Cloud Computing: IT Budget Impacts

Moving from an on-premises IT infrastructure to a cloud-based infrastructure can greatly influence how IT budgets are allocated. The greatest shift revolves around two main areas. First the offloading of responsibilities to a selected third party (the cloud provider), and second the move from purchasing hardware and software to a utility model where hardware and software owned by the cloud provider and a flexible subscription fee is paid based on usage.

These two points collectively move budgeting from Capital-based expense (CAPEX) budgeting on the purchase of assets to perform work; to Operational-based expense (OPEX) budgeting where technology costs are not purchased but the expenses assist in day-to-day work for maintaining the business.

As a result, the more an organization moves to a cloud model, the more large upfront IT costs for procurement are eliminated and replaced with ongoing recurring operational costs. Further, some operational costs are also eliminated as they are no longer the responsibility of the organization, but become the responsibility of the cloud provider. These typically include operation and security of the physical computers, networking, storage capacity, backup, archiving, and operating system along win management of the data center buildings themselves.

In moving to cloud, the costs are in general reduced based on consumption, and also allow for a more dynamic IT infrastructure that can respond to current needs to assist in the appropriate allocation of resources at any given time.