In episode, I discuss the relationship between transaction-based costing models, serverless computing, and cloud computing in a dynamic business environment. I look at how this model offers flexibility, scalability, and cost-effectiveness by allowing businesses to pay only for the resources they use - and compare this model to the traditional capex/opex model and highlight how the transaction-based model, combined with serverless and cloud, can lead to higher profit margins, better financial planning, and the ability to invest in other areas of the business.
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Published: Wed, 02 Aug 2023 16:47:19 GMT
Links
- Episode 9: Introduction to the Cloud
- Episode 43: Containers, Docker, Kubernetes and Serverless - explaining Serverless
Transcript
Hello and welcome back to the Better ROI from Software Development Podcast.
In the last episode, I discussed transaction-based costing models as an alternative to the traditional CapEx/OpEx models used in software development.
Unlike the traditional CapEx/OpEx costing models where you'd invest heavily upfront with this model, we assign costs at a finer grained level at the transaction.
That model aligns better with today's rapidly changing business environment, bringing flexibility and scalability to the forefront of software development. It allows us to think about the software development and its operation as "pay per use" rather than that heavy upfront investment.
And in today's episode, we look at how this transaction-based model, this "pay per use", integrates with two powerful forces in the technology industry - serverless and cloud architectures.
I've covered both of these topics separately in prior episodes. In episode 43, I covered serverless. In episode 9, I covered Cloud, but today I discussed them in relation to transaction-based costing.
Let's begin with a quick refresher on serverless and cloud computing. If you've been following our podcast, these terms should be quite familiar, but as a recap, let's go over them briefly.
Serverless computing, as we discussed in episode 43, is a model where the developers are freed from the tasks of managing servers or runtime environments. Instead, they can fully focus on the application's core functionality. The serverless in the name is a bit of a misnomer. There are servers involved, but the point is you as a user or a developer don't have to worry about them. The server management is handled by the service provider and you only pay for the actual computation time that you use, not for the idle server capacity.
Now let's move on to cloud computing, which I introduced in episode nine. Cloud computing provides businesses with on demand access to a shared pool of scalable computing resource. Essentially you rent computer power storage or other services from the cloud provider using them over the Internet as needed. The beauty of the cloud is that it allows businesses to easily scale their resources up and down based on demand. So you're not stuck with unneeded capacity or hit with sudden shortages.
Now, you might be wondering why do we often see serverless and cloud being used together?
Well, they complement each other perfectly. Serverless architecture thrives in a cloud environment. It enables businesses to leverage the functionality of the cloud while focusing on core functionality without getting bogged down with server management. This combination is a key reason why serverless and cloud have become such a powerful force in the software development industry.
With those definitions fresh in our minds, let's now delve into how serverless and cloud work hand in hand with the transaction-based costing model. The essence of the transaction-based costing model lies in the pay as you use approach - in the context of serverless and cloud computing this means you pay for the compute power, storage and other resources that you use rather than shelling out for fixed costs.
This is the same as your electricity or water bill. You pay for what you use, not a flat rate. This model offers several advantages, with cost effectiveness being one of the most significant. You are only billed for actual usage, meaning that idle time where your resources aren't in use don't add to your costs.
But it's not just about cost effectiveness.
This model also brings tremendous scalability and flexibility because you're not limited by the resources of a specific server or a data center. You can quickly scale up when demand increases or scale down when it decreases. This elastic nature of cloud computing is one of its most appealing features.
This leads us to the concept of autoscaling, a core feature of cloud services. Autoscaling dynamically adjusts the amount of computational resource based on the actual workload. It's like having a car that automatically adds more horsepower when you need to go faster and removes it when you need to go slower. It eliminates the need for manual interventions and ensures your application has necessary resources to perform optimally at all times. It's an efficient approach - particularly when paired with transaction-based costing, because you only pay for the resources you need when you need them.
Overall transaction-based costing in serverless and cloud computing combines efficiency, flexibility and financial savvy, offering businesses and more adaptable and more a cost effective approach in a dynamic environment.
Let's take a moment to consider the idea of a dynamic environment.
