The cloud might mean that the corporate accountant becomes your new best buddy. Appalling thought, I know, but beancounters aren't all that bad: they can do sums even if they can't do algebra, which puts them a step ahead of the marketing department. Of course, this time of year, when bonuses are being decided, is a great time …
I'm sorry, but I read that as "How to make clouds and flatulence accountants"
I'll get me coat. It smells funny in here.
_Someone's_ got to pay for it eventually
So riddle me this - if renting is so much more tax efficient than buying, why do we all get mortgages instead of renting? Oh yes... because rentals on a £200k flat tend to be higher than the cost of borrowing the capital. What's happening is you're palming the risk of obsolescence off on someone else, and they'll charge you for it. And also the leasing companies are very, very aware of the economic impact of your reallocating the incidence of tax; it's how they tend to price/value the more 'exotic'* leasing schemes.
I grant you, it's the kind of figure massaging voodoo which purports to save money & will therefore appeal to clever accountants - but just what will the overall impact be on how many new computers get built/developed is perhaps more important in the 'real' long term. For some reason, recent events have made me very wary of wonderful new ways of accounting for things that save us all money...
*Colourful, often foreign and frequently shortlived when exposed to the UK [tax regulatory] climate.
Lifetime of asset
Not really, the reason why most people prefet mortgages is that they think the asset will be worth something when they have paid off the debt. This is not the case for an IT asset where it will likely be worth next to SFA after a couple of years.
Investment Appraisal, not accounting
As a beancounter, that is a nice explanation of how accounts work and I won't even split hairs about blurring direct and indirect costs. However, the cloud is just like any other outsourcing decision; accounting doesn't make it right or wrong, just gives you some of the information to help you make that decision.
On the plus side, someone running a big data centre with lots of capacity is likely to be able to do so more cheaply than lots of individual businesses. Against that, their profit has to be paid for by their customers. And risk could be positive or negative. Much of your argument is that the cloud provider takes on lots of risk - maintenance, technological, obsolescence. But risk equals profit - think insurance where you pay more each year than the expected cost of your losses (and keep insurance companies in flash offices). The cloud provider isn't taking on that risk for nothing and, because there is uncertainty, is loading it a bit to protect himself.
Finally, there are the non-financial factors which are just as important. Is the business happy to be totally dependent on a third party? Does it have the capability to audit the cloud provider's security, disaster recovery and business continuity measures. Will your accountants have a look at their books and judge whether the hardware leasing company is going to turn up with a lorry and take away the servers? Or if the data centre is going to pull the plug for non-payment of rent? If there is a SLA, how will you enforce it in the Delaware courts. How do your business interruption insurers feel about having a major part of the business' operations being performed by a third party?
Nothing wrong with using the cloud, but there are lots of things to think about before betting the future of your employer on any one provider and most are operational rather than financial.
"On the plus side, someone running a big data centre with lots of capacity is likely to be able to do so more cheaply than lots of individual businesses. "
Assuming that the individual business are quite small and dont have any ecconomy of scale yes.
Another advantage: ramp up/ramp down
Cloud infrustructure is an Activity Based Cost. With cost per user services you can make relatively quick responses to increases and decreases in head count.
There is no need to commit to until you actually needs the capacity and then you will be billed in the next invoice.
Cutting back? reduce the user count and reduce the costs. You can't do that with the gear in your server room. It costs the same to run for 0, 1 or 100 users.
I will use this quote again
"beancounters aren't all that bad: they can do sums even if they can't do algebra, which puts them a step ahead of the marketing department"
Arthur Dent would be proud
Love the Hitch Hikers Guide to the Galaxy reference
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- Early result from Scots indyref vote? NAW, Jimmy - it's a SCAM