Although enterprise applications running on the public cloud are still in the early adopter phase, IT Executives are under pressure to develop a cloud strategy for their enterprise applications. It’s up to them to untangle the cloud “spaghetti” and comprehend the basic economics and capabilities. To effectively start tracking Cloud Payback, first examine the hardware metrics.
There are two main areas of hardware payback. The first is physical server depreciation. The hardware savings come from improving server utilization and decreasing the number of servers. The typical server in a datacenter is running a single application and is being utilized from 5% to 25% of its capacity. As systems are consolidated and virtualized in a cloud environment, the number of servers required can drop significantly and the utilization of each server can be greatly increased, resulting in significant savings in hardware costs and the avoidance of future capital investment.
The hardware metrics can be classified as:
- Number of existing physical servers
- Average total purchase price per server
- Average percent of hardware utilization
If many infrastructure(s) and applications are moved to an external cloud service provider, there may be a decrease in assets, which will have an impact on depreciation charges.
Energy and Facilities Costs
The second area of hardware payback is comprised of energy and facilities costs. If there are fewer servers using energy and floor space, your company will see direct savings. Based on a study conducted by IBM, typical savings in total hardware, energy, and facilities can be in the range of 30% to 70%, based on your current size and annual spending. The cloud computing platform can also affect the size of the cost savings.
Hardware Metrics and You
You know that transitioning to the Cloud can directly affect the bottom line of your IT costs. Every blog post, every article, every hashtag surrounding the Cloud says “it’s cheaper, it’s cheaper, #itscheaper.” We believe that there is a systematic formula for how the Cloud can save your company money, and that formula starts with hardware metrics.