I'd consider most software to operate in dynamic environments - where the needs of the user, customer or business are changeable. Compare that to the needs of a static environment where the needs of the user, customer or business are highly predictable and don't change.
transaction-based costing serverless and cloud computing fit well in a dynamic environment.
Whereas traditional CapEx/OpEx based costing and buying physical servers might be more suited to a static environment.
Let's look at transaction-based costing, serverless and cloud computing first. These three concepts are like pieces of a puzzle that fit together perfectly to create an adaptable and flexible software delivery model. With transaction-based costing, you only pay for what you use, making it a more economical choice. Serverless takes care of server management, allowing you to focus on your applications core capabilities. Cloud computing provides on demand access to resources enabling easy scalability. Now imagine a dynamic business environment where the user demands vary significantly from day to day or even hour to hour. In such a scenario, this trio offers immense flexibility and cost effectiveness. You can scale resources up and down based on demand, and you pay only for what you use.
It's like a tap. You turn it on when you need water and you turn it off when you're done. You're not paying for water that's just sitting there.
Now, on the other hand, traditional CapEx/OpEx based costing and physical server buys work differently. In this model, you make significant upfront investment in servers and other hardware - that's your CapEx. Then you have ongoing costs for maintenance and upgrades - that's your OpEx.
This model is like buying a water tank and you pay for the entire tank, even if you're not using all the water it holds.
This traditional model can work well in a more static environment where user demand is relatively constant and you can actively predict your resource needs. Since you own the hardware, you have complete control over it, which can be beneficial for businesses with specific regulatory or security requirements. However, it's important to note that in today's fast paced business world, such static environments are becoming less common - user demand is unpredictable and businesses need to be agile and ready to adapt.
That's why transaction-based costing, servers and cloud computing are becoming increasingly popular. They provide the flexibility and scalability that modern businesses need to thrive in dynamic environments.
In the end, it's not about which model is better. It's about which model is better for your specific situation. It's crucial to understand your business environment and user demand patterns - then you can choose the software delivery model that best meets your needs, whether that's transactional-based costing with serverless and cloud, traditional CapEx/OpEx based costing models with physical servers or a hybrid approach of both.
Let's now shift our focus to how this transaction-based, "pay per use", model benefits businesses, particularly when used with serverless and cloud architecture.
First and foremost, the flexibility and scalability it offers cannot be overstated in today's dynamic business environment. Demand can fluctuate rapidly. One day you might be handling a few hundred users. The next day a few thousand. Serverless and cloud computing allows you to easily adapt to such changes.
Imagine you run a small e-commerce business. During regular days, your user traffic is moderate, but during peak shopping season, your user count could multiply many times over. With a traditional infrastructure, you need to invest in a lot of hardware to manage those peaks, which would mostly sit idle during off peak times. But with serverless and cloud computing on a transaction-based costing model, you start small. And as demand increases, your resources scale up. When the peak passes, they scale back down. You're essentially paying for what you use when you use it, saving considerable costs. This scalability not only allows businesses to be agile, but also leads to more predictable costs.
Let us take the example of a fintech startup offering a new mobile payment app. In the early stages, the user numbers are small - and so are the computational needs and thus the costs. As a user base grows, so do the computational needs and costs. But because the costs are tied directly to the usage, they rise in a predictable manner, allowing the startup to plan its finances more effectively.
In addition, many cloud providers offer advanced cost management tools that give you detailed insight into your spending. These tools can break down your costs by service, region or even specific functions, helping you to understand where your money is going and how you can optimize your spending.
The transaction-based model combined with serverless and cloud is not only about cost control, it's about making your budget work smarter. It's about the ability to react quickly to change, and the power to transform your software delivery, to align perfectly with your business needs.
Now that we have an understanding of how this transaction-based model, tied with serverless and cloud, impacts business operationally, let's delve a bit deeper into the financial aspect.
The financial benefits of using this model are significant.
First, the cost saving we've discussed previously can directly impact your company's bottom line. Lower costs means higher profit margins or the ability to reinvest those savings into other areas of your business. Additionally, this model supports a shift from CapEx to OpEx. Traditionally, businesses have to invest heavily upfront in servers and data centers - these are CapEx - but with serverless and cloud on a transaction-based model, you are turning those big upfront costs into smaller ongoing - that's OpEx.
