The 3 stages of cloud economics

There are three stages of economic thinking when it comes to taking advantage of cloud platforms, which each deliver increasing benefits for the business.  Progressing through these stages sequentially and applying the learnings from each stage will help businesses pursue economic value from the cloud.

Stage 1: Scale up — cloud is a no-brainer for transient and elastic applications

The first determination every enterprise should make is which applications and services lend themselves to cloud economics.

Applications deployed for less than 12 months should be put in the cloud so the infrastructure will not induce cost once the program’s life has ended.
Other ideal candidates include transient applications like test and development projects, temporary promotional web pages, or applications supporting seasonal activities.

Any application that scales out is also a good fit for cloud platforms because it can be deployed at a small level and scaled up as traffic increases.
The more an application’s resource needs fluctuate, the better it fits to cloud models.

Stage 2: Scale down — establish use thresholds to eliminate costs

Cloud economics pays off the most when the bill is brought down to zero. This can be done by monitoring traffic patterns to minimise consumption and lower costs.

Setting strict thresholds for resource consumption and letting automation control application scale-back will help ensure applications are only being used as needed.
Because most applications don’t take this degree of automatic resource-throttling too well, some code and configuration refinement will be necessary to make this stage of economics work for the business.

Stage 3: Profit centre — add new revenue streams based on cloud economics

When CIOs master the first two stages, they can stop seeing cloud merely as a form of cost savings, and start looking at it as a profit-maker.

By working with the business to rebuild existing services or build new ones to leverage the advantages of cloud platforms, CIOs are enabling new revenue and profit opportunities for the company.

There are several steps that must be taken in order to move from one stage of cloud economics to another. Performance analysis is the key to moving from stage 1 to 2, as CIOs must learn to turn off consumption of data centre infrastructure whenever possible.

This requires new thinking across the business, allowing performance-monitoring tools to set scale-down thresholds.

In order to reach stage three and shift cloud economics from cost-saving to profit making, IT must develop an understanding of how the business makes money, and how those actions tie back to IT spend.

Start by tracking IT investments, asking enterprise architects to map these back to business needs, highlighting models that can leverage cloud services.
CIOs can enable this process by building a new class of applications that incur minimal costs, leverage hybrid deployments, and shift core functions to new cloud models.

While historically, every IT investment has been long-term, cloud economics turns IT spend into something that can be scaled up or down to match business needs.
To take advantage of this shift, CIOs need to gain knowledge and awareness of cloud services and empower employees to experiment with its use.

To balance this experimentation, it is also important to draw the line between where to use the cloud and where it is not advised.
Only through experience with the cloud can you learn where this line should be, and how to move it over time.