Cloudnomics: The Economics of Cloud Computing

As the general value proposition of cloud computing has bcome accepted there is an increased interest in cloud TCO.'s Bernard Golden discusses the economics of cloud computing and shares other notes from the CloudConnect conference.

This week saw the latest edition of CloudConnect, a cloud computing conference, held in Santa Clara. It was a well-attended, highly energized get together. CloudConnect (think I'll refer to it as "CC" for the rest of this post to reduce typing) contained a number of tracks, including Development, Standards (more on this one in a bit), Big Data, Migration, Case Studies, and Cloud Economics/ROI (I spoke in this track in the "Cloudonomics" session, where, perhaps somewhat confusingly, I presented the TCO of a case study).

I would say the feel of the conference reminded me of Internet conferences around 1995 — when it was clear that something big was going on, which the following year just exploded. Internet conferences went from well-attended small venue events to stuffed-to-the-gills big venue events in the course of just 12 months. I predict the same sort of thing for cloud computing. So get your reservations for cloud computing conferences early for 2011!

[For timely cloud computing news and expert analysis, see's Cloud Computing Drilldown section. ]

In addition to the general feel of the conference, several things stood out for me that I want to share:

Cloudonomics. This is a neologism coined by Joe Weinman (@joeweinman) meaning the economics of cloud computing. Joe and I shared a session on this topic, with Joe presenting an analytical framework to understand the economics of cloud computing, and me presenting a TCO case study of a project my firm did for the Silicon Valley Education Foundation. The room was absolutely packed. It's clear that people want to learn more about the potential financial benefits of cloud computing. There's been an amazing amount of FUD strewn about on the topic of cloud TCO, which I've written about in the past. The biggest challenge in making a TCO comparison of cloud vs. internal isn't in understanding the cloud costs — they're pretty transparent, typically — it's in establishing the baseline costs. I will say, though, that I had a conversation with a man at the conference who said they couldn't establish a TCO for AWS due to the difficulty of figuring out how much data their application was going to transmit (perhaps a Monte Carlo simulation would be a good way to address that question).

The fact that people are so interested in cloud TCO indicates that the general value proposition of cloud computing has been accepted and absorbed — in other words, one doesn't care about putative financial benefits of an unworkable technology, but once the technology is conceptually accepted, potential financial outcomes become a key issue. There were perhaps 150 people in the room, all of whom stayed awake even though the session was directly after lunch, which is a key indicator of audience engagement!

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