1. Cloud Computing Jonathan Weitz Bus: 550 June 3, 2013

2. 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

3. 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

4. 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. email) while the same resources are getting reallocated and serve North American users during local business hours with another application (eg. web server).

5. Traditional Computing

6. THE CLOUD

7. 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

8. 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

9. Cloud Benefits

10. 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

11. 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

12. 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)

13. 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.

14. 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.

15. 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

16. 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.

17. 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

18. My thoughts: Science and IT

19. THANK YOU!

20. 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

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

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