Cloud Computing Financial and Cost Analysis: A Case Study of Saudi Government Agencies
Cloud Computing Financial and Cost Analysis: A Case Study of Saudi Government Agencies
Cloud Computing Financial and Cost Analysis: A Case Study of Saudi Government Agencies
Keywords: Cloud Computing, Return on Investment (ROI), Total Cost Ownership (TCO), Data Centre Variable Cost
(DCVC), Data Centre Fixed Cost (DCFC).
Abstract: Cloud computing is an innovation in world technology. It is used to provide organization services as a
utility service through internet and the innovative uptake of cloud for improved effectiveness and efficiency.
There is an absence of academic studies about the financial feasibility and implementation cost government
agencies to take up the cloud by government agencies. This paper seeks to identify the cloud computing
financial indicators and implementation cost variables which are relevant to public organizations. The
proposed model consists of Saudi case study findings based on analysis of evidence from Saudi government
organizations. Random samples from different categories of professionals in Saudi Arabia participated in
the questionnaire to extract and confirm the financial indicators and implementation cost variables. The
results indicate a return on investment (ROI) and total cost ownership (TCO) are the main financial
indicators to study cloud adoption. Also, data centre variables and fixed cost parameters play a main role in
calculating the cloud implementation cost.
459
Mreea M., Munasinghe K. and Sharma D.
Cloud Computing Financial and Cost Analysis: A Case Study of Saudi Government Agencies.
DOI: 10.5220/0006300804590466
In Proceedings of the 7th International Conference on Cloud Computing and Services Science (CLOSER 2017), pages 459-466
ISBN: 978-989-758-243-1
Copyright
c 2017 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
CLOSER 2017 - 7th International Conference on Cloud Computing and Services Science
infrastructure, and platforms and allows them to be associations have started creating and exploring
offered as services to users (Ahuja, Yang et al. innovations and bases for Cloud Computing. There
2009). The US National Institute of Standards and are many of providers for cloud platforms. For
Technology (NIST) defined CC as “a model for example Amazon, Microsoft, Sun network, Aneka,
enabling convenient, on-demand network access to a HP, Oracle, Citrix, and Scaleway. In this area, we
share pool of configurable computing resources explore famous and oldest Cloud platforms.
(e.g., networks, servers, storage, applications, and
services) that can be rapidly provisioned and Amazon Elastic Compute Cloud (EC2)
released with minimal management afford or service (Amazon, 2016) offers Machine Image (AMI)
provider interaction”(Mell and Grance 2010). Figure having the libraries, applications, information and
1 represents the NIST cloud computing concept related design settings or select from a library of all
schema. Industries such as banking and health care around accessible AMIs. It has a virtual environment
are moving towards cloud technology because it that allows a user to run Linux-based applications.
increases efficiency and provides accessibility The user can consider his needs to transfer to this
through any portable device(Morgan and Conboy platform by choosing AMIs.
2013). The lack of resources in some countries can Google App Engine (Google, 2016) allows a user
be handled using cloud technology (Misra and to run web applications by utilizing the Python
Mondal 2011) since because it costs less than programming language. Google App Engine also
traditional infrastructure installations, CC allows supports Application Programming Interfaces (APIs)
higher user accessibility. Cloud computing delivers for the Google Accounts, data store, and picture
many benefits to organizations. The biggest of these control and email administrations. Additionally,
are high elasticity and huge cost reserves due to the Google App Engine gives an online Administration
on-demand provision of services and its charging Console for the user to deal with the user running
model (Bhisikar 2011). Cloud computing also web applications dynamically.
provides an extensive range of advantages such as Microsoft Azure (azure, 2016) intends to
increased flexibility, access anywhere, elastic provide a coordinated improvement, facilitating, and
scalability, pay-as-you-go charging, simplicity and control Cloud figuring environment so that product
distributed data centers. designers can without much of a stretch, make, have
overseen and scale both The Web and non-web
applications through Microsoft server farms. To
accomplish this point, Microsoft Azure backings a
far-reaching accumulation of restrictive
improvement apparatuses and conventions which
comprise Live Services, Microsoft.NET Services,
Microsoft SharePoint Services, Microsoft SQL
Services, and Microsoft client relationship
management CRM Services. Microsoft Azure
additionally bolsters Web APIs, for example, SOAP
and REST to permit programming engineers to
Figure 1: NIST cloud computing concept schema (Alharbi
interface between Microsoft or non-Microsoft
et al. 2015). instruments and advances.
