The Cloud model deeply changes the economic model of computing. The previous evolution of computing had already favored immaterial investments in software rather than in hardware. Now, the economic model of the cloud goes one step further by suppressing the investment altogether for the consumer of computing power.
The manner in which operations are managed and the way the balance sheet is presented will be strongly impacted, starting with IT expenses. The on-demand principle will impact companies, namely by reducing the weight of their assets on the balance sheet and reducing the amount of capital frozen to that end. The pooling of services will provide an additional economy of scale.
From the customer's point of view, this economic model is rather close to outsourcing, but it simultaneously brings other benefits:
- Per-use pricing, which bases charges on activity (either stepwise or continuously)
- Resource pooling logic that offers reduced costs
- Functionality pooling logic that offers improved performance
In summary, the Cloud model provides increased economic flexibility by replacing a fixed investment with a cost that is proportional to the activity.
This benefit is magnified by the fact that the immediate availability reduces cash requirements. Inception phases, tests, and evaluation are most often done without acquisition, as Cloud providers offer their readily available environments.
Eventually, the project life cycle is made shorter and simpler. Its financing becomes less onerous. Consumption of seed capital is reduced and, moreover, it is risk-resistant because the resources can be adjusted progressively when the need arises.
Besides the benefits regarding the immobilization of capital and the savings on the costs of operation, the Cloud also helps improve the visibility of service costs. Observing the market, one notes that, in many cases, computing costs are measured per feature, per macro-activity (infrastructure, network, desktop, helpdesk…) or per platform (technical or functional). An increasing number of companies create a catalogue of services whose costs are measured and monitored.
The main benefit of the cloud is to propose a total cost for a service excluding internal costs. Contract management allows companies to precisely follow costs and to compare them with other solutions on the market. One corollary is the readability of the contract negotiated with the service provider involved; we can only hope that the present simplicity of this emerging economic model will not get lost in labyrinthine pricing policies.