Wednesday, February 11, 2009

Cloud Economic Models

One of the most important drivers of cloud computing in the Federal space is its perceived "compelling" economic value. Some initial insight on the economic argument is now available on the Government Cloud Computing Community website. According to Booz Allen Hamilton, cloud computing changes much of what is now understood about estimating IT costs and the current process for deriving economic benefits. Calling cloud computing "a game changer", the noted management consulting firm says that virtualization, elasticity, and massive scale in the cloud break linear cost relationships and enable infrastructure compression factors from
4:1 to 10:1. This compression of infrastructure results in a reduction in operations and maintenance costs.

This new approach to IT also changes the way capital planning and budgeting are conducted.

" Depending on how cloud computing is adopted, funds can migrate out of capital budgets into O&M budgets, away from the cost of bandwidth in the LAN to the (often higher) cost of bandwidth in the WAN. Funds budgeted for software and desktop support become service fees."
For free access to this report and other resources in the Government Cloud Computing Community wiki, send an email to
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