AEC Industry Cloud Transition Cost Management: Part 4/7, Evaluating Cloud IT Costs
Most of the hard work was actually done in the previous post of the series entitled “AEC Industry Cloud Transition Cost Management: Part 3/7 Baselining Traditional IT Costs". As a refresher, in part 3 we gathered and tagged/categorized our current costs of IT in groups of Software, Platform, Infrastructure (parallel to the 3 Delivery Methods noted in the NIST Cloud Definition) and optionally Human Resources. Then we amortized the annual (or greater) spends into a “Monthilized” number so we have a periodic basis that runs in line with most “Cloud” offerings. This put our current house in order and gave us the current facts required to create relevant comparisons to 3rd party offerings. Moving on, most “Cloud” vendors present their pricing in monthly increments. They also generally classify their offerings as Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS) which come from the NIST Cloud Definition [Click Here]. There are also some nice diagrams we use to explain these layers visually on our company website [Click Here].
Once you digest that, you can see this fits very nicely in line with all the legwork we already did in the first 3 parts of this series. From here it’s just an exercise of getting the information from Vendors you are considering and plugging it into your Cost Model Matrix. Below are 3 examples based on a make believe Project Management application. These will help you understand how to classify an offering as you will typically run across them in the market. It does not matter whether is is Accounting, BIM, etc…the same applies across the board.
A Software Only Subscription License for Project Management (PM) Software that is $100/User/Mo.
This is software only. In this model you are only getting the software, you will still have to install and mange the application. This should not be confused with a Software as a Service (SaaS) offering. Essentially the vendor provides the customer the products on a subscription license instead of the traditional perpetual model where you pay a bunch up front and then 20% Annual Maintenance/year.
This may seem incomplete at first, but it’s actually a nice model because the vendor is saying hey, we just want to offer a subscription model, we don’t want to dictate where you put it. This type of licensing is becoming more prevalent for any type of product because it simplifies the sale while providing a recurring revenue model without getting into all the details of where it is hosted. Vendors that
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This fits nicely into the NIST Cloud Definition as you can license the product and then proceed with using it in a Public, Private, or Hybrid cloud deployment model without the software Vendor being involved or dictating how you manage your solution. Also because the pricing is Elastic, meaning you can adjust your usage from month to month.
Cost Modeling>
Simply plug the monthly cost into the cell where the Software Layer and PM Column meet. You will then need to fill in a cost for the Resources used in the Software Layer/PM Column as well as the Platform Layer/PM Column and Infrastructure Layer/PM Column to get a complete picture for your BIM Application
A Managed Host Offering for Project Management (PM) Software that is $75/Named User/Month
This example is the opposite or the other half of the solution building on the 1st example. The Vendor in this case is providing hosting only, not the PM software. You would not be getting any licenses of the Line of Business (LOB) Project Management Application. However Managed Hosting will typically include the Services to manage the Software Layer/PM and Platform Layer/PM Software + Services and Infrastructure Layer/PM Software + Services. You would combine this with the first example to get a complete solution including Software + Services at each of the Software, Platform and Infrastructure Layers. Microsoft was an early proponent of this model dating at least back to 2003 when My Company was involved with the beta program.
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This fits nicely into the NIST Cloud Definition for the same reasons as Example 1. The only downside here is if you are not looking for a hosted/off premise solution, then you would not have much use for this. You could still have a “Cloud” based deployment, but it would be managed by your own In House IT/Human Resources vs. leveraging a Managed Host offering. That is a different topic altogether, but the same cost modeling can be applied either way.
Cost Modeling>
Once you have confirmed that the offering (or your own in house IT) is providing you the correct Software, Platform, and Infrastructure Layer requirements to run your PM application, simply plug the monthly cost for the hosting into the cells for Software Layer/PM Humans and for Platform Layer/PM Product+Services and Infrastructure Layer/PM Product+Services.
A SaaS offering for Project Management (PM) Software that is $150/User/Mo.
This example is a combination of Example 1 & 2. So the first question you may ask is why bother with example 1 or 2? Generally (but there are exceptions) this is example is offered a SaaS, and SaaS only. This means there is no other way to buy this offering than to have the software + service provided by this vendor. This may work for you, but be clear that unless the vendor also offers a Software only model, where you could choose the deployment option that works best for you, you are embarking on a nearly inseparable relationship.
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If the offing is SaaS only then you will likely have no insight into the Product/Service cost breakout in the Software, Platform and Infrastructure layers. You will have a lump sum cost for the end result at the Software Layer. From a modeling perspective just drop that number into the Software Layer/PM cell and then enter a $0 in the Software Layer/Humans and $0’s in the Platform Layer/PM and Infrastructure Layer/PM cells.
You can continue down the line of your Cost Model putting various Line of Business (LOB) application columns across your matrix and combine them with various Platform and Infrastructure offerings. This can get crazy, but just remember, you are simply looking at the 3 layers of Software, Platform and Infrastructure, and then listing out all of your Business need categories and then filling in options or blanks until you reach a cohesive solution at the price that is right for you.
Until part 5/7 where I break into Value Engineering and Quality vs. Cost, enjoy your AEC Industry Cloud Transition Cost Management efforts.