How to Track Cost Allocation for Cloud Apps

Grazed from CIO. Author: Bernard Golden.

One of the most interesting aspects of cloud computing is the way it changes cost allocation over the lifetime of an application. Many people understand that pay-as-you go is an attractive cost model, but fail to understand the implications that the new cost allocation model imposes on IT organizations.

The pay-as-you-go model addresses several obvious and painful limitations of the previous model, which was based on asset purchase; in other words, prior to application deployment, a significant capital investment had to be made to purchase computing equipment (i.e., servers, switches, storage, and so on)…

The Shortcomings of the Asset Purchase Approach

It requires a large capital investment, which displaces other investment that the organization might make (that is, it forces a tradeoff between this application and other, potentially useful capital investments like new offices, factories, and so on). The capital investment must be made before it may be clear just how much computing resource will be needed when the application is operating; perhaps the application will experience much more use and there won’t be enough equipment, but perhaps the application won’t be used as forecast, and some or much of the investment will be wasted…

Read more from the source @ http://www.cio.com/article/717183/How_to_Track_Cost_Allocation_for_Cloud_Apps