Abstract
Cloud computing technologies have brought new attributes to the IT world. One of them is a flexibility of IT resources. It enables effectively both to downsize and upsize the capacity of IT resources in real time. Requirements for IT size change defines business strategy and actual market state. IT costs are not stable but dynamic in this case. Standard investment valuation methods (both static and dynamic) are not able to include the flexibility attribute to the evaluation of IT projects. This article describes the application of the Real Options Analysis method for the valuation of the cloud computing flexibility. The method compares costs of the on-premise and cloud computing solutions by combining put and call option valuation. Cloud computing providers can use the method as an advanced tool that explains hidden benefits of cloud computing. Unexperienced cloud computing customers can simulate the market behavior and better plan necessary IT investments.
Highlights
Present time can be called the "cloud technology" era
This article describes the application of the Real Options Analysis method for the valuation of the cloud computing flexibility
The paper describes the first version of the Real Options Analysis method used for the cloud computing flexibility valuation
Summary
Present time can be called the "cloud technology" era. Everyone should own or operate some cloud computing. What are the real differences between the cloud computing and on-premise solutions? Before coming of cloud computing, all IT departments had to answer the following question: “What area of the rectangle in Fig. 1 should IT resources cover at the beginning of business operations and how to manage changes in the future?” It means how to size the hardware, software and other resources capacity and how to evaluate the appropriate investments. We analyze the main differences between the traditional on-premise and cloud computing-based IT infrastructures and systems behavior. The research question is: How can be the flexibility of cloud computing compared and evaluated with the traditional on-premise IT infrastructure. The paper is structured as follows: after the introduction, we describe cloud computing and Real Options Analysis (ROA) method.
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
