The document discusses four key mechanisms through which Cloud Computing generates cost savings for organizations:
1) By lowering the opportunity cost of running technology through more efficient use of resources.
2) By allowing for a shift from capital expenditure to operating expenditure, providing more flexibility.
3) By lowering the total cost of ownership of technology over time.
4) By giving organizations the ability to focus on core business activities rather than managing infrastructure. Case studies are provided to illustrate how these savings can be realized in practice.
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The Economics of Cloud Computing: OpEx is the New CapEx
1. ™
Cloudonomics
The Economics of Cloud Computing
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2. Executive Summary
There are many reasons for organizations to move from
traditional IT infrastructure to Cloud Computing. One of
Table of Contents
the most cited benefits is the economics of the Cloud. Yet
Executive Summary 1
while many people point out the cost savings that Cloud
The Problem with the 80-20 Rule 2
Computing brings to an organization, we believe attention
Remember the Opportunity Cost 4
should be drawn to four distinct mechanisms through
OpEx is the New CapEx 5
which these cost savings are generated:
Financial Considerations 5
Allows Business Units to Decide 6
• By lowering the opportunity cost of running
Overcomes Expenditure Limitations 6
technology
Total Cost of Ownership 7
• By allowing for a shift from capital expenditure to
A Gregory/Ricochet fashions Case Study:
operating expenditure
a TCO win using Software-as-a-Service 8
• By lowering the total cost of ownership (TCO) of
Time is Money: Focus on What Matters 9
technology
Conclusion 10
• By giving organizations the ability to add business
Appendix 1 11
value by renewed focus on core activities
The Ten Laws of Cloudonomics 11
About Diversity Analysis 13
In this paper we detail these four mechanisms and
About Rackspace 14
introduce several case studies and examples to show the
increased economic value that Cloud Computing brings to
an organization.