What is cloud unit economics?
By definition, cloud unit economics refers to the financial analysis and evaluation of both the costs and revenue associated with operating a cloud-based business.
In other words, it’s a way of looking at how much it costs to run your business on the cloud, as well as how much it brings in.
Related Definitions
Zero-Based Budgeting
What is zero-based budgeting?
Zero-based budgeting is an accounting technique that requires all expenses to be justified and approved for each financial period, starting from zero rather than a pre-existing spend. This enables organizations to monitor and assess the necessity of each cost on a more granular level, lowering expenses and promoting fiscal responsibility.
Originally conceived in the 1970s, zero-based budgeting isn’t a new idea — but in the current economic climate, accounting for every dollar is helping businesses to regain control over their outgoings. The technique can be applied to a wide range of costs, from research and development to asset management.
Cloud Instances
What is an instance in the context of cloud computing?
In cloud computing, an instance refers to a virtual server provided by a third-party cloud service, for example AWS, Azure or Google Cloud. These instances ultimately enable companies to deploy and run their applications or services in the cloud, in a scalable and flexible manner. This is because instances are on-demand and can be adjusted based on your workload requirements.
Auto-Scaling
What is auto-scaling?
Auto-scaling refers to the automatic adjustment of cloud computing resources based on an organization’s current demand and workload. It dynamically adjusts the allocation of resources to match the evolving requirements of an application or system without the need for manual intervention.
There are a number of benefits to using auto-scaling, the first being cost efficiency. By ensuring that resources are scaled up or down as and when needed, organizations can avoid over-provisioning and subsequently reduce unnecessary expenses. It also helps maintain consistent performance levels by automatically adding resources during peak demand periods.
Multi-Tenancy Environment
What is a multi-tenancy environment?
In cloud computing, a multi-tenancy environment refers to a situation where multiple users, also referred to as tenants, share the same physical infrastructure and resources. These resources, such as computing power, memory and storage are dynamically allocated based on the needs of each tenant. Each tenant’s data is, however, stored in separate databases to ensure both privacy and security.
Enterprise License Agreement (ELA)
What is an ELA?
An Enterprise License Agreement (ELA) is a contract between a software vendor and an enterprise customer that sets out the terms and conditions for the licensing of software products across an enterprise. Unlike a Master License Agreement (MLA) which is a more comprehensive business agreement that can cover a range of products and services, an ELA is often used for specific software products.
While the specific terms and conditions of an ELA can vary, it will typically outline the number and type of licenses covered under the agreement, restrictions or limitation on usage, the duration of the agreement, the fees associated with the license, renewal terms and termination clauses.
Tail Spend
What is tail spend?
Tail spend refers to the unmanaged purchases made within an organization that fail to pass through an official procurement process. On account of their low value, the costs incurred by these purchases are seldom monitored by financing teams as they are generally too small to be deemed “strategic”. The problem, however, is that they can make up as much as 20% of a business’ total spend.