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Accounting in Akron

Posted by Doctor Cloud May 3, 2011

Dear Dr. Cloud,


There has to be a way to financially determine whether or not a service should go out to the public cloud, based on Opex and Capex considerations, monthly costs, internal costs, and so on. I keep fiddling with this on the back of napkins and thought I’d finally ask.. is there a published method by which companies do this math?


--Accounting in Akron


Dear Accounting,


Thanks for reaching out. This is a great question… I hope you find the answer .. not disappointing. Why?


Well, most of the time, the math is not done. There are criteria that take precedence over the math, including:


  • Architecturally, can this app run in a public cloud? There are plenty that are not x86, not virtualized, linked to massive local data stores, require massive data transfer, need specific configurations of resources, etc….
  • From a compliance perspective, is this app allowed to be in the public cloud – and, further, would our CSO support it? There’s often rules.. and then there are emotions/risk assessments above the rules. You hear a lot of “Exchange is clearly easily run out there, but we consider it mission-critical” – it’s a valid line of thinking. It trumps a lot.
  • Have we got a relationship with a public cloud vendor? Unlike most common myth around this, enterprises do write contracts with public cloud vendors – and those negotiations are not easy. Few actually credit-card swipe their way to large scale cloud usage.


Get all that together, and you have a long-term strategic decision. The finances of it actually often come next, and can come out both ways. If you happen to have the capacity, it is always cheaper to use what you have than go public. If you don’t have it – it depends on the pricing model of the cloud vendor (with compliance and backup and all those features you require). I’ve found, in my experience, that when people go to public cloud, they do it for a certain brand of low-risk agility. It’s the cloud equivalent of automation around password-reset. Trivial, fairly risk-free, and annoying to IT. those workloads move. The rest… will take some time or bigger thinking.


But.. it was a very good question.


Dr. Cloud answers cloudy questions on Tuesdays (or when he's late, Wednesdays). To reach the good doctor, email