6 Advantages of Cloud Computing

Summary

The video script discusses AWS's six key advantages of cloud computing over traditional models. These include trading capital expense for variable expense, benefiting from economies of scale, eliminating capacity guessing, increasing speed and agility, ceasing data center spending, and enabling rapid global expansion. The script emphasizes how cloud computing allows for more efficient resource use, cost savings, and innovation, providing a competitive edge for businesses.

Takeaways

• 💼 **Capital Expense to Variable Expense**: AWS highlights the shift from large upfront capital expenses (capex) to variable operational expenses (opex) as a key advantage of cloud computing.
• 💼 **Tax Deductibility**: With opex, cloud computing expenses are tax deductible in the same year, unlike capex which is spread over several years.
• 🌐 **Economies of Scale**: AWS benefits from massive economies of scale due to its large customer base, leading to lower costs for customers.
• 🚀 **Capacity Management**: Cloud computing eliminates the need to guess capacity, allowing for adjustments based on actual demand, reducing resource waste.
• 🔧 **Speed and Agility**: AWS enables rapid deployment of resources and quick responses to market changes, enhancing business agility.
• 💼 **Reduced Data Center Costs**: AWS encourages businesses to stop spending on maintaining data centers and instead invest in innovation.
• 🌟 **Innovation Focus**: By offloading data center management to AWS, businesses can focus on developing new services and gaining a competitive edge.
• 🌍 **Global Reach**: AWS allows for easy global deployment of resources, which was previously difficult to achieve.
• 📈 **Competitive Advantage**: The agility and global reach provided by AWS can help businesses respond faster to customer needs and outpace competitors.

Q & A

What are the six advantages of cloud computing as described by AWS?

The six advantages of cloud computing according to AWS are: 1) Trading capital expense for variable expense, 2) Benefiting from massive economies of scale, 3) Stopping guessing capacity, 4) Speed and agility, 5) Stopping spending money on running and maintaining data centers, and 6) Going global in minutes.

How does the cloud computing model differ from traditional models in terms of capital expenditure?

In traditional models, capital expenditure (capex) involves significant upfront costs for purchasing equipment and setting up data centers. In contrast, cloud computing operates on an operational expenditure (opex) model where users pay for services on a pay-as-you-go basis, only for what they use.

What is the tax implication of the cloud computing model compared to traditional models?

With traditional capex models, expenses are tax deductible over a depreciation lifetime, which can span several years. In the cloud computing opex model, expenses are deductible in the same tax year, providing quicker tax benefits.

How does AWS leverage its large customer base to benefit its users?

AWS benefits from economies of scale due to its large customer base, which allows it to aggregate usage and negotiate lower costs. These savings are then passed on to customers, resulting in lower variable costs for them.

What is the advantage of cloud computing in terms of capacity management?

Cloud computing eliminates the need to guess capacity by allowing users to adjust their resource allocation based on actual demand, thus avoiding the waste of over-provisioned resources that is common in traditional IT setups.

How does cloud computing enhance speed and agility for businesses?

Cloud computing allows for quick and easy deployment of resources through API calls, command line, or management consoles, enabling businesses to respond to market changes faster and bring new services to market more rapidly.

Why does AWS encourage users to stop spending on data center maintenance?

AWS believes that spending time and money on data center maintenance is a low-value activity that does not differentiate businesses. Instead, they encourage investing in innovations that can provide a competitive edge.

What does 'going global in minutes' mean in the context of cloud computing?

'Going global in minutes' refers to the ability to deploy resources and services worldwide quickly and easily, which was previously difficult and time-consuming, but is now simplified through cloud computing platforms like AWS.

How does the pay-as-you-go model of cloud computing benefit small businesses?

The pay-as-you-go model allows small businesses to scale their spending according to their usage, avoiding large upfront costs and enabling them to grow at their own pace without being tied to fixed, high capital investments.

What is the competitive advantage of agility in cloud computing?

Agility in cloud computing allows businesses to quickly adapt to customer needs and market changes, potentially outpacing competitors in innovation and service delivery, thus gaining a competitive edge.

How does AWS's ability to aggregate usage across customers contribute to cost savings?

