How much is the Cloud?

How much is the Cloud? IT Performance Measurement for Cloud Computing Prof. Dr. Frank Bensberg Department of Business Management

Agenda Introduction to Cloud Computing IT Performance Measurement The Total Cost of Ownership Approach Summary & Lessons Learned 2

Cloud Computing in the Gartner Hype Cycle Source: Gartner Group (2009). 3

Popularity of Cloud Computing Google Trends Source: Google Trends (2011). 4

Do You work in the Cloud? 5

Definition Cloud Computing Cloud Computing Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. Source: NIST (2011) 6

Characteristics of Cloud Computing 1 On-demand Self-Service A consumer can request computing capabilities, such as server time and network storage, as needed automatically without requiring human interaction 2 Network Access Capabilities are available over the network and accessed through standard mechanisms 3 Resource Pooling 4 The provider s computing resources are pooled to serve multiple consumers Rapid Elasticity Capabilities can be rapidly and elastically provisioned, in some cases automatically, to quickly scale out 5 Measured Service Resource usage can be monitored, controlled, and reported, providing transparency for both the provider and consumer of the utilized service. Source: NIST (2011). 7

Cloud Provider Cloud Broker "A person, organization, or entity responsible for making a service available to interested parties." A Reference Model of Cloud Computing " manages ages the use, performance and delivery e of cloud services, and negotiates relationships between Cloud Providers and Cloud Consumers." Cloud Consumer "A person or organization that maintains a business relationship with, and uses service from, Cloud Providers." Cloud Auditor "A party that can conduct independent assessment of cloud services, information system operations, performance and security of the cloud implementation." Source: NIST (2011). Cloud Carrier "An intermediary that provides connectivity and transport of cloud services from Cloud Providers to Cloud Consumers." 8

Agenda Introduction to Cloud Computing IT Performance Measurement The Total Cost of Ownership Approach Summary & Lessons Learned 9

Business Engineering Framework Business Strategyt Business Processes Applications IT-Infrastructure Source: Alpar, P., et al. (2011), S. 126. 10

Business Engineering Framework Business Strategyt Business Process Outsourcing Outsourcing:= "Outside Resource Using" Business Processes Applications Substitution of internal business processes (Make) for external Services (Buy) IT-Infrastructure Source: Alpar, P., et al. (2011), S. 126. 11

Business Engineering Framework Business Strategyt Business Processes Cloud Sourcing Substitution of internal IT-Services (Make) for external, cloud-based Services (Buy) Applications Cloud-based Services provide on demand infrastructure services (computing, storage, network) and / or application services IT-Infrastructure Source: Alpar, P., et al. (2011), S. 126. 12

Performance Measurement for Cloud Computing Business Strategyt Business Processes Cloud Sourcing Business Impact Applications Soft Benefits Non-Monetary Impact Measures IT-Infrastructure Hard Benefits Monetary Impact Measures Source: Alpar, P., et al. (2011), S. 126. 13

Agenda Introduction to Cloud Computing IT Performance Measurement The Total Cost of Ownership Approach Summary & Lessons Learned 14

Definition Total Cost of Ownership (TCO) "purchasing tool and philosophy which is aimed at understanding the true cost of buying a particular good or service from a particular supplier" Source: Ellram (1995) 15

Typical TCO Elements of IT-Centers Total Cost of Ownership (TCO) Direct Costs Indirect Costs Hard-/Software Operations Administration End User Activities Down Time Servers, Desktop-PCs, Software Licenses Power, Room, Self Support, Productivity it Labour Maintenance, Hey Joe-Support Losses Labour Source: Grob, H. L., Reepmeyer, J.-A., Bensberg, F. (2004), S. 500. 16

TCO Elements of a Cloud 1 Computing Costs price for computing time 2 Storage Costs price for persistent storage 3 Input/Output p Costs price for data access 4 Transfer Costs price for data transfer to cloud 17

TCO Elements of a Cloud 1 Computing Costs price for computing time 2 Storage Costs price for persistent storage 3 Input/Output p Costs price for data access 4 Transfer Costs price for data transfer to cloud 18

Sample Business Case Simulation of life Insurance contracts Life Insurance Company Simulation results are timely required to support risk & compliance management Heavy duty application with following performance parameters Computing power of 4,5 Teraflops required (peak performance) Equivalent to a server farm with 106 nodes Degree of utilisation amounts to 80% Storage capacity of 100 TB required Data transfers amount to 20 GB / hour Make or buy-problem: Operate the application in the Cloud or in our own IT-Center? >? < TCO Cloud TCO IT C t TCO IT-Center 19

Business Case TCO Results Conclusion: own IT-Center is more attractive than Cloud (!) 20

Software Support for TCO Calculation TCO-Tool Open Source Tool Supports Design, Calculation and Analysis of TCO models Open Source License Lesser General Public License (LGPL) Available at http://sourceforge.net/projects/tcotool/ 21

Design of relevant cost categories Hierarchical Structure of the TCO Cost Categories 22

Definition of Labour Costs 23

TCO Reporting 24

Agenda Introduction to Cloud Computing IT Performance Measurement The Total Cost of Ownership Approach Summary & Lessons Learned 25

Summary & Lessons Learned Cloud Computing primary is an organisational principle of ITservice provisioning, which implies attractive economical characteristics To make the monetary impacts of Cloud Computing transparent, the TCO approach can be applied, e. g. by use of TCO-Tool The TCO approach requires a detailed specification of technical parameters (e. g. required computing power, storage volumes) The TCO approach does not catch the soft benefits of cloud computing (e. g. increased user or customer satisfaction) In order to support long-term decisions, i further financial i parameters have to be considered, e.g. interest rates and taxes In addition, risks of Cloud Computing also have to be considered in depth (e. g. legal aspects) 26

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List of References Alpar, P., Alt, R., Bensberg, F., Grob, H. L., Weimann, P., Winter, R., Alt, R., Bensberg, F. (2011), Anwendungsorientierte t Wirtschaftsinformatik i f tik Strategische t Planung, Entwicklung und Nutzung von Informationssystemen, 6., überarb. u. aktual. Aufl., Wiesbaden 2011. Ellram, L. M. (1995), Total Cost of Ownership An Analysis Approach for Purchasing, in: International Journal of Physical Distribution & Logistics Management, 25. Vol., Nr. 8, S. 4 23 (1995). Grob, H. L., Reepmeyer, J.-A., Bensberg, F. (2004), Einführung in die Wirtschaftsinformatik, 5., vollst. überarb. u. erw. Aufl., München 2004. NIST (Hrsg.) (2010), NIST Cloud Computing Reference Architecture, Special Publication 500-292 of the National Institute of Standards and Technology (NIST), Gaithersburg 2011. Voorsluys,W., Broberg, J., Buyya, R. (2011). Introduction to Cloud Computing, in: Cloud Computing Principles and Paradigms, Hrsg.: R. Buyya et al., Hoboken 2011. 28