Aneka is being supported through Manjra soft, is
2.2 Cloud Computing Platforms a.NET-based administration (Chu, Nadiminti et al.
2007). It is planned to bolster different application
Industry investigators have made strong forecasts on models and security arrangements. To create an
how Cloud technology will change the industry. Aneka Cloud, the administration provider just needs
Buyya et al. (2009) recognized Cloud technology as to configure Aneka platform, facilitating necessary
one of the noticeable innovation patterns (Buyya, administrations on each selected desktop PC. The
Yeo et al. 2009). As the assuming business shifts to motivation behind the Aneka platform is to in state
giving Platform as a Service (PaaS) and Software as administrations and operates as a private point for
a Service (SaaS) for ventures and buyers to access communication with whatever remains of the Aneka
on interest paying little attention to area and time, Cloud. Aneka gives service level agreement SLA
there will be a growth in the quantity of Cloud with full support to help the client to indicate quietly
stages accessible. As of late, a few modern
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Cloud Computing Financial and Cost Analysis: A Case Study of Saudi Government Agencies
of services QoS prerequisites. Finally, the client can awareness in Saudi Arabia from an organization
to arrange and correspond on the QoS necessities to level view. The study showed that cloud
be given by the administration provider (Venugopal, technologies will be a new trend for Saudi’s
Buyya et al. 2006).access the Aneka Cloud remotely organizations. Alkahter (2014) was identifying the
through the Gridbus website. The Gridbus is an factors with the most influence on the intention of
intermediary to allow the client to arrange and private organizations in Saudi Arabia to adopt cloud
correspond on the QoS necessities to be given by the services. This study found that the factors of
administration provider (Venugopal, Buyya et al. reliability, complexity, availability, privacy and
2006). others had a significant impact on the decision to
adopt cloud computing.
2.3 Cloud Computing Adoption in
By critiquing the previous studies, there was the
Saudi Government absence of theoretical and empirical studies
concerning the adoption in government sector in the
According to International Data Corporation (2016),
developing countries specify in Saudi Arabia. Public
Saudi Arabia individuals, private and small
organizations’ business initiatives are different and
organizations invested on cloud services about $50.4
more complex than a private organization.
million in 2014. And they expect to reach $77.4
Researchers have emphasized the need for an
million in 2016. Most of their requirements were
increased focus on how organizations adopt
email, communication and collaboration, and
innovations (Mohammed and Ibrahim 2014). Some
content management. However, government entities
researchers recommended applying theoretical
are the biggest resistors to adopt cloud (IDC 2016).
models and empirical studies for cloud adoption
Because there is no visible plan to implement any
decisions because there is a shortage of research in
cloud computing solutions in the government sector
this area (Mohammed and Ibrahim 2014).
due to the overly bureaucratic structure of the
Furthermore, no study to date has investigated and
multiple sectors and layers of the existing
analysed the financial data to invest in cloud
government machinery. The major push and
computing implementation. Thus, more financial
initiative from someone in a position of authority or
data analytics is important to contribute to the
a member of the royal family is a prerequisite before
research.
the Saudi government would take a strategy to
discover the essential benefits offered by cloud
computing solutions to stakeholders. Also, the lake 2.4 Proposed Financial Cloud
of awareness and security issues other reasons for Computing Model for Saudi
this resistance. Government
Cloud computing is still in its beginning stages, The author addresses the need to find the main
There is a few studies conduct in the Saudi context. financial indicators and implementation cost
Chanchary and Islam (2011) observed a variables which impact on the organization to adopt
phenomenon of striking inefficiency in Saudi Arabia the cloudbased on survey analyses. The author
during their research on existing e-government conducted one case of participants’ who responded
systems. They recommended that incorporating a to the survey to clarify their responses.
