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Cost-Benefit Analysis

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Cloud computing is not always the correct solution. Which is the correct solution is a business decision guided by a cost-benefit analysis. Cloud computing benefits include reduced capital costs as the individual customers no longer have to buy the hardware and system software that the CSP provides. The lowered capital expenses are offset by higher operating costs, as the customers must pay for the services used.

In many countries, capital expenses and operational expenses are treated very differently for tax purposes. For example, capital expenses may be written off or depreciated over a number of years. To write off the entire business of expenses of new infrastructure, purchased and installed on-premise could take many years. Operational expenses, such as the cost of cloud computing, can usually be written off as a business expense in the year the expense is incurred.

The business must understand the cost and tax implications of moving to the cloud or investing in on-premise infrastructure to make the choice most beneficial to the business. A move to the cloud may be as much (or more) for financial reasons than technical ones. This move should be considered only if the benefits justify the cost or if the benefits lower the costs.

The Official (ISC)2 CCSP CBK Reference

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