Value Creation in Cloud Infrastructure: It Varies, but mostly from Good to Excellent

6 Jan 2012


Cloud Vista


In recent times, the datacenter saw two significant developments, virtualization technology, and advent of cloud computing. The former is certainly an innovation, and is the principal tool powering the latter. IaaS (infrastructure-as-a-service), or cloud infrastructure, made significant strides in maturity as well as adoption in recent past. If done right, a cloud adoption can make a lot of sense for virtually any datacenter environment. This document provides evidence on how use of cloud can bring both business benefits as well as cost savings to the CIO.

Embracing cloud in infrastructure provides benefits along two main value levers:

  • Capacity reduction through increased utilization: Reduction in total cost of owning IT capacity is enabled by increased asset utilization. Virtualization technology helps create and run multiple virtual servers on one physical server, leading to lower total number of physical servers. This results in reduction in management, cooling, power, rack space, and asset refresh costs. Through a yearly total cost of ownership (TCO) analysis, by modeling four scenarios: non-virtualized legacy, virtualized legacy, private cloud, and hybrid cloud (that is a mixture of private and public cloud), we found that hybrid cloud provides maximum savings potential given a typical IT environment.
  • Greater flexibility of provisioning: Provisioning becomes both faster and more efficient thanks to use of dynamic provisioning and virtualization in cloud. As a result, the increased flexibility and higher productivity of the IT environment leads to business benefit of reduced time to market as well as management cost-overhead savings.

Everest Group built a comprehensive economic model for next-generation IT engagements, which encompasses numeric findings discovered during live client engagements, and traces key dynamics of cloud to the underlying drivers of cloud value-levers. In this viewpoint, we analyze four typical situations that can exist within an enterprise IT environment and compare typical annual ownership costs that help demonstrate the cost savings unlocked by cloud.

Given a set of assumptions regarding a typical IT environment, it is found that hybrid cloud provides best savings while addressing key computing needs of the adopting company. That said, buyers can actually take advantage of cloud in various cloud configurations, the fact that points to the need for every IT shop to investigate how they can adopt cloud computing and therefore, both, save costs and accrue business benefits.


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