Hybrid Cloud


Over the weekend, I was driving through the mountains in Virginia and had the opportunity to stop at various scenic overlooks to view the beautiful mountains at sunset in the horizon.  As an IT Finance professional, I am always in search of relevant analogies between my personal and professional life.  Yesterday, the clouds in the sunset vistas made me think about cloud computing and storage in our industry.  Too literal of an analogy to be provocative?  Maybe, but we all know this is a very hot topic to say the least.

The thought leaders in our industry predict a significant transition from on-premise to cloud-based infrastructure solutions.  With more cloud service providers entering the market, basic economics predicts a significant decrease in pricing of those cloud services.  As tempting as it might be to run out and move everything to the cloud, there are some important things to consider before making this change.  Therefore, many experts believe organizations will eventually land with a combination of traditional on-prem and cloud-based compute and storage solutions over the next 5-10 years. 

We are planning to have a forthcoming series of blog posts on this topic but wanted to introduce one of the biggest factors when deciding how to leverage cloud services.  As Accounting and Finance professionals, we are always concerned about the dollars and cents, right?  Naturally, one of the biggest things to consider are the various facets of cost:

 

100% On-prem

Cloud

Upfront cash flow

Significant cash outlay for hardware, software, and labor to stand up new environment

Minimal upfront costs

Long term cash flow

Internal labor costs to maintain as well as vendor licensing & maintenance costs

Consider rates & charges after year one as they often increase

Utilization

Less flexible as on-prem infrastructure is a sunk cost

More flexibility to adjust capacity for over- or under-utilization

Expense recognition

Generally capitalized and amortized/depreciated over multiple years

Generally expensed to P&L when invoiced by service provider

Cloud migration costs of existing apps/workload

n/a

Re-platforming is labor-intensive and expensive.  Also, FASB has made it more difficult to capitalize costs associated with migration to cloud.

Data transfer costs

n/a

Consider the costs associated with data transfer between apps on-prem & apps in the cloud.

Existing application life cycle

n/a

Consider the stage in app/workload life cycle to ensure the benefits to re-platform exceed the cost to do so.