The traditional ontology of costing and micro theories of costing may need to be redefined in the virtual world where value adding activities may be less visible except in areas of strategic alliance, information sharing or online payment mores. The theories may have to be generically deployed to achieve cost management irrespective of whether the enterprise belongs to the manufacturing or service sector. The criteria for evaluation may include generality, efficiency, perspicuity, transformability, extensibility, granularity, scalability and competence.
So, how does one keep costs under control? The process must logically begin, by recognising the characteristics of the cloud and identifying the appropriate / suitable costing methods for delivery and use of services.
• The cloud consolidates the distributed enterprise and shifts all activity–online–to the remote data centre in the cloud. This largely precludes the possibility of pinpointing
specific activities to specific cost centres.
• CAPEX vanishes with the cloud and is replaced by OPEX. Direct expenses suddenly assume the aspect of indirect expenses.
• Logistics costs and information management costs form a large chunk of the costs for the virtual enterprise.
Consequently, cloud vendors adopt use-based, granular costing methods for estimating the costs of maintaining a cloud and servicing the customer. There is a defined base cost and a top up cost for the service. While base costs are fixed, the top up costs vary in accordance with the level of usage of the services. The secret of cost control, in context, is simply to monitor the amount of base plus top up costs or to evaluate storage space or application use of the different participating departments and define limits of usage for budgeting purposes.
However, the process is not as simple as it seems. The implication is that enterprises will have to get more sophisticated about shaping the use of resources within the enterprise. They will have to recognise utilisation risks and the management will have to play a significant role in ensuring sufficiency of usage and financial viability of the use. Cost saving opportunities will involve using cloud based applications only where the use makes business sense and scaling up operations in the cloud only when there is a peak transaction load. Since pricing in the cloud is directly proportional to utilisation, IT financial talents must be made conscious that IT operations must become more business like in their dealings if costs are to be kept under control in the cloud. IT Administrators must lock step with business growth and success and optimise on use of cloud based IT resources to advantage the business.
We, at Backup Technology, are always ready to work with our customers in evaluating the economics of using the cloud. Our cloud services are designed to optimise resource use for our customers. Our customers remain informed on usage data and have the option to scale up or scale down usage on-demand. Alerts are generated when usage boundaries are reached. Compression, de-duplication and archiving technologies are used to help our customers achieve cost savings in the cloud.
