and storage resources.

Pricing can vary based on the amount of data transferred in and out
of the cloud.
Tiered
Pricing:
Some providers offer tiered pricing, where the cost per unit of a resource decreases as your
usage increases. For example, storage costs per gigabyte might decrease as you store
more data.

Resource
Bundles:

Cloud providers may offer resource bundles or packages that include a combination
of services at a fixed price, which can be cost-effective for specific use cases.

License-included
Instances:

Some cloud providers offer instances that include the cost of software licenses, which
can simplify pricing for applications that require specific software.
Container
Pricing:

Some cloud providers offer specialized pricing for containers and container
orchestration services, such as Kubernetes.

Serverless
Pricing:

Serverless platforms often charge based on the number of function executions or the amount
of compute resources consumed during execution.

Machine Learning
Pricing:

Cloud providers offer various pricing models for machine learning services, such as pay-as-
you-go, pricing based on model training, and inference costs.

It's essential to carefully review the pricing details and terms of service for the specific cloud
provider you are using, as pricing models can vary significantly between providers and
may change over time. Additionally, consider your usage patterns and requirements to
choose the most cost-effective pricing model for your cloud services.
Freemium
Freemium is a business model that combines elements of "free" and "premium." In
this model, a company offers a basic version of its product or service for free to a wide
range of users while also providing a premium or paid version with additional features or
enhanced functionality. The idea behind freemium is to attract a large user base with the
free offering and then convert a portion of those users into paying customers by
offering valuable enhancements through the premium version.

Key characteristics of the freemium model

include:

Free Access: The basic version of the product or service is available to users at no cost. This
free version typically offers essential features and functionality, making it accessible
to a broad audience.

Premium
Features:

The premium or paid version offers additional features, benefits, or advanced functionality
that are not available in the free version. These premium features are designed to entice
users to upgrade.

Upsellin
g:

Companies employing the freemium model use the free version to attract users and
then encourage them to upgrade to the premium version. This is often done through in-app
or on- site prompts, marketing campaigns, or other conversion strategies.

User
Base:

The goal of the free version is to build a large user base, which can result in network effects,
user-generated content, or other benefits that add value to the overall service.

Monetization :
Revenue is generated by converting a portion of free users into paying customers.
The premium version is typically priced at a level that covers the costs of offering
the free version and provides a profit.

Customer
Retention:

To maintain paying customers, companies often focus on providing ongoing value, support,
Data and
Insights:

Freemium models can provide companies with valuable data and insights about user
behavior, which can inform product development and marketing strategies.
Freemium is a popular model in the software and internet services industry,
where companies offer free versions of applications, games, cloud storage, or content
platforms, and then offer premium versions with added functionality, ad-free
experiences, or other benefits to those willing to pay. This approach can be
effective for companies looking to scale rapidly and monetize their user base over time

Pay Per
Reservation
"Pay Per Reservation" is a pricing model often used in the hospitality and travel industry,
particularly by hotels, restaurants, and other reservation-based businesses. In this model,
customers are charged a fee or make a payment each time they make a reservation for a
service or experience. It's a form of revenue generation that aligns costs with actual
customer bookings. Here are some key points related to the "Pay Per Reservation" pricing
model:
Reservation Booking Fee:

Customers are required to pay a fee when they make a reservation. This fee can vary in
amount and may depend on factors such as the type of reservation, the location, or the
time and date.

Variable Costs:

Pay Per Reservation aligns costs with the number of reservations made. Businesses
only incur costs when a booking occurs, which can be advantageous when compared
to other pricing models with fixed costs.

Common in Online Booking Platforms:

Online reservation platforms and services often use this model. These platforms provide
customers with the convenience of booking online and charge a fee for each
successful reservation.

May Include Cancellation Fees:

Some businesses that use the Pay Per Reservation model may also charge customers for
cancellations or no-shows. This helps mitigate potential revenue loss due to empty tables
or rooms.

