Your organization needs to replace 22 physical servers and your CEO would like to implement a cloud
Question:
Your organization needs to replace 22 physical servers and your CEO would like to implement a cloud (Amazon Web Services) strategy. You have been assigned the project. To initiate the project, you will have to create a business case for the cloud strategy. The business case will be presented to the CEO of the organization. Cloud Provider: Amazon Web Services
Cloud Provider: Amazon Web Services
The cloud business case template also acts as an effective checklist of considerations that pertain to cloud adoption. A draft business case based on this template can be used to promote discussion around the legitimacy of cloud adoption during preliminary planning stages.
G.1. Business Case Identification
This section provides information that specifies the details of the business case, such as the following:
• Business Case Name
• Description – A brief summary of the business case’s purpose and goals.
• Sponsor – Identification of business case stakeholders.
• List of Revisions (optional) – Revisions by date, author, and approval if control or historical logging is required.
G.2. Business Needs
The expected benefits and requirements that are to be addressed and fulfilled by cloud adoption are detailed in this part of the template:
• Background – A description of relevant historical information that spurred on the motivation for the business case.
• Business Goals – A list of the tactical and strategic business objectives that are associated with the business case.
• Business Requirements – A list of the business requirements that are expected to be fulfilled by the achievement of the business goals.
• Performance Objectives – A list of any relevant performance objectives related to the business goals and business requirements.
• Priorities – Business goals, business requirements, and performance objectives listed in order of priority.
• Affected On-Premise Solutions (optional) – A detailed description of current and planned on-premise solutions that are to be migrated, or that will otherwise be affected by the adoption effort.
• Target Environment – A description of the anticipated outcome of the adoption of the project, including a high-level overview of cloud-based solutions that are to be built in support of the business case.
G.3. Target Cloud Environment
The cloud deployment and delivery models expected to be utilized as part of the cloud adoption effort are listed and briefly described, along with other available information regarding planned cloud services and cloud-based solutions:
• Cloud Deployment Model – Reasons for the choice of models, advantages, and disadvantages are provided to help communicate the rationale.
• Cloud Characteristics – A description of how the planned target state
relates to and supports cloud characteristics.
• Cloud Service Candidates (optional) – A list of candidate cloud services and corresponding usage estimates.
• Cloud Provider Candidates (optional) – A list of potential cloud providers and a comparison of costs and features.
• Cloud Delivery Model – The cloud delivery model that is presumably required to meet the business goals of the business case is documented.
G.4. Technical Issues
This section highlights requirements and limitations related to common technical concerns:
• Solution Architecture
• SLA
• Security Requirements
• Governance Requirements
• Interoperability Requirements • Portability Requirements
• Regulatory Compliance Requirements • Migration Approach (optional)
G.5. Economic Factors
This section comprises considerations related to the economics of the business case, involving the pricing, costs, and formulaic tools that are used for calculation and analysis. See below metrics for a broad range of financial metrics, formulas, and considerations that can be incorporated into this section.
15.1. Business Cost Metrics
This section begins by describing the common types of metrics used to evaluate the estimated costs and business value of leasing cloud-based IT resources when compared to the purchase of on-premise IT resources.
Up-Front and On-Going Costs
Up-front costs are associated with the initial investments that organizations need to make in order to fund the IT resources they intend to use. This includes both the costs associated with obtaining the IT resources, as well as expenses required to deploy and administer them.
• Up-front costs for the purchase and deployment of on-premise IT resources tend to be high. Examples of up-front costs for on-premise environments can include hardware, software, and the labor required for deployment.
• Up-front costs for the leasing of cloud-based IT resources tend to be low. Examples of up-front costs for cloud-based environments can include the labor costs required to assess and set up a cloud environment.
On-going costs represent the expenses required by an organization to run and maintain IT resources it uses.
• On-going costs for the operation of on-premise IT resources can vary. Examples include licensing fees, electricity, insurance, and labor.
• On-going costs for the operation of cloud-based IT resources can also vary, but often exceed the on-going costs of on-premise IT resources (especially over a longer period of time). Examples include virtual hardware leasing fees, bandwidth usage fees, licensing fees, and labor.
