Cloud Service Costing Challenges

In today´s world we have smarter consumer and enterprise who are not looking to spend much up-front cost and getting tied down to a vendor or brand. This benefits consumers to a large extend in reducing their capital expenses and operational cost, also allows them to focus on their core business and leave out the support needs to the service provider. This challenge is resolved to an extend by a very highly competitive service market. But from the provider´s end, enabling any service incur cost and this expense need to be recovered and has to gain from the investment by defining the right pricing model. It is no different in cloud computing too, the cloud enablement itself involves significant cost and it has to be recovered from the consumer by adopting a competitive pricing model. Hence a proper costing of your cloud offering is always important to lead in the market. In this paper the different capital expenditures and operational expenditures for enabling a cloud service is detailed. Also the cost depreciation factors that need to be considered for a cloud model would be assessed with practical scenario. This paper would also cover the costing models samples for an IT profit center and a cost center for a private cloud.