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The PaaS Tipping Point

Every organization has an inflection point when PaaS becomes more economical than an in-house deployment.

by Subramanian Iyer

June 2015

The main benefits of platform as a service are well established: reduced time to market, lower costs, and increased agility. However, deploying PaaS can rack up significant networking, migration, and service costs, as well as disrupt existing processes during deployment. It is important to understand these benefits in quantifiable detail.

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Every organization has a tipping point at which deploying PaaS becomes more economical than deploying platform (middleware and database) technologies in-house. The accompanying graph indicates the inflection point for a sample organization in the third year of a PaaS deployment.

Companies can identify the inflection point, when the public model is more economical than the on-premises one, by examining costs and benefits in four areas: total cost of ownership (TCO), time to market, information asset lifecycle management, and agility of deployment. By focusing on these areas, organizations can get to their tipping point and procure a return on their investment faster.

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Total Cost of Ownership

In an in-house deployment, platform and infrastructure costs can hit customers even before actual deployment, as they must purchase both licenses and hardware in advance. These licenses are usually perpetual and cause the software asset to remain on the account books even if the project is delayed, stalled, or scrapped. With in-house deployments, customers will also incur annual support costs.

By documenting the projected costs versus benefits of PaaS, organizational leaders can determine their inflection point for PaaS.”

In the cloud model, customers purchase no hardware. They can subscribe to platform services only when they need them and unsubscribe if the project is delayed. In addition, there is no permanent support cost, reducing overall liabilities.

Time to Market

Rather than wait for their IT organizations to proceed through the software procurement and deployment process, companies that use PaaS can plow ahead. Studies by Oracle Insight indicate the time lag involved in provisioning non-PaaS environments slows a company’s ability to launch new digital business services, potentially costing it the first-mover advantage. Classic examples are in the banking and communications industries, where the inability to launch new schemes or products quickly can erode companies’ customer bases.

Efficiency and Use of IT

PaaS deployments enable services while reducing the overhead of managing and maintaining information assets—as there are no assets—from the platform to the infrastructure, which the customer owns. Since the IT team has no physical assets to manage, it can focus on improving service delivery.

Agility in Deployment

A PaaS environment abstracts applications away from the infrastructure platform and reduces management and procurement complexity. The cloud architecture is common, allowing for repeatability and faster deployments. This model allows IT organizations to be more agile, and to keep pace with business needs while reducing risks through simplification and standardization. IT should ensure the service catalog is easy to use and allows for business units to directly subscribe to a PaaS solution based on their requirements.

The Inflection Point

So how do we calculate the inflection point for a PaaS deployment? We return to the costs and benefits.

Let’s look at standard costs first. These include the sunk cost for facilities, the cost of building out infrastructure, and the costs of maintaining the infrastructure and platform. Many organizations allocate budget by project and they size for peak workloads, thus increasing their spending on infrastructure, floor space, and people.

In a PaaS model, the incremental cost of adding a service ends up being much lower, as the new service extends the existing environment, leveraging past investments. If the organization already has a private cloud, then the argument is mainly about the investments made in the platform software and the availability of resources to manage the environment.

To begin looking at the inflection point, refer to the chart below and total up the numbers for a five-year period.

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Calculating business benefits is a little more complex. A useful template takes into account KPIs that directly impact the revenues of the company.

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Subramanian Iyer, Oracle Insight

Once the TCO and business benefits are worked out, a weighted average that depends on the criticality of the business requirement lets the organization work out where the inflection point would be and therefore what the right deployment methodology would be for that environment.

Deploying PaaS has obvious advantages over both on-premises and infrastructure as a service deployments. A cost-benefit analysis provides organizations with clear guidelines on which approach would work better for them in the long run.

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