![]() This is because cloud services are chosen from an open market, where competition and economies of scale can lower the costs of these services beyond what can be expected on premise. On one hand, following the neoclassical economic thinking, cloud services are cheaper than on premise services. This paper reveals some of the management efforts involved in adopting cloud.Ĭloud computing needs a different view of analysis to understand the unpredicted costs. Considerable management effort is needed for successful cloud adoption. Our critique, however, is that these advantages are, in most cases, requires extra after-provisioning management efforts. Cloud helps companies in various ways such as with scalability and agility. ![]() The point is that this should not disguise other efforts needed before and after provision. This should not mean that the ‘minimal management effort’ associated with the rapid provision is incorrect. Lack of vendor transparency, continuous maintenance costs, and lack of cloud expertise play a role in unpredicted costs and implementation problems. In a survey conducted on 250 IT managers, it was reported that more than 70% of companies that moved to the cloud were not aware of these costs following adoption. ![]() ![]() Choosing a cloud service is sometimes a difficult and costly process. In some cases, “unexpectedly”, cloud services cost more than the initial investment in terms of continuous maintenance and other hidden costs. The cloud services market can be considered from a general standpoint unclear hence, the profitability of using cloud services is mostly hindered by assumptions and trialing. cloud customers lack criteria and/or guidelines to get a full picture of what is required from them before going to the cloud. However, research has reported some interesting findings that should complement that. Vendors, as well, over-use this aspect in their marketing activities. Rapid provision of cloud services, with minimal management efforts, have largely motivated for customers to adopt cloud. Although the rapid provision is a big advantage, it needs to be handled carefully. It defines cloud computing as “a model for enabling convenient, on- demand network access to a shared pool of configurable computing resources (for example, networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service-provider interaction” (:2). The most adopted cloud computing definition is the one provided by the National Institute of Standards and Technology (NIST). Finally, cloud has high ‘transaction frequency’, which compensates for the needed investments triggered by ‘uncertainty’ and ‘asset specificity’.Ĭloud computing has been massively booming in the last decade. Cloud also has a considerable level of ‘uncertainty’ asking for managing contracts, investing in cloud-specific monitoring solutions and consciously reviewing of the legal compliance. Findings of this research indicate that cloud has high ‘asset specificity’ due to change management costs, meta services costs and business process reengineering costs. Findings were validated through a case study. Expert interviews with vendor, customer and consultancy sides were conducted to understand costs associated with cloud computing. This paper applies transaction cost theory to cloud computing through a 360-degree industry analysis. The aim of this paper is to study transaction costs of cloud computing from the customer perspective to make the cloud journey less cloudy, i.e. Such costs may not be known to cloud customers, leading to unmet expectations and implementation challenges. However, according to institutional and transaction cost economics, cloud customers should estimate other costs beyond the price. Looking merely from the neoclassical perspective, cloud computing is price effective.
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