Cloud Computing Jonathan Weitz Bus: 550 June 3, 2013

Agenda  Scope of case file(s)  Case 1: What is Cloud Computing?  Modeling the Cloud  Cloud Economics  Case 2: Economics of Cloud Computing US Gov.  Thoughts, Comments, Questions

Cases  Modeling the Economic Impact of Cloud Computing  Australian Information Industry Association  Lays a foundation of what cloud computing is, how it is constructed and the potential economic costs and benefits of a shift in ideology from traditional computing to “Cloud Computing”  Economics of Cloud Computing  Addresses the economic implications of US government mirgration to a Cloud Based network for Information Technology

What is the Cloud?  Cloud computing relies on sharing resources in order to achieve economies of scale and gain greater coherence.  Maximizes the effectiveness as compared to traditional computing.  Example idea:  Cloud facility which serves European users during European business hours with a specific application (eg. ) while the same resources are getting reallocated and serve North American users during local business hours with another application (eg. web server).

Traditional Computing

THE CLOUD

Modelling the Cloud  Cloud computing has four deployment types:  Private – Exclusive use by a single organization (may be outsourced to a 3 rd part provider, but sole use is for the single org.)  Public – For use by multiple organizations on a shared basis nad hosted by a 3 rd part provider (Amazon & Google Apps)  Community – For use by a group of related organizations  Hybrid – A single oganization adopts a private and blupic model cloud to use the benefits of both applications

Service Models for Cloud Computing  Software as a service – Google Apps  Platform as a service – Microsoft Office 365  Infrastructure as a service – Amazon EC2 & S3

Cloud Benefits

Cloud Computing Economic Benefits  Most identifiable economic benefit of cloud computing is direct cost savings, which occur from changes within the organization and the data centers that house the IT infrastructure.  Supply Side – Large scale data centers lower cost due to superior buying power  Demand Side – Allowing multiple users across varying industries regions & time zones allowing for server utilization  Multi-user efficiency – Increasing # of users lowers server cost per tenant  Data center efficiency – Advanced data center designs reduce power loss and improved cooling

Case Study: Economics of Cloud Computing US Gov.  Public Cloud Adopters: most likely early adopters  Department migrates to an IT public cloud  Low level of mission, bureau, (Dep of Commerce, Labor, EPA, Dep. of transportation)  Assumptions: Transition will occur over 3 years, workload is constant  Hybrid Cloud: middle adopters  Department builds a private cloud solution to handle majority of its IT load but uses a public solutions for low sensitivity apps  Dep of Agriculture, Dep of Education, NSF  75 % of the IT server workload will migrate to private and 25 % will be transitioned to public cloud steadily over 3 years  Private Cloud: Late adopters  Department or agency build own private solution or joins in an interagency cloud  Broad mission sensitivity  Transition will occur over 3 years, workload is constant

Case Study: Economics of Cloud Computing US Gov.  Economic analysis to investigate potential savings of the federal plan by focusing on a proprietary cost model of United States Government IT programs  Metrics used for Analysis:  Benefit-to-cost ratio’s (BCR)  Net present value (NPV)  Discounted payback period (DPP)

Case Study: Economics of Cloud Computing US Gov. Cont.  Benefit-to-cost ratio’s (BCR)  Calculated by each cloud scenario’s discounted net benefits less the cloud’s discounted one-time investment costs. (Absolute metric)  Greater then 1.0 indicates the economic benefit vs. the SQ (status quo environment)  Net present value (NPV)  calculated as each cloud scenario’s discounted net benefits divided by its discounted investment costs. (Relative economic metric)  Discounted payback period (DPP)  Reflects the number of years it takes for each scenario’s accumulated annual benefits to equal its total investment costs.

Economics of Cloud Computing  Net benefits and payback for agencies for hybrid is more similar to private cloud then public.  Based on the 75/25 percent previous assumption.

Sensitivity Analysis  Primary factors driving economic benefit:  Reduction in hardware  Length of cloud migration schedule  Public cloud benefit continues to increase BCR as servers migrated

Impact of Migration Schedule on Economics  Better to group smaller existing data centers into a larger cloud rather then several smaller clouds  As BCR decreases, DPP increases with transition time.

Take Home: Economics of Cloud Computing US Gov  Cloud computing offers potentially significant savings to federal agencies by reducing their expenditures  Benefits come with risks and practicalities to consider:  Will take 2-3 years for most agencies to transition  Once implemented, it could take as long as 4 years to reach enough savings to offset initial investments  Only an estimate, not based on a reliable estimate of government spending of an overall dollar figure

My thoughts: Science and IT

THANK YOU!

Question 1  What are the types of service models for cloud computing A.Software as a service B.Platform as a service C.Infrastructure as a service D.All of the Above

Question 2  Early adopters are more likely to be grouped into which deployment cloud type A.Public B.Hybrid C.Private D.Community

Question 3  Which are benefits of transitioning to a cloud environment A.Long term savings B.Flexibility C.Efficiency D.All of the above