Alternatives to Commission Models:

In the travel and hospitality industry, the Pay Per Reservation model is an alternative to
commission-based models. Instead of charging a percentage of the transaction value,
businesses charge a fixed fee for each reservation.

Customizable Pricing:

The reservation fee can be customized to suit the business's pricing strategy. It can
be adjusted based on demand, time of day, or other factors.

Competitive Landscape:

In highly competitive markets, businesses may use Pay Per Reservation as a way to
attract customers by offering low b o eoeksi nogr feven waiving them in some cases.
Transparency:

This model provides transparency to both businesses and customers regarding the cost
associated with making a reservation, which can help customers make informed
decisions.

It's worth noting that the success of the Pay Per Reservation model depends on the business's
ability to provide value to its customers while justifying the reservation fee. Customers
must perceive the convenience and benefits of making reservations as being worth the
additional cost.
Pay per User
"Pay per User" is a pricing model used by many companies, particularly in the software,
SaaS (Software as a Service), and online service industries. In this model, customers are
charged a fee based on the number of users or accounts they have within a system or
platform. This pricing structure is commonly used for services that involve user access and
engagement. Here are some key points related to the "Pay per User" pricing model:

User-Based Pricing:

The cost of the service is determined by the number of users or accounts a customer has.
Businesses typically offer different pricing tiers or plans to accommodate varying numbers
of users, and customers select the plan that aligns with their needs.
Scalability:

Pay per User models allow customers to scale their usage and costs in line with their
organization's growth. They can add or remove users as needed, and their fees are adjusted
accordingly.

Tiered Pricing:

Businesses often offer multiple tiers of service, with each tier providing different features or
capabilities. The price per user may vary among these tiers, with more advanced plans
typically having a higher cost per user.

Customization:

Some businesses offer customization options, allowing customers to negotiate pricing based
on their specific requirements, particularly for larger enterprise clients.

Usage Flexibility:

Customers have the flexibility to pay only for the users who actually need access to the
service, which can help control costs.

Cost Predictability:

Businesses can more accurately predict their monthly or annual expenses based on their user
count, making budgeting and financial planning easier.

Common in SaaS:

Many Software as a Service (SaaS) companies use this model, as it aligns well with cloud-
based applications and services. Examples include project management software, CRM
(Customer Relationship Management) systems, communication and collaboration tools, and
more.

User Management:

Pay per User models often come with user management features, such as the ability to add,
remove, or manage user access easily.

Perceived Value:

For customers, the value of this model depends on how much they use the service and how
essential it is to their business operations. They should evaluate whether the cost per user
aligns with the benefits and functionality provided.

Competitive Pricing:

In the software and SaaS industry, businesses often compete on price, so offering
competitive user-based pricing can be a strategy to attract and retain customers.
It's important for both businesses and customers to carefully consider their needs and the
scalability of the "Pay per User" pricing model to ensure it is a cost-effective and value-
added choice for their specific use case.

Subscription based Charging

Subscription-based charging, also known as a subscription model, is a pricing and revenue

model where customers pay a recurring fee at regular intervals (e.g., monthly, annually) to
access a product or service. This model is commonly used in various industries, including
software, media, streaming services, and more. Here are some key characteristics of
subscription-based charging:

Recurring Payments:

Customers are billed on a regular basis (e.g., monthly, quarterly, annually) to maintain access
to the product or service. This predictable revenue stream is a fundamental aspect of
subscription models.

Access to Services:

Subscribers typically gain ongoing access to a set of features, content, or services for as long
as they maintain their subscription. The offering can range from software applications to
streaming video, news, or other digital content.

Pricing Tiers:

Subscription-based services often offer multiple pricing tiers or plans with different levels of
access and features. Customers can choose the plan that best suits their needs and budget.

