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Business valuation

In addition to the purely technical aspects, of course, financial aspects also play a role, if one thinks about the use of cloud hosting. From a business perspective, cloud hosting is an IT outsourcing offer. Quantitative valuation models can help you make a decision about outsourcing IT infrastructures to a cloud hosting provider.

Total Cost of Ownership (TCO) is a valuation model developed by Gartner to capture direct and indirect costs from IT investment decisions. The decision for or against operating your own IT infrastructure is significantly influenced by the deployment scenario.

In this context, there are studies that calculate the direct and indirect costs of a self-operated IT infrastructure by means of TCO analysis and these compare the TCO of cloud hosting services such as Amazon EC2. The result of these studies shows, among other things, that own IT infrastructure is cheaper then cloud hosting on Amazon EC2, if the operated IT infrastructure has a high resource utilization.

In a TCO analysis and analysis, for example, one can determine CPU costs per virtual machine in one’s own IT infrastructure and compare them with the costs of an externally procured computing resource (eg EC2 machine image). In addition to material costs, personnel costs are also to be considered. In the run-up to a TCO calculation, a distinction must be made between direct and indirect costs. Not only does this allow for the cost of running your own IT infrastructure, it also allows for further aspects of future use. A distinction is made between investment costs (CAPEX, eg hardware) and operating costs (OPEX, eg administration, energy). The total costs, also called TOTEX, result from CAPEX plus OPEX.

Another approach suggests Edward Walker of the University of Texas in Austin before . It determines the value of a CPU hour using a Discounted Cash Flow (DCF) analysis. This makes it possible to compare the costs of buying and operating a server cluster with the cost of rented CPU time “in the cloud”.


Cloud Computing combines best practices from enterprise computing of the past few years and enables dynamic and flexible usage by aggregating multiple resources into an abstract cloud resource. Standardization and virtualization are the drivers of cost reduction and at the same time an integral part of cloud computing.

The promise of cloud hosting is on-demand provisioning and scalability of IT resources with pay-per-use billing. If these promises are fulfilled, it is possible to start new projects faster – and to end them again. As the management and payment of cloud hosting offerings are based on actual resource consumption, dynamic IT processes become more cost-effective. In contrast, cloud hosting is often relatively expensive and the initial setup effort should not be underestimated for traditional web hosting projects whose resource consumption is more linear.

Existing cloud hosting services appear attractive, especially for small and medium-sized enterprises, from a cost perspective, since the initial investment in own IT hardware accounts and cloud hosting providers can offer their specialized services very cost-effective. Low costs for Internet traffic also favor the outsourcing “into the cloud”.

In addition to a purely quantitative analysis, it is absolutely necessary to include qualitative aspects in the decision-making for or against cloud hosting. This requires an IT strategy that looks to the future and anticipates potential technology lock-in situations. In addition, legal requirements, lack of Service Level Agreements (SLA) and organizational obstacles can complicate the use of cloud hosting. At the operational level, it also needs to explore what new applications and services “build” with cloud hosting offerings, and which existing applications and services migrate to such an environment.

Cloud hosting provider

As in many areas, the US is also a pioneer in cloud hosting. In addition to cloud pioneer Amazon, there are numerous other providers offering cloud hosting services. After offering its web services in Europe since late 2008, Rackspace has now moved to a European data center in London.

In Germany, the market is currently still very manageable. In addition to Zimory, a spin-off of Deutsche Telekom, there are some vendors such as Nionex, todo or Netmonic (Austria), which can be referred to as a cloud hoster, but do not meet all the above features of a pure cloud hoster. Here it is necessary to check in each case whether the offers meet their own requirements in terms of provisioning, scalability and payment model.

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