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Cloudonomics Principles

A small New Zealand firm has just published a list of “cloudonomics” principles. The list offers useful guidance how to think about the adoption of cloud computing. * The following is a redacted version of “cloudonomics”:

Cloudonomics Principle #1:
Cloud services cost less even though their unit costs are more. 
Although cloud services unit cost are more expensive when used, they cost nothing when they are no
Customers save money by replacing fixed infrastructure with clouds because all workloads are spiky.
The peak-to-average load ratio is much greater than the utility premium.

Cloudonomics Principle #2
On-demand trumps forecasting. 
Short-term forecasting is often wrong. 
Long-term forecasting is always wrong.
The ability to scale workload up and down to meet unpredictable demand allows for cost optimization.

Cloudonomics Principle #3
The peak of a sum of workloads is never greater than the sum of the peaks.
Individual enterprises deploy capacity to handle their peak demands. Under this strategy, the total capacity deployed is the sum of these individual peaks.
However, since clouds can reallocate resources across many enterprises with different peak periods, a cloud needs to deploy less capacity.

Cloudonomics Principle #4
Average unit costs are reduced by distributing fixed costs over a larger number of units of output. Larger cloud providers can therefore achieve economies of scale.
Superiority in numbers is the most important factor in safeguarding cyber security. 
Cloud operations coupled for fail-over have the scale and the personnel to fight rogue attacks.

Cloudonomics Principle #5
Organizations derive competitive advantage from responding to changing business conditions faster than the competition.
With cloud scalability and instant availability of capacity, for the comparable cost, a business can accelerate its information processing and decision-making.
Dispersion of processing sites will increase the latency (response time) of transactions. 
Reduced latency is increasingly essential in cyber operations (less than 200 milliseconds).
A Cloud computing provider is able to provide more distributed computing nodes (servers on the edge), and hence reduced latency, than an individual enterprise would want to deploy.

Cloudonomics Principle #6
The reliability of a system increases with the addition of redundant, geographically dispersed components such as data centers. Cloud Computing vendors have the scale and diversity to do so.
A data center is a very large fixed facility. Data centers tend to remain in locations for a variety of reasons such as where the company was founded, where they got a good deal on property or where politics dictates it. 
A Cloud service provider can locate sites optimally.

The consolidation of over 100 DoD data centers into the current number in DISA, gave little consideration to aggregating these facilities into workload-sharing operations. At the time (1992) software and operating standards were not available. As one of the principal policy makers, who was driving data center consolidation (DMRD 918), can now reconsider what would be the next step in DoD data center management.

The “cloudonomics” principles proposed by an astute researcher offers useful guidance for everyone who is planning to execute guidance from the Federal CIO on data center consolidation.


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