freitasm:

 

PolicyGuy:

 

At TradeMe's scale it might actually be cheaper, though they would be one of a very few NZ businesses big enough for that.

 

What it does do is shift very significant costs from TradeMe's capital account (CAPEX) to the revenue/operational account (OPEX) as they are now renting capacity instead of buying it. Depending on how an organisation is set up, and how easy or difficult it is get big lumps of CAPEX, this can be a big influencer on a decision to "go cloud".

 

 

Exactly the point. Not all companies will benefit of "cloud for cloud-sake" in terms of cost, although with current business environment it might end up being an imperative.

 

Ha! IT capital costs are accompanied by depreciation, which is used to fund future capital costs. It’s not possible to look at TM’s books since they have been de-listed, but in 2011 they had $4m in depreciation and amortisation. So they would be spending a similar amount on capital expenditure across all expense lines.

Also, I would be super surprised if TM wasn’t leasing its hardware and comm’s gear. They would be renting data centre space. So it is almost certainly wrong to suggest TM is using capital for hardware and data centre charges. I don’t know for sure, but I do know the senior executives running TM in 2012 and they are smart enough not to use capital for those sorts of charges.

The direct charges they are incurring that they will be able to save is in manual labour maintaining infrastructure. That won’t be insignificant - a couple of million a year? They will be able to save indirect costs associated with the complexity overflow of maintaining their own infrastructure - their infrastructure profiles will become standardised and they will be able to plan software maintenance more easily - they will be forced partially into a devop’s model as google’s infrastructure evolves irrespectively of TM’s plans.

The benefits of cloud are rarely related to infrastructure costs. Most private businesses, and increasingly Govt businesses, do not use capital for ICT infrastructure as that is a waste of capital at the depreciation rates ICT experiences. The real benefit of “cloud” relate to the standardisation that is forced, and the change of operations that that implies. I don’t know how many public and private organisations that have moved to the cloud, and then been surprised that the provider does an update or upgrade on third Thursday of the month, with limited to no discretion to take that update up.

It’s really only Govt that is shifting capital cost to opex due to moving to the cloud, relative to infrastructure, because the private sector would generally not use capex for ICT infrastructure. Generalised statement of course, and also of course the funding model for Govt capital expenditure not quite like that for private sector.