Cloud Computing Cost-Benefit Analysis Assessing Green IT Benefits - Part1

Purpose

This research work is about Cloud Computing and Green IT. Through a thorough examination of the cloud computing phenomenon, and its relationships to green IT, the dissertation develops a cost-benefit analysis (CBA) for an information and communication technology (ICT) project that strives to quantify the environmental benefits of cloud computing's higher computing efficiency. The project aim is to deploy and maintain a software development and test environment in a public infrastructure-as-a-service (Iaas) cloud to improve the overall efficiency of research and development (R&D) activities, as well as cut datacenter operational costs at the Engineering Center of (****NAME HIDDEN****)Corp.

Both cloud computing and green IT topics discussed in this dissertation address two of the most important epochal challenges and business opportunities of our time.

Approach and Methodology

The dissertation employs a multi-stepped methodology to CBA, which provides an introduction to CBA for people interested in its application to environmental management. The CBA structure is roughly outlined in six essential steps, which main objective is to determine which costs and benefits are economically relevant to the financial analysis of the business case under study. In combination with the multi-stepped approach to CBA, I apply the Total Economic Impact™ (TEI) methodology of Forrester. I have chosen to use TEI methodology as a guideline throughout the dissertation because it helps provide a complete picture of the total economic impact of an ICT investment project by measuring not only costs and benefits, but also by weighing the enabling value of technology.

Scope

The (CBA) is done for the ICT team of the Engineering Center of (****NAME HIDDEN****)Corp. The project under consideration consists in evaluating the business benefits of using the Amazon Web Services (AWS) public cloud for the software development, test and quality assurance (QA) customary tasks of GEC. As observed by a number of field practitioners, software development and test/QA ICT.

A Cloud Computing Cost-Benefit Analysis Assessing Green IT Benefits service delivery functions constitute an interesting use case for cloud computing, because it allows software R&D organizations to develop and test applications without having to build and maintain a large datacenter infrastructure.

Key Findings

From the information provided in an in-depth interview with the ITC staff, I have constructed a TEI framework to better assess the economic impact of the migration of parts the development and test computing resources to the AWS cloud in what is referred to as an hybrid cloud architecture using the network isolation schemes provided through the Amazon's Virtual Private Cloud services. The hypothesis is that the benefits of cloud computing should substantially lower the TCO of operating the hybrid cloud infrastructure that supports the software development and test activities of GEC, but my research shows that many of the benefits that can be realized in this project are not easily quantifiable in terms of return on investment (ROI). However, there are three areas in which significant operational cost savings could be achieved in this project.

·        Hardware equipment cost savings as a result of externalizing computers that have a low annual utilization ratio to the AWS cloud.

·        Electricity consumption cost savings as result of externalizing a large chunk of the computers and storage to the AWS cloud

·        Support staff cost savings as a result of a better efficiency of the solution.

In addition, productivity gains for the engineering staff could be achieved thanks to the overall effectiveness of the solution, as well as an improved business agility, and a better software engineering life-cycle management that are inducing of better quality products.

At the end of the three-year financial analysis period, the total risk-adjusted benefits that could be achieved with this project amounts to $2,422,743 in present value (PV) terms, for a total risk adjusted operating cost of $1,958,679 in present value (PV) terms. Other risk-adjusted financial metrics include:

·        The ROI that is 297%

·        The Payback for an initial investment outlay of $203,214 that is 9 month

·        The net savings (Net Present Value) at the of the three-year period that is $464,063

·        The internal rate of return (IRR) that is 117%

However, despite the positive results of the financial analysis, it was not possible to demonstrate in the CBA that the assumed environmental benefits of cloud computing played a sensitive role. This is partly due to the fact that while some cloud providers are reaching extremely low PUEs, and are also looking to build massive datacenters in places so as to maximize energy efficiency and harness renewable or clean energy, the primary motivation is cost containment, which doesn't necessarily meet environmental and social responsibility objectives. Second, the current body of environmental legislations that are enacted by governments and regulatory organizations such as the European Commission have had, so far, minor to zero financial impacts for the datacenter sector.