Monday, February 7, 2011

Finding Value in Cloud Computing – Part 7: CapEx Management

Cost reduction and containment are significant drivers behind Cloud computing adoption. IT departments are seeking ways to reduce new IT spending and to extract more value from their existing IT environments. Many find that they have IT assets that are significantly under-utilized. The federal government faced this problem and opportunity with its thousands of data centers and hundreds of thousands of servers around the world. The Federal CTO assessed the situation, “Now, when you think about these data centers, one of the most troubling aspects about the data centers is that in a lot of these cases, we’re finding that server utilization is actually around seven percent, that’s unacceptable when you think about all the resources that we’ve invested.” __ Vivek Kundra, ‘The Economic Gains of Cloud Computing’, An Address, The Brookings Institution, 2010-APR-07, ( )

The Cloud Computing paradigm intentionally minimizes IT asset ownership to translate capital expenditures into operational expenditures resulting in reduced CapEx. The IT assets are shared; improving workload densities and resource utilizations. Virtualization further improves resource utilizations while containing capital expenditures. “When we think about information technology and the potential of cloud computing to lower the cost of government operations, drive innovation, and fundamentally change the way we deliver technology services across the board, we recognize that this is an amazing time in the very early days of cloud computing.” __ Vivek Kundra, ‘The Economic Gains of Cloud Computing’, An Address, The Brookings Institution, 2010-APR-07, ( )

Organizations can leverage the multi-tenancy capabilities of the Cloud Computing paradigm to allow multiple business units to share infrastructure (IaaS), platforms (Paas), and applications and services (SaaS). They can also leverage Cloud computing’s virtualization capabilities to run multiple applications and/or services on a physical platform or run a large application across several physical platforms. Resource sharing and virtualization increase utilization and improve return on investment (ROI).

__ Joseph Starwood (

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