Cloud Computing's capital spending vs. operating expenses

The debate about the economic benefits of cloud computing is so intense that it is often attributed to the controversy between operating expenses (OPEX) and capital expenditure (CAPEX). However, as with many debate topics, the conflict between the two is actually a cover horse, which masks the real source of conflict.

In the debate over capital expenditure vs. operating expenses, the fundamental issues discussed are actually about http://www.aliyun.com/zixun/aggregation/13695.html "> Debate on the future of the IT infrastructure and operations team: Will they become the operators of the assets owned by the enterprise, or will they be the operators of the assets owned by external suppliers?

It's really hard to understand: why spend hundreds of millions of of dollars to buy assets, assume responsibility for running them, and deploy the appropriate human resources (technology assessment, supplier relationships, capacity planning, etc.) that are considered more attractive than the assets that are directly provided by external suppliers (responsible for all operational responsibilities)? Another possible nightmare is that infrastructure and operations teams will no longer be involved in cloud computing operations, and that the application team will be responsible for direct communication with external suppliers, and that infrastructure and operations teams continue to be responsible for the inherent assets of the enterprise that is constantly engulfed by cloud computing.

There are heated discussions about the cost of cloud computing, mainly around capital spending and operating expenses, but most discussions around this topic do not fully understand the far-reaching implications of different funding models and their mapping of the future of IT applications.

In my opinion, these discussions are all about determining the best way to run an application, because the application is all the value it creates.

The following are the thoughts and implications of the current financial model that is not understood in the discussions on capital expenditure and operating expenses:

Operating expenses should be more expensive than capital expenditure

One of the benefits of operating expenditure patterns is that there is no long-term constraint. Once the user has run out of resources, the resource can be returned to the supplier, the supplier has ownership of the resource, that is to say, the supplier needs to find out how to make full use of the resources to guarantee its economic benefits.

The absence of long-term constraints is certainly cost-effective, as users do not need to make huge long-term investments. So it's reasonable to say that from every unit of measure, operating expenses should be more expensive than capital spending. We can look at the price of car rental, in fact, we are only for short-term use of resources to pay an additional fee. Since it is a short-term use, renting a car is certainly more cost-effective than paying a large price for a car.

How to calculate

Therefore, the real question is not which option is to pay more for each unit of measurement, but which option is more expensive for the total amount of resources (or the total amount of all resources used by the operating application), which is trickier than the cost per unit calculation. First, it needs to predict the total usage for a certain period of time (usually one months). In other words, how many hours does the application run per month? How much storage does it use? How much network traffic will there be?

Second, this calculation may have to consider changing the lease rate based on the use layer. If the total storage uses 10,000 megabytes, the gigabit storage is at a certain rate level, and it will be cheaper if total storage uses 10 megabytes.

Third, this calculation also needs to consider the different use patterns, some periods of low usage and other times of high utilization rate. For example, a financial services company's application may have a monthly peak, a quarterly peak and an annual peak, not to mention unpredictable peaks affected by aperiodic events, such as amending the law----Changing the attractiveness of certain types of financial products to consumers.

(Responsible editor: The good of the Legacy)