Cloud economics

In many companies, a central IT organization manages infrastructure and charges back the price of IT services vended to the lines of business (LOB) plus their own administrative costs (known as a chargeback model). It is important to realize that the chargeback price rarely equals the price of cloud (for an equivalent stack). In these pricing exercises, rarely do central IT organizations take into account facility costs, security, cooling, water, and electric in their prices.

The price of a cloud stack must be compared to the chargeback price plus capital expenditures (building and equipment), operational expenditures (electricity, cooling, water), staffing, licensing (costs for virtualization software, ISV/third-party tools, and so on), facilities, overhead, and opportunity costs. This is referred to as Total Cost of Ownership, or TCO. Azure (https://www.tco.microsoft.com/) and AWS (https://awstcocalculator.com/) have TCO calculators that allow users to make reasonable numerical...