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A Cloud Total Cost of Ownership Model for IT Decision Making (233370580)


Academic year: 2021

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Educause Center for Analysis and Research

Total Cost of Ownership for Cloud Services

Gabriel Youtsey, University of California, Davis



About Me

 Assistant CIO at UC Davis

 Lead UC system-wide cloud strategy group





Cloud: promise and challenge

 Lower cost and better service

 Faster deployment

 Eliminate upgrades (SaaS)

 More business focus

 Immediate scalability

Cannot accurately compare costs

 More trust placed in vendors

 More control shifted to vendors (SaaS)



What is TCO?

 From Wikipedia:

“A financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or system.”

 My revision:

“A financial estimate intended to help campus IT and administrative leaders determine the quantitative

and qualitative costs and risks of various cloud and campus alternatives.”



CIOs are concerned about TCO

A 2012 global study on cloud computing revealed:

 79% of companies are concerned about the hidden costs of cloud services for their applications

 Areas of hidden cost due to performance concern include:

 Loss of revenue

 Damage to reputation

 Weakened customer relationships

 Reduced productivity



The scope of the TCO challenge

From Gartner:

 More than 80% of organizations base their sourcing decisions on inadequate financial information.

 More than 70% of discrete projects and longer-term outsourcing initiatives exceed original business case costing estimates.

 Organizations fail to include up to 20% of internal costs in their calculations of a business case.



Hidden subsidies

Energy Costs Often paid for centrally, although more

projects are working on metering and mechanisms to gate consumption.

Facilities Costs Space in the central data center, local

computer rooms, office, broom closets.

Student Labor Not counted as either a direct cost or

opportunity cost

Indirect Cost (grants) Cloud services are often subject to indirect costs, computing hardware is not.



A TCO Model for Higher Ed

 Many great TCO resources out there today that are very detailed and helpful:

 AWS just released a new TCO calculator


 Microsoft Azure reps will help customers calculate TCO

 Gartner released a toolkit for creating a business case and TCO for SaaS vs. traditional applications. G00234295

Most are vendor-specific, not flexible, and don’t capture the nuances of higher education. A model for higher ed is needed that:

Creates a useful tool for campuses to make actual decisions about various



ECAR TCO for Cloud Workgroup

 Educause sponsored the ECAR TCO for Cloud Workgroup in late 2013 to:

 Set the context

 Identify cloud models

 Outline use cases

 Develop a framework

 16 members of the higher education community representing:

 IT

 Finance

 Contracts & Licensing

 Research

 Project Management

 Industry and community representation

 Microsoft Azure & Amazon Web Services



Objective 1: Set the Context

Provide a narrative that sets the context for the unique needs and circumstances for

higher education

 Building on the University of Washington study

 Help campus community, partners, and vendors better understand campus cloud needs and



Objective 2: Identify Cloud Models

Identify service and deployment models for cloud computing that are most interesting to higher education

Public Hybrid

Community Private

Cloud Models



Objective 3: Outline Use Cases

Outline and model several common use cases that apply to the business of higher education


Teaching and learning


Suggest a use case!



Objective 4: Develop a Framework

Develop a TCO framework that will serve as a useful tool for campus decision-making

Based on use cases

Broad applicability across higher education

Must be useful for calculating TCO for both campus and cloud models



A look at the framework: quantitative


Importance Current Option 1 Explanation

Hidden Subsidies and Indirect Costs

H,M,L $ $

One-Time Costs H,M,L $ $



A look at the framework: qualitative


Importance Current Option 1 Explanation

Agility H,M,L +1,0,-1 +1,0,-1

Contract review & negotiation H,M,L +1,0,-1 +1,0,-1 Elasticity/scalability H,M,L +1,0,-1 +1,0,-1 Privacy/security H,M,L +1,0,-1 +1,0,-1 Regulatory requirements H,M,L +1,0,-1 +1,0,-1 Service level agreements H,M,L +1,0,-1 +1,0,-1



A look at the framework:

Decision-making summary

 One-page decision making summary

 Lists all the quantiative costs, one time and ongoing over 4 years



Parting thoughts

#1 - Use the 80% rule to calculate TCO

It’s very easy for a TCO analysis to turn to paralysis while every cost is calculated. Leverage campus and

vendor tools to support the TCO.



Parting thoughts

#2 – Consider the cost of risk/risk avoidance

Much of our discussion about cloud risk is related to regulatory compliance. Use the TCO model to help quantify

There is often a higher risk of inaction than making a decision



Parting thoughts

#3 – TCO is not your entire business case

Cost savings is often an initial driver, but often the “why cloud?” needs other reasons (e.g. refocus on mission, modern features)

Addressing security, privacy, and regulatory compliance questions are critical and may have cost implications



Thank you!

Find out more:


Reach out to the group:


Reach out to me:



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