This shift can free up capital from other parts of the business. Instead of sinking large amounts of money into physical infrastructure, you can invest in other areas like product development, marketing or customer services.
For example, imagine that you are a CEO of a startup that's just secure funding. Instead of using a chunk of that funding to buy servers, you can use it to hire top talent, ramp up your marketing efforts or enhance your product offering. The servers, they are handled by your cloud provider and you pay a manageable monthly fee based on your usage.
In essence, this transition from CapEx to OpEx can lead to a better return on your investment in software development - you're not just saving money, you're making your money work more effectively for your business. It's about being lean and efficient and focusing your investment where you can make the most impact. In the end, this transaction-based model, combined with serverless and cloud, provides businesses with a flexibility, scalability and financial savvy approach to software development.
Let's wrap up today's episode with a quick recap of the main points.
I've talked about how transaction-based costing align seamlessly with serverless and cloud architecture - the "pay per use" model coupled with these technologies offers numerous advantages, including cost effectiveness, flexibility and scalability.
By shifting from capital expenditure to operational expenditure, businesses can make their money work more effectively, freeing up capital for other strategic areas.
Plus, this model can lead to more predictable costs, allowing for better financial planning and management.
Remember, in a world where business needs are constantly changing, the ability to quickly scale resources up or down is crucial. Serverless and cloud architectures with transaction-based costing offers exactly that capability, giving you the agility to meet your business demands head on.
In next week's episode, I want to continue this transaction-based costing theme by looking at Value Stream Teams.
Thank you for taking the time to listen to this podcast and look forward to speaking to you again next week.
ChatGPT transcript
This episode used content generated through conversation with ChatGPT. The below is the full conversation with ChatGPT.
User:
The Better ROI from Software Development podcast is a short (10-15 minutes) weekly podcast aimed at non-technical CXO/ Managers - advising them on how to get better results from their software development efforts. In a prior episode I've compared transaction-based costing model to capex/ opex.
Draft an outline for an episode which explores why transaction-based coding and serverless & cloud are a good fit in modern software delivery.
I've previously explained serverless in episode 43 and cloud in episodes 9 - but include a recap summary for both.
Also cover how they operates on a transaction-based costing model, and how businesses can benefit from the flexibility and scalability they provides. Also touch on the financial aspects of them, illustrating how it leads to more predictable costs
ChatGPT:
Podcast Episode Outline: The Synergy Between Transaction-Based Coding and Serverless & Cloud in Modern Software Delivery
Introduction (1-2 minutes)
- Briefly reintroduce the concept of transaction-based costing model from previous episodes and its significance in modern software delivery.
- Introduction to the topic of the day: exploring the integration of transaction-based coding with serverless and cloud architectures.
Recap Summary: Serverless and Cloud (2-3 minutes)
- Recap from episode 43: What is Serverless?
- Definition of serverless, explaining how it allows developers to focus on their application's core functionality without the need to manage servers or runtime environments.
- Recap from episodes 9: What is Cloud?
- Definition of cloud computing, outlining how it provides businesses with scalable computing resources on demand.
- A quick note on the interplay between serverless and cloud: why they're often used together.
Transaction-based Costing in Serverless and Cloud (3-4 minutes)
- Explain how serverless and cloud operate on a transaction-based costing model.
- The 'pay as you go' model, where you pay for the compute power, storage, and other resources you use, rather than having fixed costs.
- Discuss the advantages of this model: cost-effectiveness, scalability, and flexibility.
- Dive into the concept of auto-scaling, and how it relates to transaction-based costing.
Benefits to Businesses (3-4 minutes)
- Elaborate on the flexibility and scalability that serverless and cloud provide.
- Easier to adapt to changes in demand.
- Enables businesses to start small and scale as needed.
- Discuss how this could lead to more predictable costs, with real-life examples or case studies.
- Use of cost management tools that provide detailed insights into your spending.
- Budgeting and cost control: Pay for what you use, scale up or down based on need.
Financial Aspects (2-3 minutes)
- Delve deeper into the financial benefits of using a transaction-based costing model with serverless and cloud.
- Illustrate how transitioning from capex to opex can free up capital for other areas of business.
