Definition

cloud economics

Contributor(s): Emily McLaughlin

Cloud economics is a branch of knowledge concerned with the principles, costs and benefits of cloud computing.

Because CIOs are constantly challenged to deliver information technology (IT) services with the greatest value for the business, they must determine specifically how cloud services will affect an IT budget and staffing needs. In assessing cloud economics, CIOs and IT leaders weigh the costs pertaining to infrastructure, management, research and development (R&D), security and support to determine if moving to the cloud makes sense given their organization's specific circumstances. 

Although the cloud can facilitate resource provisioning and flexible pricing, there are several cloud computing costs beyond instance price lists to consider. Pricing usually includes storage, networking, load balancing, security, redundancy, backup, software services and operating system (OS) licenses -- but some cloud computing considerations that affect resource contention, bandwidth and salaries can come as a surprise. IT leaders within an organization must closely examine the economics of moving to the cloud before deciding whether to invest in the expertise and time that is required to maximize cloud investments. 

See also: IT cost structure

This was last updated in September 2013

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This is an interesting but not complete approach and explanation. It reminds me of the 1980s and 1990s when we separated retail and wholesale voice and wireless models. What we learned then (after many bankruptcies) is that the 2 are inextricably linked. Today the retail (cloud or IT layer) is inextricably linked to the wholesale (datacenter and transport) layers. Elasticities and cost savings need to be addressed in both simultaneously.
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