Updated: February 10, 2010 21:44 IST

Economics of cloud

D. Murali
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Book Review: Cloud Computing for Dummies
THE HINDU Book Review: Cloud Computing for Dummies

You might want to add a new business application, but lack the required funds. Rather than wallow in despair, think cloud! The cloud, for starters, is ‘a set of hardware, networks, storage, services, and interfaces that enable the delivery of computing as a service,’ as Judith Hurwitz et al. define in ‘Cloud Computing for Dummies’ (

Cloud computing is the next stage in the evolution of the Internet, the authors aver. “The cloud in cloud computing provides the means through which everything – from computing power to computing infrastructure, applications, business processes to personal collaboration – can be delivered to you as a service wherever and whenever you need.”

A major driver of cloud computing is the potential to reduce capex (or capital expenditure), because cloud service providers often charge at a prorated basis, such as storage rented at a per-gigabyte fee.

Companies that are challenged to increase the functionality of IT (information technology) within tight budgets can purchase the right amount of IT resources on demand, the authors explain. They caution, however, that opex (or operating expenditure) may increase more than expected.

Also, certain situations may call for trade-offs. “The company may already have purchased significant IT resources and it may be more economically efficient to use them to create a private cloud. Some companies actually view IT as their primary business and therefore will view IT as a revenue source. These companies will want to invest in their own resources to protect their business value.”

Towards conclusion, a chapter on ‘economics’ instructs that any ‘cloud’ calculations have to consider the complicated nature of decisions involving emerging technologies, and the dynamics of data centre.

Cloud may hold its lure in situations such as where your organisation is ramping up for a new but short-term initiative and you temporarily need some extra CPU capacity and extra storage, or you are a start-up wishing to create an online presence without spending money on hardware or software.

The authors concede that forecasting precisely the economics of the cloud versus the data centre is complicated. The problem for many organisations will be that they do not have an accurate model of data centre costs that allows them to consider cloud propositions on an apples-to-apples basis, they add.

“It’s hard for most organisations to accurately predict the actual costs of running any given application in the data centre. A particular server may be used to support different applications. How do you accurately judge how much of your personnel resources are dedicated to a single application?”

Of help is the insight in the book that the cloud won’t necessarily be less expensive and that it won’t necessarily provide the same level of service as your data centre. “Your own data centre may have a service level agreement with a 99.999 per cent uptime record. Will your cloud provider offer that same level of service? Probably not.” You have to, therefore, weigh how critical that level of predictable uptime is to your internal customers, the authors advise.

Recommended read for the tech-savvy finance professionals.

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