Cloud Computing and Modelling of Cash Flows for Full vs. Fractional Adoption of Cloud

Easwar Krishna Iyer, Venkatesh Tilak, Varuna Narayanaswamy, Tapan Panda

Abstract


This paper does a revenue–neutral cash flow modelling for fractional cloud computing adoption. The aim is to find out a mathematical fraction, other things being equal, for which the Net Present Value (NPV) maximizes with respect to cloud adoption. The impact of both deferred capital expenses and reduced operating expenses on NPV are treated in the model. The paper posits that the revenue generation and growth of the firms under consideration are independent of the way the IT resources are managed between cloud vs. traditional.

In addition to NPV modelling, the paper also examines the fraction of the total product /solutions options that can be moved to the cloud today from the total universe of IT assets by running a statistical analysis of data collected from a vendor sample space.


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