Customer Retention:

Businesses using this model focus on customer retention and engagement, as they aim to
keep subscribers over an extended period. Customer satisfaction and ongoing value are
critical to reducing churn (subscription cancellations).

Value Proposition:

The value proposition for subscribers is the ongoing benefit of using the product or service,
which can include regular updates, new content, and ongoing support.

Predictable Revenue:

Subscriptions offer a predictable and steady revenue stream, making it easier for businesses
to plan and invest in long-term growth and development.

Free Trials and Promotions:

Many subscription services offer free trials to attract new customers, allowing them to
experience the product or service before committing to a subscription.

Auto-Renewal:

Subscriptions often include automatic renewal, with payments being charged to the
customer's chosen payment method unless they actively cancel the subscription.

Usage Monitoring:

Some subscription services may monitor user activity to provide tailored content or
recommendations, improving the overall user experience.

Cancelation Flexibility:

Subscribers can usually cancel their subscriptions at any time, providing a degree of
flexibility and control.

Competition and Content:

In the case of content-based subscriptions, libraries of content (e.g., movies, music, articles)
are often updated to retain and attract customers.

Cross-Selling and Upselling:

Businesses often cross-sell or upsell subscribers to higher -tier plans or complementary

services to increase revenue.

Subscription-based charging is widely used in the digital age and has become increasingly
popular with the rise of online streaming services, cloud-based software, and other digital
products. It offers advantages to businesses by providing a steady source of income and
fostering long-term customer relationships, while customers benefit from the convenience of
accessing services on an ongoing basis.
Procurement of Cloud-based Services

Procuring cloud-based services involves the process of obtaining and managing cloud
computing solutions and services to meet the needs of your organization. Cloud-based
services encompass a wide range of offerings, including infrastructure as a service (IaaS),
platform as a service (PaaS), software as a service (SaaS), and various other cloud-based
solutions. Here is an overview of the key steps and considerations for procuring cloud-based
services:

Define Requirements:

Start by clearly defining your organization's requirements. Identify the specific use cases,
performance expectations, scalability needs, and any compliance or security
requirements.

Assess Cloud Service Models:

Understand the different cloud service models (IaaS, PaaS, SaaS) and decide which one
aligns best with your needs. For some projects, you may need a combination of these
service models.

Evaluate Deployment Models:

Determine whether a public cloud, private cloud, hybrid cloud, or multi-cloud strategy is
most suitable for your organization. Consider factors like data sensitivity and control
requirements.
Vendor Selection:

Research and select cloud service providers that offer the services you need. Popular cloud
providers include AWS, Microsoft Azure, Google Cloud, IBM Cloud, and others. Evaluate
their pricing, performance, support, and compliance offerings.

Cost Analysis:

Develop a cost analysis to estimate the total cost of ownership (TCO) for the selected cloud-
based services. This includes subscription fees, data transfer costs, storage fees, and potential
hidden costs.

Security and Compliance:

Ensure that the cloud services align with your organization's security and compliance
requirements. Check if the vendor has the necessary certifications and adheres to industry
best practices.
Service-Level Agreements (SLAs):
Review and negotiate SLAs with the cloud service provider. SLAs define the level of
service, uptime guarantees, and support commitments.
Data Migration:
Plan for data migration from on-premises systems to the cloud. Ensure data integrity and
consider data transfer methods and any downtime implications.

Integration:

Assess how the cloud services will integrate with existing systems, applications, and
workflows. Integration might involve APIs, middleware, and other tools.

Vendor Lock-In:

Consider the potential for vendor lock-in and explore strategies for minimizing it. Portability
of applications and data should be a key consideration.

Performance and Monitoring:

Establish performance metrics and monitoring tools to track the health and performance of
cloud-based services. Implement strategies for optimization.
Training and Skills:

Ensure that your IT staff and end-users have the necessary skills and training to effectively
use and manage the cloud-based services.
Disaster Recovery and Backup:

Implement robust disaster recovery and backup strategies to protect your data and ensure
business continuity.