By aggregating usage across a vast customer base, AWS can achieve higher purchasing power, which leads to lower costs for infrastructure and services. These savings are then passed on to customers, reducing their overall expenses.

Outlines

00:00

🌟 The Six Advantages of Cloud Computing

The paragraph introduces the concept of the six advantages of cloud computing as presented by AWS. These advantages are crucial for understanding the benefits of cloud computing over traditional operating models. The first advantage is the shift from capital expense (capex) to operational expense (opex), where instead of investing in physical infrastructure like servers and data centers, businesses pay for cloud services on a pay-as-you-go basis. This not only reduces upfront costs but also allows for tax deductions in the same year for opex. The second advantage is the ability to leverage massive economies of scale, where AWS's large customer base enables cost reductions through aggregated usage and purchasing power, which are then passed on to customers. The third benefit is the elimination of capacity guessing, where cloud computing allows for dynamic adjustment of resources based on actual demand, avoiding the waste of over-provisioned resources.

Keywords

💡Cloud Computing

Cloud computing refers to the delivery of computing services, including servers, storage, databases, networking, software, analytics, and intelligence, over the Internet (the cloud) to offer faster innovation, flexible resources, and economies of scale. In the video, the concept is central as it outlines the benefits of using cloud services over traditional IT models, emphasizing flexibility, cost savings, and scalability.

💡Capital Expense (CapEx)

Capital Expense (CapEx) is the cost of acquiring or improving physical assets for a business that are expected to benefit the company for more than one accounting period. In the script, it is contrasted with operational expenditure, where traditional IT models require significant upfront CapEx for purchasing servers and setting up data centers, which is then replaced by operational expenditure in cloud computing.

💡Operational Expense (OpEx)

Operational Expense (OpEx) is the cost of running a business on a daily basis, not including costs spent on long-term assets. The video explains that cloud computing shifts from CapEx to OpEx, allowing businesses to pay for what they use on a pay-as-you-go basis, which is more flexible and aligns costs with usage.

💡Economies of Scale

Economies of scale refer to the cost advantage that businesses obtain due to expansion. When a business increases production, the cost per unit decreases. The video mentions that AWS benefits from economies of scale by aggregating usage across thousands of customers, which allows them to lower costs and pass the savings on to their customers.

💡Capacity Planning

Capacity planning in IT involves anticipating the future demand for resources and ensuring that the infrastructure can handle the load. The video discusses how traditional IT models often involve guessing capacity, leading to over-provisioning and wasted resources. Cloud computing allows for more accurate capacity planning based on actual demand.

💡Speed and Agility

Speed and agility in the context of cloud computing refer to the ability to quickly deploy resources and respond to changes in the market. The video emphasizes that cloud services allow for rapid deployment of resources globally and the ability to adapt to customer needs faster than competitors, which is crucial for maintaining a competitive edge.

💡Data Centers

Data centers are facilities used to house computer systems and associated components, such as telecommunications and storage systems. The video suggests that cloud computing allows businesses to stop spending money and time on running and maintaining their own data centers, instead focusing on innovation and value-added activities.

💡Global Deployment

Global deployment in cloud computing means the ability to deploy applications and resources across different geographical locations easily. The video highlights that AWS enables businesses to go global in minutes, which was traditionally a complex and time-consuming process.

💡Tax Deduction

A tax deduction is an expense that can be subtracted from taxable income. The video explains that with CapEx, expenses are tax-deductible over the depreciation lifetime of the asset, while with OpEx, such as cloud services, expenses are deductible in the same tax year, which can be more beneficial for cash flow.

💡Innovation

Innovation in business refers to the process of translating an idea or invention into a good or service that creates value or for which customers will pay. The video suggests that by offloading the burden of maintaining data centers to cloud providers, businesses can redirect resources and focus on innovation to differentiate themselves in the market.

💡Competitive Edge

A competitive edge is a significant advantage that a company has over its competitors. The video implies that by leveraging cloud computing, businesses can achieve a competitive edge through faster time to market, better resource utilization, and the ability to focus on innovation rather than infrastructure management.

