Economics of cloud computing

As cloud computing becomes a more important paradigm for information systems, it is useful to consider not just the technical parameters but also the costs as well. This article, reporting on a Booz, Allen and Hamilton study, does just that. From the article:

The government's adoption of this new IT model warrants careful consideration of the model's broad economic implications-including the potential long-term benefits in terms of cost savings and avoidance as well as the near-term costs and other impacts of a transition from the current environment. Factors such as the number and rate of federal agencies adopting cloud computing, the length of their transitions to cloud computing, and the cloud computing deployment model (public, private, or hybrid) all will affect the total costs, potential benefits, and time required for the expected benefits to offset the investment costs.

-------------------8<----------------

Although cloud computing offers potentially significant savings to federal agencies by reducing their expenditures on server hardware and associated support costs, chief information officers, policymakers, and other interested parties should bear in mind a number of practical considerations:

• It will take, on average, 18-24 months for most agencies to redirect funding to support this transition, given the budget process.
  
• Some up-front investment will be required, even for agencies seeking to take advantage of public cloud options.
  
• Implementations may take several years, depending on the size of the agency and the complexity of the cloud model it selects (i.e., public, private, or hybrid).
  
• It could take as long as 4 years for the accumulated savings from agency investments in cloud computing to offset the initial investment costs; this timeframe could be longer if implementations are improperly planned or inefficiently executed.