Governance and Compliance:

Develop governance policies and processes for cloud services usage. Ensure compliance
with data protection regulations and internal policies.

Contract Negotiation:

Engage in contract negotiations with the cloud service provider to secure favorable terms and
conditions. Pay attention to subscription duration and pricing flexibility.

Implementation and Testing:

Deploy the chosen cloud services and thoroughly test them to ensure they meet your
requirements and expectations.

Ongoing Management:

Continuously manage, monitor, and optimize your cloud-based services to ensure they
remain cost-effective and aligned with your organization's needs.

The procurement of cloud-based ser vices requires careful planning, ongoing management,
and a focus on aligning cloud resources with your organization's objectives. It's crucial to
stay informed about the evolving cloud landscape and make adjustments as needed to
 leverage the benefits of cloud computing effectively.

Capex vs Opex Shift

The shift from capital expenditures (CapEx) to operating expenditures (OpEx) is a strategic
financial move that many organizations consider when adopting cloud-based services or
transitioning from traditional on-premises infrastructure to cloud-based solutions. This shift
has significant implications for budgeting, financial management, and the flexibility of
resource allocation. Here's an overview of the CapEx vs. OpEx shift:

Capital Expenditures (CapEx):

Definition: CapEx refers to investments in assets that have long-term value and are expected
to generate future benefits. These assets often include physical infrastructure, such as
servers, data centers, and networking equipment.

Characteristics:

Upfront Costs: CapEx investments typically involve significant upfront costs, often requiring a
large capital outlay.

Depreciation: These assets are usually depreciated over time, with the costs spread out over
several years.

Fixed Costs: CapEx typically results in fixed, non-variable costs that remain relatively stable.

Examples: Building a new data cen ter, purchasing physi cal servers, or buying networking
equipment.

Operating Expenditures (OpEx):

Definition: OpEx includes ongoing, day-to-day expenses incurred in the regular operation of a
 business. This can include costs for utilities, salaries, rent, and services that are consumed
during the current accounting period.

Characteristics:

Immediate Costs: OpEx represents immediate costs that are typically recurring and can be
adjusted more readily.

Flexibility: OpEx costs are more flexible and can be scaled up or down based on business
needs.

Tax Treatment: OpEx costs are often fully deductible in the year they are incurred.

Examples: Utility bills, employee salaries, cloud service subscriptions, and maintenance
contracts.

Shift from CapEx to OpEx:

The shift from CapEx to OpEx is often motivated by the desire for greater financial flexibility,
scalability, and cost efficiency. It is particularly relevant when transitioning to cloud
computing, where organizations no longer need to invest in and manage their physical
infrastructure. Here's how this shift occurs:

Cloud Services:

Many cloud service providers offer a pay-as-you-go or subscription-based pricing model,

which is classified as an operating expense. Organizations use these cloud services without
the need for large upfront investments in physical infrastructure.

Flexibility:

OpEx-based models allow organizations to scale resources up or down quickly, based on

actual usage and changing business needs. This adaptability can lead to cost savings.

Reduced Upfront Costs:

The need for large capital investments in hardware and facilities is eliminated, making it
easier for organizations to get started with new projects or initiatives.

Simplified Budgeting:

OpEx models often result in more predictable, straightforward budgeting because costs are
spread over time and are easier to anticipate.
Tax Benefits:

Operating expenses are typically tax-deductible in the year they are incurred, providing
potential tax advantages.

Managed Services:

By shifting to OpEx- based cloud services, organizations can offload the ma nagement of
 infrastructure, updates, and maintenance to cloud providers, reducing the need for in-house
IT support.

While the shift from CapEx to OpEx offers many advantages, organizations should carefully
evaluate the total cost of ownership, compliance, security, and long-term strategic goals
when making this transition. The decision should align with the specific needs and priorities
of the business.

