Economics of cloud computing for enterprise IT

Enterprise adoption of cloud computing often requires a significant transformation of existing information technology (IT) systems and processes. To justify such a change, a viable business case must be made based on the economics of transformation such as cost of transformation, return on investment (ROI), and payback period analysis. The expected return from investing in the planned transformation and the estimated time to recoup the investments made determine whether such a transformation is to be undertaken. This paper describes models for determining the economics of transformation by considering the effects on the affected business and the IT processes. Using transformations to a development and test cloud and a desktop cloud as case studies, we develop models to quantify the costs associated with the transformation of traditional enterprise IT computing to one of these target cloud computing models. We discuss key factors that must be considered in determining the economic soundness of any transformation to cloud computing and in performing sensible ROI analysis. We also discuss best practices in developing practical ROI analysis tools for capturing the relevant factors affecting the economics of transformation.