.

This is the main cloud’s philosophy: services pending on servers in different datacenters, which can be used with or without charge. To access and use a cloud computing based service you don’t have to install anything and don’t need extra storage space. All you need is just a web browser and an Internet connection.

Briefly, this means cloud computing. And, according to several studies conducted by IT services or IT research & consulting leading companies (Google, Deloitte, Gartner, Forrester Research, etc), more and more companies started to search for cloud solutions, trying to extra streamline operational processes and reduce costs.

It is true: cloud computing get rid of hardware investment, licenses payments and significantly increase your uptime. But every time, the managers ask the same question: „How do we measure the cloud’s benefits?”.

The first quantifiable benefit is related to savings on infrastructure and operational costs. When you purchase a cloud service based on monthly or annual fee, you actually don’t buy the software, you rent it. Speaking in economic terms, you will move costs from CAPEX to OPEX. You no longer have costs and depreciation assessments  on those services, because you lease the service. You use and pay such as water, gas, electricity, heat.

The second benefit is that you pay strictly as you use. For example, you own a company working on projects. Sometimes you are simultaneously involved in 3-4 projects, other times just in one. Therefore, If you want the service on 25 computers, then on 50 and sometimes on 10, you can do it by paying strictly what you use. In this way optimizing costs and aligning them to the company`s activity.

In the third place, you have a much higher uptime than you could provide yourself. For example, Google has an uptime of 99.99% to those who have an active SLA.

The fourth benefit is an increased mobility. In Cloud, data is accessible anytime, anywhere, from any device connected to the Internet. This means that users can access data from office, home or travel, on laptop, PC tablet or smartphone, by using a web browser.

Last but not least, several studies demonstrated that by giving up to your company server-room, you will achieve a substantial shrinkage to electricity bills. Utilities (like cooling or power) are better used in cloud, making your company more profitable and “environmentally friendly”.

Source: Forbes, Small Business Blog, Go Cloud, Agora, PC World