Cloud service Charging

Cloud service charging, also referred to as cloud pricing or cloud billing, is the process of
determining and collecting charges or fees for the use of cloud computing services provided
by cloud service providers (CSPs). Cloud service charging is a crucial aspect of cloud
service delivery, as it directly impacts the cost structure, billing accuracy, and customer
experience. Here are the key aspects of cloud service charging:

Usage-Based Billing:

Cloud service charging is often based on usage metrics, such as compute time, storage
capacity, data transfer, network bandwidth, and the number of virtual machines or instances.
Customers are billed according to the resources they consume.

Pricing Models:

Cloud providers offer various pricing models, including pay-as-you-go, reserved instances,
spot instances, and subscription plans. These models determine how customers are charged
for their cloud usage.

Pay-as-You-Go:
The pay-as-you-go model charges customers based on their actual usage of cloud resources,
making it highly flexible and suitable for variable workloads.
Reserved Instances:

Reserved instances allow customers to commit to a fixed amount of resources for a specified
duration, typically at a reduced cost compared to pay-as-you-go.
Spot Instances:

Spot instances are available at a significantly lower price but can be terminated by the cloud
provider when demand for those resources increases. Customers bid for these instances.

Subscription Plans:

Some cloud services, especially software-as-a-service (SaaS) offerings, are available through
subscription plans that charge a fixed fee on a monthly or annual basis.

Resource Tiers:

Many cloud providers offer different resource tiers or service plans, each with varying
features and pricing. Customers can choose the tier that aligns with their needs.

Data Transfer and Bandwidth Charges:

Cloud providers may charge for data transfer between their data centers, to the internet, or
between services. Bandwidth utilization can also be a factor in pricing.

Additional Features:

Some services offer premium features or add-ons, which may incur extra charges. Customers
should be aware of these additional costs.

Discounts and Commitment-Base d Savings:

Cloud providers often offer volume discounts or savings for customers who commit to long-
term usage or high resource consumption.

Billing Cycles:

Customers are billed at regular intervals, typically monthly, for their cloud usage. Cloud
providers provide detailed usage reports and invoices.

Cost Management Tools:

Cloud providers offer cost management tools and dashboards to help customers monitor and
control their cloud spending. These tools allow customers to set budgets, alerts, and cost
allocation.

Pay-Per-Use Services:

Some cloud services, such as serverless computing, function on a true pay-per-use model,
where customers are charged for the actual computational resources consumed during the
execution of functions or code.
Estimation and Budgeting:

Customers can estimate their cloud costs using pricing calculators provided by cloud
providers. This helps in budgeting and cost planning.

Reserved Capacity:

In some cases, customers can reserve a certain amount of capacity, such as virtual machines or
databases, in advance for a specified term at a lower cost.

Effective cloud service charging is essential for both cloud providers and customers. It ensures
transparency, cost control, and the efficient allocation of cloud resources. Organizations need
to closely manage and optimize their cloud spending to avoid unexpected costs and make the
most of their cloud investments.

Cloud Cost Models

Cloud cost models are pricing structures and strategies used by cloud service providers
(CSPs) to bill customers for the use of cloud resources and services. These models can vary
significantly, offering customers flexibility in how they pay for cloud services. Common
cloud cost models include:

Pay-As-You-Go (PAYG):

Characteristics: This is one of the most flexible cloud cost models, where customers are
billed based on their actual usage of resources. There are no upfront costs, and customers pay
only for the resources they consume on an hourly or minute-by-minute basis.

Use Cases: PAYG is suitable for variable workloads, development and testing environments,
short-term projects, and businesses that want to avoid long-term commitments.