Additional Costs
To supplement and extend a financial analysis beyond the calculation and comparison of standard up-front and on-going business cost metrics, several other more specialized business cost metrics can be taken into account.
For example:
• Cost of Capital – The cost of capital is a value that represents the cost incurred by raising required funds. For example, it will generally be more expensive to raise an initial investment of $150,000 than it will be to raise this amount over a period of three years. The relevancy of this cost depends on how the organization goes about gathering the funds it requires. If the cost of capital for an initial investment is high, then it further helps justify the leasing of cloud-based IT resources.
• Sunk Costs – An organization will often have existing IT resources that are
already paid for and operational. The prior investment that has been made in these on-premise IT resources is referred to as sunk costs . When comparing up-front costs together with significant sunk costs, it can be more difficult to justify the leasing of cloud-based IT resources as an alternative.
• Integration Costs – Integration testing is a form of testing required to measure the effort required to make IT resources compatible and interoperable within a foreign environment, such as a new cloud platform. Depending on the cloud deployment model and cloud delivery model being considered by an organization, there may be the need to further allocate funds to carry out integration testing and additional labor related to enable interoperability between cloud service consumers and cloud services. These expenses are referred to as integration costs . High integration costs can make the option of leasing cloud-based IT resources less appealing.
• Locked-in Costs: Cloud environments can impose portability limitations. When performing a metrics analysis over a longer period of time, it may be necessary to take into consideration the possibility of having to move from one cloud provider to another. Due to the fact that cloud service consumers can become dependent on proprietary characteristics of a cloud environment, there are locked-in costs associated with this type of move. Locked-in costs can further decrease the long-term business value of leasing cloud-based IT resources.
Case Study Example
ATN performs a total cost-of-ownership (TCO) analysis on migrating two of its legacy applications to a PaaS environment. The report produced by the analysis examines comparative evaluations of on-premise and cloud- based implementations based on a three-year time frame.
The following sections provide a summary from the report for each of the two applications.
Product Catalog Browser
The Product Catalog Browser is a globally used Web application that interoperates with the ATN Web portal and several other systems. This application was deployed in a virtual server cluster that is comprised of 4 virtual servers running on 2 dedicated physical servers. The application
has its own 300 GB database that resides in a separate HA cluster. Its code was recently generated from a refactoring project. Only minor portability issues needed to be addressed before it was ready to proceed with a cloud migration.
The TCO analysis reveals the following:
On-Premise Up-Front Costs
• Licensing: The purchase price for each physical server hosting the application is $7,500, while the software required to run all 4 servers totals $30,500
• Labor: Labor costs are estimated as $5,500, including setup and application deployment.
The total up-front costs are: ($7,500 x 2) + $30,500 + $5,500 = $51,000
The configuration of the servers is derived from a capacity plan that accounts for peak workloads. Storage was not assessed as part of this plan, since the application database is assumed to be only negligibly affected by the application’s deployment.
On-Premise On-Going Costs
The following are monthly on-going costs: • Environmental Fees: $750
• Licensing Fees: $520
• Hardware Maintenance: $100 • Labor: $2,600
The total on-premise on-going costs are: $750 + $520 + $100 + $2,600 = $3,970
Cloud-Based Up-Front Costs
If the servers are leased from a cloud provider, there is no up-front cost for hardware or software. Labor costs are estimated at $5,000, which includes expenses for solving interoperability issues and application setup.
Cloud-Based On-Going Costs
The following are monthly on-going costs:
• Server Instance: Usage fee is calculated per virtual server at a rate of $1.25/hour per virtual server. For 4 virtual servers, this results in: 4 x ($1.25 x 720) = $3,600. However, the application consumption is
equivalent to 2.3 servers when server instance scaling is factored in, meaning the actual on-going server usage cost is: $2,070.
• Database Server and Storage: Usage fees are calculated per database size, at a rate of $1.09/GB per month = $327.
• Network: Usage fees are calculated per outbound WAN traffic at the rate of $0.10/GB and a monthly volume of 420 GB = $42.
• Labor: Estimated at $800 per month, including expenses for cloud resource administration tasks.
The total on-going costs are: $2,070 + $327 + $42 + $800 = $3,139
Auditing and Assurance Services
ISBN: 978-0077862343
6th edition
Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Straws