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Summary:

Comparing the cost of on-demand computing to buying your own infrastructure is one way to look at IT costs in a cloud era, but it’s a shortsighted way to measure how cloud computing can affect your business. Amazon’s CTO Werner Vogels outlines another way.

Werner Vogels, CTO and VP, Amazon Structure 2012
photo: Pinar Ozger

Amazon’s CTO Werner Vogels offered up some cloud-related eye candy on Thursday night in a blog post discussing the challenge of choosing the right metrics for cloud computing. The post contributed to the ongoing conversation about how to calculate the benefits of choosing on-demand infrastructure over building your own with some charts from an Amazon white paper and a few AWS customers explaining what they have saved and spent in going to the cloud.

But the key with cloud computing is that the search for metrics really relies on a keen understanding of what business your company is in. Much like different industries have different metrics associated with their costs, figuring out how to measure IT costs first means someone has to understand the role IT plays in their business. For Google, the important metric is knowing exactly how much it costs to deliver a search result in the maximum amount of time customers will tolerate. Wal-Mart’s ideal metric might involve calculating the trade-off between how much profit margin could be gained by a real-time data analysis and the cost of performing that analysis.

And as those examples make clear, each company probably could use a variety of metrics in their business depending on what aspect of the business is using IT, which just underscores the point that there are no GAAP-like metrics that will help companies easily understand the trade-offs between building their own IT and the cloud. Vogels tries to offer up a “return on agility” concept that is pretty nebulous, but he hints at the real thought process that must take place when thinking about IT.

From Vogels’ post:

“Many of our customers come to AWS with a reduction of TCO and other cost savings in mind but after using AWS for a while most of them will claim that agility is the even more benefit for them. Agility has many different faces within an enterprise: Operational advantages such as setting up infrastructure in minutes rather than months, completing massive computational projects with a large number of resources quickly, and scaling architecture up and down to provide the needed IT resources only when you need them, deliver targeted IT solutions fast for individual business units – these deliver a ‘return on agility.’ The return on agility delivers business value by allowing you adapt rapidly, while remaining focused on your core competencies rather than distracted by operating IT infrastructure.”

The heart of the issue is that for most companies IT is really a tool as opposed to a business differentiator. And once a business understands that, then it can focus its efforts not on calculating total cost of ownership of that tool but in figuring out what features of that tool matter to their business and then choosing the best cloud. Instead of thinking of cloud versus owning your own infrastructure as some kind of apples-to-apples comparison, companies should think of it more like the shift from desktop to mobile computing on worker productivity.

Companies used to issue employees desktops that had all of the company’s programs stuck on the device. Then they issued laptops that allowed employees to take their work home with them. Now many offer an array of work-related apps, tablets, smartphones and other tools to let employees take their work with them. Sure, this presents challenges, but it’s also changing and improving the way people work. And few companies decide whether or not they should issue tablets, or provide data via a mobile app, based on comparing the cost of doing so with the cost of issuing the same app on a desktop.

Much like that shift to mobility, cloud computing has the same possibilities and should engender similar debates at the executive level. The issues aren’t about trying to calculate apples-to-apples cost comparisons but about how to deal with the challenges posed by sending data outside a firewall or developing a company culture and policies that squeeze the benefits out of the new tool while also reducing risks. That’s much harder than a TCO analysis, but the benefits are a more agile business that’s likely to save some money on IT.

  1. Why does the graph have ‘Pinterest’ at the bottom-right corner?

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    1. it’s a graph from Pinterest showing its costs that was provided to Amazon.

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