Maximizing Returns: The 5 Key Areas of Cloud Computing Payback

As companies worldwide evaluate the business value of Cloud Computing, it is crucial to understand how it can reduce IT expenses. Determining the time it takes for your business to recoup its Cloud Computing investment is known as the "payback" period. In today's economic climate, this is a vital aspect of any investment analysis. When we discuss with clients across various industries, they seek clear answers to critical cost-saving questions about Cloud Computing. This article is to inform readers about the five key areas of cost savings associated with any Cloud infrastructure implementation.

Each of these five areas will be detailed in terms of their characteristics, the expected savings based on the size of your environment, and the data elements that need to be benchmarked and tracked to project and calculate these savings. Tracking and calculating savings are essential components of any Cloud implementation program.

The 5 Key Areas of Cloud Computing Payback

Implementing cloud computing can yield substantial cost savings and productivity gains across five key areas:

• Hardware
• Software
• Automated Provisioning
• Productivity Improvements
• System Administration

While you may recognize these broad areas from your own experience with cloud computing, the significant savings in certain sub-areas might surprise you.

A crucial step towards implementing a cloud computing environment is achieving a highly virtualized setup. This virtualization involves consolidating systems, which leads to reduced hardware costs. Initially, the appeal of funding virtualization projects often centers around these hardware savings. However, the labor savings can be even more significant.

Many companies still manually provision IT systems, leading to long, costly delays as people wait for resources to become available. This process also diverts highly skilled personnel from important projects to mundane system administration tasks. Automating these tasks in a highly virtualized cloud environment can save significant labor costs while enhancing quality and productivity. The business impact of these labor and time savings, which accelerate projects, can be substantially greater than just the savings in hardware.

Moreover, the total savings from these improvements can far outweigh the small incremental increase in software costs necessary for delivering virtualization and service management components integral to any cloud computing solution.

1.Hardware

The consolidation of systems in a virtualized environment can drastically reduce hardware costs. Instead of maintaining numerous physical servers, cloud computing allows for the use of virtual servers, which are more cost-effective and efficient.

1.1 Hardware metrics

o Number of existing physical servers

o Average total purchase price per server

o Average Hardware % utilization

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2 Software

While there may be an initial increase in software costs to enable virtualization and service management, these costs are typically offset by the substantial savings in other areas. Additionally, cloud computing can provide more flexible and scalable software solutions, further enhancing cost efficiency.

? 2.1Software metrics

o Number of existing non-Free OS (e.g. Windows Server) licenses

o Number of existing virtualization software licenses

o Annual virtualization software license cost per physical server

o Cost of non-free OS license (one time cost) per physical server

o Cost of non-free OS annual license maintenance per physical server

3 Automated Provisioning

Automated provisioning eliminates the need for manual setup and configuration of IT systems. This not only reduces labor costs but also minimizes errors and accelerates the deployment of resources, leading to faster project completion and improved operational efficiency.

3.1 Provisioning metrics

o Number of images installed per year (provisioning requests)

o FTE hours required per provisioning without automation software

o FTE hours required per provisioning with automation software

o Costs for provisioning automation software (Tivoli Service Automation Manager)

?4 Productivity Improvements

By automating routine tasks and streamlining processes, cloud computing allows skilled personnel to focus on more strategic initiatives. This shift can lead to significant productivity improvements and drive innovation within the organization.

4.1 Productivity metrics

o Total number of projects per year

o Average idle time caused by provisioning per project without automation

o Average idle time caused by provisioning per project with automation

?System Administration

Cloud computing reduces the burden of system administration by automating maintenance and management tasks. This leads to lower labor costs, fewer errors, and increased system reliability.

5.1 System Administration metrics

o Number of existing physical servers

o Number of actively managed OS instances

o How many system administrators are managing the environment (excluding network

and storage administration)

o Administration productivity gain due to cloud transformation

o Ratio of system administrators to support staff

o Annual labor cost per system administrator

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In conclusion, the move to a cloud computing environment can bring significant financial and operational benefits across these five key areas. Understanding and leveraging these savings can help your organization maximize the return on its cloud computing investment.

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