TCO, ROI, OPEX/CAPEX
Organizations are bombarded with large amounts of data and need a way to convert them into actionable information to aid in decision making. That process is referred to as creating business intelligence (BI). Whether it is a decision to build a new parking lot or a decision to move the organization's application to the cloud, it requires actionable information.
Commitment to a cloud strategy to support BI requires that a large amount of information be considered before the commitment of resources can be made. In this chapter, concepts and measures that provide effective ways to organize and review the multitude of data and information are discussed. Each of the concepts and indicators should be considered when determining whether a cloud infrastructure is the best choice. Specifically, we will examine these primary financial concepts:
- Total cost of ownership (TCO). This is a financial estimate of the direct and indirect costs of owning something like cloud infrastructure. Understanding the TCO of existing infrastructure aids in knowing how businesses benefit from that infrastructure. It is also very useful when comparing various options being considered for funding. In the cloud space, we should consider the total cost of ownership as well as another, newer meaning of TCO: total cost of operation.
- Capital expense (CAPEX) and operational expense (OPEX). CAPEX refers to the way in which large purchases with an expected life of ...