software-as-a-service (SaaS) layer would greatly
improve e-governance efficiency and help users in 2.4.1 Case Study
their decision-making processes. They suggested
that this additional layer would facilitate better I analyzed one of the Saudi government
access to information. The study concluded with the organization’s stories regarding the adoption of
assertion that this integration would help improve cloud services. This organization is a part of the
any e-government services provided. Moreover, the education and training sector in Saudi Arabia. They
technology acceptance model (TAM) proposed by have recently implemented the cloud email service
Alharbi (2012) can be used to assess acceptance package of Google “Google Apps Suite.” This
levels in an organization. A study found that the organization manages about 32 faculties over the
acceptance rates for cloud computing were highly Kingdom of Saudi Arabia. They have more than
dependent on users’ ages, attitudes, jobs and 1000 staff. I interviewed an IT lecture’s who was
educational backgrounds (Alharbi 2012). Yamin working as an IT senior in this organization’s data
(2013) completed a survey of cloud computing center to clarify his survey responses. He told me
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CLOSER 2017 - 7th International Conference on Cloud Computing and Services Science
about their obstacles in providing email services to organization fixed the challenges by migrating their
all the staff in this organization. The main obstacles services to the cloud. This impacted financially on
were: availability, they could not guarantee the the organization budget.
availability of email service. Also, this service The key points that can be understood from this
remained offline for a long time until they fixed it. case study are the following:
The reasons behind that were that had no qualified - Cloud computing is an optimal option when
people to manage it, shortages in support contracts the budget is not going well in the organization
and lack of financial resources. Sometimes, they had - The organization achieved some of the
asked IT academic staff to work with them as IT financial indicators such as ROI, TCO.
supports staff to help them. - There was a positive ROI of adopting
Also, they faced many issues with security Google’s cloud computing services.
patches and limitations in storage. Finally, they - The TCO for organization data center
faced an issue with data centre space and the growth decreased. This impacted on ongoing support
in a number of servers. This negatively impacted on cost for the data center.
the environment and space. Moreover, the increasing
- The hardware requirements such as servers
maintenance and upgrade costs were too high for the
can be simply configured and adjusted to meet
organization.
the organization's growth and demand under
Based on these issues and the increasing demand
the cloud computing model. And cloud
for email services of organizational staff, the
providers can provide hardware platform
organization thought seriously about adopting a
services with least amount of management
cloud to provide this service to its employees. This
overhead.
decision required costs to implement such as
- The cloud computing facilitates "pay per use"
hardware and software platforms, licenses, and
capability to organizations. This lead to the
storage and network devices. Also, they paid for
organization having the flexibility to use
additional services such as consultation and
appropriate bandwidth based on their
migration services and maintenance contracts. But
objectives.
the return on the investment in the long term was
better than the current situation. - The Software requirements such as email can
After adopting the email service via the cloud, be scale up or down in relation to the current
they noted the difference between in-house email demand by applications hosted on the cloud
and cloud email. They achieved many benefits: platforms.
efficiency in their services; availability 24/7, greater - Cloud computing can support decreasing
mailbox size, and good security management with variable and fixed infrastructure costs
advanced hardware. Also, they gained many of the significantly. Thus, the saving cost is one of
financial benefits. For example, decrees in TCO and key tipping point parameters to adopt cloud.
ongoing support cost compared with in-house - The organization decision to adopt cloud
solution. Maintenance and development costs Leeds to reducing the creating a new data
decreased.Also, increase on ROI percentage. They centers. This impacted positively on saving
also gained competitive support via qualified people fixed costs.
from the provider and saved the organization space - The organization decision to implement cloud
to use as its training centers for students. Also, by needs a specific budget. But the return on the
transferring this headache to qualified providers investment in the long term was better than
simplified their business model and saved the their previous situation.