Highlights

AWS articulates six key advantages of cloud computing over traditional operating models.

Cloud computing allows trading capital expense for variable expense, shifting from large upfront costs to pay-as-you-go models.

Operational expenditures in the cloud are tax deductible in the same year, unlike capital expenditures which are spread over depreciation periods.

AWS benefits from economies of scale due to its vast customer base, leading to lower costs for users.

Cloud computing eliminates the need to guess capacity, as resources can be adjusted based on actual demand.

Speed and agility in the cloud enable rapid deployment of resources and quick responses to market changes.

AWS encourages users to stop spending on data center maintenance and invest in business innovations instead.

Cloud services like AWS allow businesses to go global with deployments in minutes, a significant advantage over traditional methods.

AWS's large customer base includes some of the world's biggest and most well-known companies.

The cloud's pay-as-you-go model provides immediate tax benefits compared to the delayed deductions of capital expenditures.

Aggregating usage across a massive customer base gives AWS significant purchasing power to lower costs.

In traditional IT, over-provisioning is common, leading to wasted resources; the cloud allows for more efficient capacity management.

API calls, command line, and management console enable easy and quick deployment of cloud resources.

Agility in the cloud allows businesses to bring new services to market faster, gaining a competitive edge.

Investing in data centers is considered low value by AWS; they advocate for innovation and service development instead.

Global deployment of resources is simplified with cloud computing, making it easier for businesses to expand.

Transcripts

[Music]

aws

have a concept of the six advantages of

cloud computing

and this is their way of articulating

the benefits

of cloud computing in comparison to

traditional operating models

and it's a big subject for the exam it's

something that comes up

in quite a few questions so let's go

through these six advantages

the first one is that you trade capital

expense for

variable expense so remember we talked

before

about how in the traditional model you

spend a lot of money

buying equipment paying for data centers

it's a capital expenditure or capex

whereas in the cloud you're paying for

your services in a pay-as-you-go model

and that's an

operational expenditure or opex

so rather than purchasing servers you're

just paying for what you use

another advantage is that with capex

your expenses

are tax deductible over a depreciation

lifetime and that can be

several years depending on your country

whereas with an opex model

your expenses are deductible in the same

tax year

the second advantage is that you get to

benefit from massive

economies of scale and this image here

just shows

some of aws's thousands of customers

and you can see some of the biggest

companies and the most well-known

companies in the world

just in this list so because they have

such a large

customer base they're able to aggregate

their usage

across those customers it means they've

got purchasing power to lower their

costs

and they pass that on to the customers

so that means a lower

variable cost for you the third benefit

is to

stop guessing capacity now if you've

worked in it

you know what i'm talking about here in

the beginning when you're planning a

new workload you often have an idea of

what you need

in terms of the amount of processing

power storage space and so on

and the reality is that often once

you've deployed your workload

you find out what you really need and

it's much less

so that means a lot of wasted resources

and i used to work as a consultant going

into customers

and i'd see this in every single

customer there was

always wasted resources with the cloud

we just don't have this problem because

we can actually adjust our capacity

based on our demand

the next benefit is speed and agility

speed is the ability to deploy resources

easily

and quickly and you can do so through

api calls

through the command line or through the

management console and you can do so

around the world as well so you can

not only deploy fast but you can go

global agility

is the ability to react to change and

bring things to market

faster so it means that in a competitive

situation you can respond to your

customers needs

better than your competitor because you

have agility

the next advantage is to stop spending

money

running and maintaining data centers aws

want you to stop spending your money and

also your time

maintaining data centers and instead put

that time and that money

into innovations the way aws see it

is that spending time and money on data

centers

is low value it doesn't differentiate

your business

whereas if you're a bit more intelligent

and you put that time

and that money into new innovations

bringing new

services to market then that's a way

that you can differentiate your business

and get a competitive edge lastly it's

go global in minutes we've talked about

this before

with aws you have the ability to deploy

your resources

all over the world that used to be a

very difficult thing to do

but now with cloud computing it's

actually very easy

and we'll see some examples of this

later in the course so those are the

six advantages of cloud and keep these

in mind

as you go through the course

[Music]

you