At first glance, it may seem like cloud computing should be valued in the same way as on-premises systems. It may also seem that open source solutions always make the most sense as there are no license fees. It is free, right?
We will walk through some ways to think about valuing cloud computing and open source software for IoT analytics. Like most things, it is more complicated than it seems at first.
Variable costs expand and contract with the amount of usage. Examples are automotive production parts for assembling vehicles, fuel in transportation, and cloud services. Fixed costs are constant no matter the amount of usage needed. Examples are data centers, rack servers, and equipment (or cloud environment) management.
In a traditional business case, fixed costs are assumed to continue until they are able to be sold at some anticipated amount. This rarely occurs in a short period of time. Variable costs are assumed...