organization budget. Finally, by decreasing the - It can conclude some of their data center
number of servers, the organization contributed to a implementation costs such as hardware and
cleaner environment. software platforms, licenses, storage, network
devices, consultation and migration services
2.4.2 Analysis of Case Studies and maintenance contracts (SLA).
Finally, it can conclude the following
A closer look at the case study from a financial equations to calculate data center fixed and
angle, the decision to adopt Google’s cloud variable implementation costs.
computing services through a cloud provider was a
result of major organizational changes to help them
∑𝑁
𝑛=0 𝐷𝐶𝑉𝐶𝑜𝑠𝑡
face financial and growth challenges. Thus, the
DCVCost= DCVCost1+ ……..+DCVCost n
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Cloud Computing Financial and Cost Analysis: A Case Study of Saudi Government Agencies
4.2 Results
A one-way between-groups analysis of variance
(ANOVA) was conducted to explore the Saudi
organization's adoption cloud situation of financial
indicators and cloud data center implementation
cost. Table 2 presents comparisons mean value of
financial indicators and cloud data center
implementation cost factors according to
organizations situations of adopting cloud. There
Figure 2: Proposed model. was not a statistically significant difference at the
p<.05 level for the three groups.
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CLOSER 2017 - 7th International Conference on Cloud Computing and Services Science
5 DSCUSSION
Peiris et al. (2010) proposed cost equation to
calculate the cloud data centre implementation cost.
They calculated email service cost for the in-house
Also, table 3 explains the overall model. Thus,
model and cloud model for the small and medium
the overall model for ROI is significant with TCO
organization in Australia. The output from that
and Ongoing Support Cost.
calculation used as tipping point parameter to
Table 3: ANOVA analysis.
compare between in-house model and cloud model
cost and to select the best model for the
organization. This paper agrees with previous work
cost equation. But this paper adds value for previous
work by linking the data centre cost to an
appropriate financial indicator (TCO) and represent
this relationship by following equation TCO=
1.156+0.017FC+0.698VC.The earlier study ignored
Moreover, regression model in table 4 explains
that. TCO is an important parameter to calculate
the implementation cost to adopt cloud in Saudi
direct and indirect costs. This parameter will give
Arabia. Thus, data centre variable cost and fixed
decision makers full vision about a different type of
costs are significant. Also, they are significant with
costs for this solution.
TCO financial parameter in cloud computing
adoption. According to the regression results, data Moreover, the previous work ignored to link data
centre variable cost has a positive linear relationship centre cost to the return on investment (ROI)
with TCO. financial parameter. This will help decision makers
to decide about their situation to invest in a cloud or
Table 4: TCO model. not.
The previous equations can help the organization
to calculate any cloud services cost in both
approaches private and public cloud. If the
organization decide to implement private cloud to
provide any service, then it should be responsible for
the whole cost for different delivery models such as
infrastructure, platform, and software to make this
Also, table 5 explains the overall model. Thus, the service workable. However, the cost of
overall model for TCO is significant with data centre implementing this approach will be high.
variable and fixed cost. However, the cost of public cloud may be cheap,
and the organization can only pay based on its
usability. Also, the previous equation can help to
calculate that cost.
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Cloud Computing Financial and Cost Analysis: A Case Study of Saudi Government Agencies
Related to the previous tables, ANOVA one-way outcome of cloud adoption. This study used
test confirmed there was not a statistically regression method to predict ROI and TCO values.
significant difference between comparisons of There is a limitation in this paper. The authors could
financial indicators and cloud data center not reach to quantitative financial information about
implementation cost factors mean value according to these organizations due to the Saudi government
organizations situations of adopting cloud. Thus, the policy to disclose financial information. Future
participants from different organizations situations works will integrate this model with my previous
which adopted some cloud services or planned for models to give the public organizations in Saudi
the next three years or do not think about cloud Arabia comprehensive view to adopt cloud. Also,
agreed about the financial indicators and cloud data more investigation is needed to define cloud system
center implementation play the main role to adopt in Saudi Arabia to contribute more measurements.
cloud. Also, they agreed about financial benefits of
adopting cloud.
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