Profiting from a cloud deployment

Cloud computing does offer enterprises and organizations a mixed bag of goodies. For one it provides for a utility style computing, the ability to grow and shrink with changing loads, zero upfront costs etc. The benefits of cloud computing are many but does it all add up to profit for an enterprise? That is the critical question that needs to be answered.

This post will take a look on what it takes for a cloud deployment to be profitable for an organization.

The critical parameters for any web application are latency and throughput.  A well designed web application whether it is an e-retail site or an ad serving application will try to minimize the latency or response time while at the same time maximizing the throughput of the application. For any application while the latency can be kept within specified limits the throughput will tend to plateau at a certain level and will not increase with increasing traffic. Utilizing a larger instance can improve the throughput plateau slightly. In any case the reality is that throughput tends to flatten as the traffic is increased.

A typical cloud application will be made of several compute instances, database instances, DNS services etc. Cloud usage is billed by the hour. Hence we can represent the cost of a cloud deployment as follows

Cost (cloud deployment) = m * compute instance + n * database instance + o * network bytes + P

Where P = cost of DNS + Elastic IPs + other costs.

This can be represented by the formula

C = a * D * t

where C = cost of cloud deployment

D = costs per hour of the deployment

and ‘a’ is some arbitrary constant and ‘t’ is the time

Let us assume that for the cloud deployment we get a throughput of T.

The revenue for a web application whether it is an e-commerce site, an e-ticketing site or an ad serving engine will all depend on the throughput i.e. larger the throughput, larger the revenue and hence profit. We can then say that ‘R’ the revenue is

R (revenue) α k * T * t

In others words  the revenue is proportional to the throughput.

Hence to determine the profitability of a particular cloud deployment we need to compare the cost of the deployment for a given throughput versus a projected  profit margin. As long the cost of the deployment is less than the revenue arising from the throughput, the deployment will be profitable.  This can be represented pictorially as below.

The graph clearly shows that for a profitable deployment

d/dt (k * T *t) > d/dt (a * D * t) or

k * T > a * D

Hence as can seen from the picture as long as the slope of the cumulative deployment costs are less that the slope of the revenue the deployment will be profitable.

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Mobile Smartphones – The New Swiss Knife

The humble mobile phone from its early avatar of enabling voice calls has now metamorphosed into a device which can perform multiple functions. The mobile smart phone is the new Swiss knife. From making voice calls, to watching video clips, from mobile TV to Location Based Services (LBS) the uses of the mobile phone are many.The mobile phone is both ubiquitous and almost indispensable to daily life. A look at some of key technologies which will still further the utility of the mobile phones are discussed below.

Mobile Banking : Bringing the bank to the mobile: Mobile banking is a trend that is just picking up. Mobile banking provides for the banking needs for the poor who have no access to banks and has a lot of potential for growth. Mobile banking refers to a method where the rural poor can make payments and do cash transactions through simple SMS text messages. Mobile banking is crucial in emerging markets where traditional banks are not viable. A recent McKinsey Report 2010 states that the though the number of mobile phones in emerging markets is in excess of 1 billion, only about 45 million use mobile money in the place of traditional banking. The report further states that opportunity in mobile banking is about 3 billion annually.

Mobile banking requires the interworking of telecom operators, application providers and cash agents for making this service a reality. Mobile banking can promote customer growth and reduce churn for service providers. Some success stories are M-Pesa in Keya and SmartMoney in Philippines. There is a tremendous opportunity for this application in countries like India and China and other emerging markets. In this application, the mobile phone helps the user to bank while on the move.

Near Field Communication (NFC) : Mobile phones enabled with NFC technology can be used for a variety of purposes. One such purpose is integrating credit card functionality into mobile phones using NFC. Already the major players in mobile are integrating NFC into their newer versions of mobile phones including Apple’s iPhone, Google’s Android, and Nokia. We will never again have to carry in our wallets with a stack of credit cards. Our mobile phone will double up as a Visa, MasterCard, etc. NFC also allows retail stores to send promotional coupons to subscribers who are  in the vicinity of the shopping mall.

E-Ticketing: With an application, our flight iternary, tickets or movie tickets will be sent to the mobile phone. E-Ticketing can also be used for train and bus rides and does away with the need to carry small change.

Some of the key applications envisaged for the mobile phone in the future has been discussed and many are already in use. The smartphone will not only be indispensable in future but will be omnipotent and omniscient.

Published in Technorati – Mobile Smartphones – The New Swiss Knife

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