by Don Jones

There are two theoretical financial advantaged to cloud computing.

The first is the one most commonly advanced as the best reason to move to a cloud-based platform: Elasticity. I used to work for a company called Craftopia.com (I believe it’s now owned by the Home Shopping Network). We started with three Web servers. Most of the time, none of these servers worked especially hard. In fact, one of them was also our database server — we had the Web site on it primarily as a backup in case the first two got too busy. One day, we learned that we might be featured in a spot on Oprah’s daytime talk show. We immediately had visions of millions of housewives and grandmothers (our primary market) slamming our servers until they melted into a puddle of goo. But what could we do? We were a small start-up; we couldn’t afford to deploy more servers just for that short-term surge in traffic.

That’s exactly the scenario cloud computing promises to solve. Had we been hosted in a cloud platform, we could have temporarily scaled our Web farm up to a thousand servers, if needed. We would only have paid for the actual utilization, and when the surge — which would hopefully also generate sales — died down, we could release those extra resources without needing to pay for them. So the cloud’s big promise is one of scalability without investment, and without wasted capacity hanging around all the time.

Cloud computing providers charge by usage. Typically, that involves several elements of consumption:

• Disk storage
• Database storage
• Number of requests
• Amount of data transferred
• Computing power used

You pay for what you use… which opens up a second financial advantage that many organizations overlook.

One of the biggest problems in corporate IT today is figuring out who pays for everything. In smaller and mid-sized companies, IT is usually just one big blob of overhead, paid for from the company’s bottom line. Company leadership determines what projects IT will take on, and agrees to fund the projects. Bigger companies try to do chargebacks, billing IT services to the departments or divisions that use those services. E-mail is a great example: Departments are often billed based on their utilization of the e-mail system, since most messaging systems make it relatively easy to measure and allocate that usage.

Because cloud computing providers have built this pay-as-you-go model — and built the controls into their platform to provide the usage metrics they need to support the financial model — you can leverage that platform to provide granular billing for IT services. The Finance department needs a new analysis application? Put it into the cloud, where you can measure exact utilization and charge Finance precisely what the application costs to run.

About the Author

Don Jones has more than a decade of professional experience in the IT industry. He's the author of more than 30 IT books, including Windows PowerShell: TFM; VBScript, WMI, and ADSI Unleashed; Managing Windows with VBScript and WMI; and many more. He's a top-rated and in-demand speaker at conferences such as Microsoft TechEd and TechMentor, and writes the monthly Windows PowerShell column for Microsoft TechNet Magazine. Don is a multiple-year recipient of Microsoft's "Most Valuable Professional" (MVP) Award with a specialization in Windows PowerShell. Don's broad IT experience includes work in the financial, telecommunications, software, manufacturing, consulting, training, and retail industries and he's one of the rare IT professionals who can not only "cross the line" between administration and software development, but also between IT workers and IT management. Don is a co-founder of Concentrated Technologies, and serves as author and series editor for Realtime Publishers.