Reserved Instances (RIs):

Characteristics: Reserved instances involve customers committing to a fixed amount of
cloud resources (such as virtual machines) for a specified duration, typically one or three
years. In return, they receive a significant discount compared to PAYG pricing.
Use Cases: RIs are beneficial for workloads with predictable and steady resource
requirements. They can provide substantial cost savings for long-term projects.
Spot Instances:

Characteristics: Spot instances are available at a significantly lower price than on-demand
instances. However, they can be terminated by the cloud provider when demand for those
resources increases. Customers bid for these instances, and if their bid is higher than the
current market price, they can use the instances.
Use Cases: Spot instances are suitable for non-time-sensitive, fault-tolerant workloads where
cost savings are a priority. These instances are often used for batch processing and data
analysis.

Subscription Plans:
Characteristics: Subscription plans involve customers paying a fixed fee on a monthly or
annual basis for access to a particular service or set of services. These plans often come
with predefined features and usage limits.
Use Cases: Subscription plans are commonly used for software-as-a-service (SaaS)
offerings, such as email services, productivity tools, and other applications.
Resource Tiers:
Characteristics: Some cloud services offer multiple resource tiers, each with varying
features and pricing. Customers can choose the tier that best aligns with their needs
and budget.
Use Cases: Resource tiers are beneficial when customers have varying requirements and are
looking for a balance between features and cost.

Data Transfer and Bandwidth Charges:

Characteristics: Many cloud provi ders charge for data tr ansfer between their data
centers, to the internet, or between cloud services. Bandwidth utilization can also be a
factor in pricing.
Use Cases: These charges apply to organizations with significant data transfer needs, such as
content delivery networks (CDNs) or data-intensive applications.
Additional Features and Add-Ons:
Characteristics: Some cloud services offer premium features or add-ons that may incur
extra charges. Customers should be aware of these additional costs when using these
features.
Use Cases: Organizations that require advanced functionality or additional capabilities may
opt for these features, but they should be budgeted for separately.
Serverless Pay-Per-Use:

Characteristics: In serverless computing, customers are charged based on the actual

computational resources consumed during the execution of functions or code. There is
no need to provision or manage servers.
Use Cases: Serverless pay-per-use is suitable for event-driven and highly variable
workloads, where customers want to minimize infrastructure management.
Effective cost management in the cloud requires organizations to understand these cost
models and select the one that best aligns with their workloads and business objectives. This
includes optimizing resource allocation, monitoring usage, and leveraging tools provided by
cloud providers to control costs.
UNIT V CLOUD SERVICE GOVERNANCE & VALUE

IT Governance Definition, Cloud Governance Definition, Cloud

Governance Framework, Cloud Governance Structure, Cloud Governance
Considerations, Cloud Service Model Risk Matrix, Understanding Value of
Cloud Services, Measuring the value of Cloud Services, Balanced Scorecard,
Total Cost of Ownership

IT Governance Definition:
IT governance, short for Information Technology governance, refers to
the framework of policies, processes, and decision-making structures that
ensure an organization's IT investments support its business objectives.
Essentially, it's about how an organization manages and directs its IT activities to
achieve its goals. This includes decision-making responsibilities, risk
management, performance monitoring, and resource allocation related to IT.It as
the rules and guidelines that keep the IT ship sailing smoothly, making sure
that technology is aligned with business strategies, risks are managed
effectively, and resources are used efficiently.

Cloud Governance Definition:

Cloud governance is a set of policies, procedures, and controls put in place to

manage an organization's use of cloud services. It involves overseeing and
controlling cloud-related resources, applications, and data to ensure they align with
the organization's overall IT and business objectives. This governance framework
helps mitigate risks, ensures compliance with regulations, and optimizes the use of
cloud resources.

In simpler terms, it's like setting the rules and guidelines for how your organization
uses and manages cloud services. This includes aspects such as data security, cost
management, compliance with industry regulations, and overall strategy
for leveraging the benefits of cloud computing while minimizing potential
drawbacks.

Cloud Governance Framework:

A cloud governance framework is a structured approach to managing

and controlling an organization's use of cloud services. It provides a set of
guidelines, policies, and best practices to ensure that cloud resources are used