Total Cost Management and Cloud Computing Methodologies and Quantitative Methods Bernardo Nicoletti Master in Procurement, Università di Tor Vergata, Rome, Italy Carlo Andreoli Milan 20, 21 and 22 October 2014 Re-Engineering Total Cost Management
Definition: cloud computing Cloud computing is Internet-based computing, whereby shared resources, software and information are provided to computers and other devices on-demand, like a public utility. Source: Wikipedia slide 2
The NIST Model The NIST Mo 5 Characteristics On-demand self-service Ubiquitous network access Resource pooling Rapid elasticity Pay per use 3 Delivery Models Software as a Service (SaaS) Platform as a Service (PaaS) Infrastructure as a Service (IaaS) 4 Deployment Models Private Cloud Community Cloud Public Cloud Hybrid Cloud slide 3
Total Cost Management and Cloud Computing This paper aims to contribute to the understanding of cloud computing, particularly from a benefit/cost point of view. The qualitative benefits of cloud computing are clear. It seems important to define a quantitative model to help in evaluating the decision to adopt a cloud computing vs. an on-premise solution. To reach this objective we suggest to use a Total Cost Management approach. slide 4 Re-Engineering Total Cost Management
Total Cost Management The Total Cost Management (TCM) is the application of technical and professional competences to planning, managing and controlling resources, costs, profitability and risks. It is a systematic approach to cost management and control of any investment or business activity during its life cycle*. *Aice Website slide 5 Re-engineering Total Cost Management
Levels in TCM Strategic Asset Management refers to the TCM process of managing the total life cycle cost investment of the enterprise s strategic asset portfolio. Project Control refers to the TCM process as applied at an individual project level. It is applied to a project to ensure a desired asset investment result. slide 6 Re-engineering Total Cost Management
Processes connected with the Change to Cloud Computing ICT Infrastructure Platform Standardization Integration Organization Change in processes, their improvement and leaning, human resources and competencies Procurement Changes in procurement, now focused on services rather than products and systems Marketing Definition of new possible products/services with Cloud Computing (for instance mobility becomes much easier) slide 7 Re-engineering Total Cost Management
Enterprises cite flexibility and on demand over cost reasons slide 8
Elasticity Elasticity, in the case of ICT, is ICT infrastructure is the shared ICT resources consisting of a technical physical base of hardware, software, communications technologies, data, and core applications and a human component of skills, expertise, competencies, commitments, values, norms, and knowledge that combine to create ICT services that are typically unique to an organization. This can be computed as: UserHourscloud x (revenue Costcloud) UserHoursdatacenter x (revenue CostdatacenterUtilization ) slide 9 Re-engineering Total Cost Management
Substantial Reduction in Risks Reduced oversupplying Management of security by professionals Technology updates and upgrades Loss of critical employees The risk of not correctly estimating workload shifts from the service operator to the cloud vendor. The cloud vendor may charge a premium (reflected as a higher use cost per server-hour compared to the 3-year purchase cost) for assuming this risk. slide 10 Re-engineering Total Cost Management
Comparing Costs of On Premise and SaaS On Premise SaaS Procurement (sourcing, transportation, and installation) of hardware (servers, storage) Procurement of application and platform license and maintenance Customization and Configuration Operational costs Physical and logical security Site Disaster Recovery Costs replication between data centers for the business continuity plan Upgrades and patches Support to the end user Architectural costs Data Center support and maintenance Power, cooling and space Costs of the network (Lan, Wan) Resources for physical and logical security. Integration with applications that remain in the house Customization and Configuration Support to the end user Costs of the network (usually the Internet) You pay the resources that you actually consume: Pay per use. Vendor management Disposition of the existing resources (people, hardware, slide 11 software, and so on) 1 Copyright Bernardo Nicoletti 2013 1
A Hidden Advantage: Simplified Procurement slide 13 Re-engineering Total Cost Management
An Important Aspect: Contracts Agreement on Applicable Laws and Jurisdiction Service Level Agreements (SLA) Notes on data protection (NDA) Notification obligation: Unauthorized access Data theft Data Loss Audit Procedures Bonds at the time of termination of the agreement Time to return data Mode of delivery Format of databases Costs slide 14
Bernardo Nicoletti info@bernardonicoletti.com Skype: babbo06 Tel. +39 348 470 7016 Blog: www.leandigitize.com slide 15 Re-engineering Total Cost Management