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Georg Singer is a researcher in the area of cloud computing at the University of Tartu in Estonia. His research focuses on ROI, economic and business aspects of cloud computing.

Microsoft White Paper – Economic Benefits of Cloud Computing

Microsoft has recently, in November 2010,  published a white paper with the title “The Economics of the Cloud”. In this white paper the authors mention the following potential cost savings for organisations:

Cloud also allows core IT infrastructure to be brought into large data centers that take advantage of
significant economies of scale in three areas:

  • Supply-side savings. Large-scale data centers (DCs) lower costs per server.
  • Demand-side aggregation. Aggregating demand for computing smooths overall variability, allowing server utilization rates to increase.
  • Multi-tenancy efficiency. When changing to a multitenant application model, increasing the number of tenants (i.e., customers or users) lowers the application management and server cost per tenant.

We do agree, that economies of scale (will) provide a potential for cost savings. Yet we also want to point out, that one should not be overly optimistic. The degree of savings to be realized from moving to the cloud strongly depends on the whole business context of an organisation. We have published a research paper with the title “Costs for running scientific applications on EC2 significantly higher in comparison to in-house infrastructure” in 2010, where we proved the cloud to be significantly more expensive for a certain domain of applications.

Therefore a decision whether to migrate to the cloud or not can only be based on a very thorough investigation of a company’s operations, existing IT infrastructure and also strategic implications that such a move would imply.

The Microsoft white paper can be obtained as a PDF from here.

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