- Discuss how this model can lead to better return on investment in software development.
Conclusion (1-2 minutes)
- Recap main points: transaction-based coding's alignment with serverless and cloud architecture, the cost-effectiveness, flexibility, and predictability it offers.
- Encourage listeners to consider how these technologies could be integrated into their own software development practices.
- Tease the topic for the next episode.
Q&A/ Listener's questions (Optional, 1-2 minutes)
- Address questions or comments from previous episodes.
- Invite listeners to submit their questions or thoughts on this episode's topic.
User:
Produce a script for the introduction to the episode - be sure to cover: * Briefly reintroduce the concept of transaction-based costing model from previous episodes and its significance in modern software delivery. * Introduction to the topic of the day: exploring the integration of transaction-based coding with serverless and cloud architectures.
ChatGPT:
[Theme Music]
Host: "Hello, and welcome back to another episode of the 'Better ROI from Software Development' podcast - your weekly guide on how to get the most out of your software development initiatives. I'm your host, [Your Name], here to simplify tech jargon for the non-technical CXOs and managers.
In one of our previous episodes, we discussed the transaction-based costing model, and how it has been altering the landscape of software delivery. Just to jog your memory, transaction-based costing revolves around the idea of 'pay per use'. Unlike traditional costing models where you'd invest heavily upfront, with this model, you pay only for the specific transactions or operations your software performs. It's a model that aligns perfectly with today's rapidly changing business environment, bringing flexibility and scalability to the forefront of software delivery.
Today's episode is all about understanding how this transaction-based model integrates with two powerful forces in the tech industry – serverless and cloud architectures. We've covered these topics separately in our past episodes - episode 43 for serverless and episode 9 for cloud, but today, we aim to unveil the magic that happens when these two come together with transaction-based coding.
So, whether you're trying to understand these concepts for the first time or looking to extract better ROI from your existing software delivery model, this episode is a must-listen for you. Let's dive right in!"
[Theme Music Ends]
User:
Produce a script to recap serverless and cloud - be sure to cover: * Definition of serverless, explaining how it allows developers to focus on their application's core functionality without the need to manage servers or runtime environments. * Definition of cloud computing, outlining how it provides businesses with scalable computing resources on demand. * A quick note on the interplay between serverless and cloud: why they're often used together.
ChatGPT:
Host: "Let's begin with a quick refresher on serverless and cloud computing. If you've been following our podcast, these terms should be quite familiar. But as a recap, let's go over them briefly.
Serverless computing, as we discussed in episode 43, is a model where the developers are freed from the task of managing servers or runtime environments. Instead, they can fully focus on their application's core functionality. The 'serverless' in the name is a bit of a misnomer - there are servers involved, but the point is that you, as a user or developer, don't have to worry about them. The server management is handled by the service provider, and you only pay for the actual computation time you use, not for idle server capacity.
Now, let's move onto cloud computing, which we explored in-depth in episode 9. Cloud computing provides businesses with on-demand access to a pool of shared and scalable computing resources. Essentially, you rent computing power, storage, or other services from a cloud provider, using them over the internet as needed. The beauty of the cloud is that it allows businesses to easily scale their resources up or down based on demand, so you're not stuck with unneeded capacity or hit with sudden shortages.
Now, you might be wondering, why do we often see serverless and cloud being used together? Well, they complement each other perfectly. Serverless architecture thrives in a cloud environment. It enables businesses to leverage the flexibility of the cloud while focusing on core functionality, without getting bogged down with server management. This combination is a key reason why serverless and cloud have become such powerful forces in the software development industry."
[Pause]
User:
Produce a script discussing Transaction-based Costing in Serverless and Cloud - be sure to cover: * Explain how serverless and cloud operate on a transaction-based costing model - The 'pay as you go' model, where you pay for the compute power, storage, and other resources you use, rather than having fixed costs. * Discuss the advantages of this model: cost-effectiveness, scalability, and flexibility. * Dive into the concept of auto-scaling, and how it relates to transaction-based costing.
ChatGPT:
Host: "With those definitions fresh in our minds, let's now delve into how serverless and cloud work hand in hand with the transaction-based costing model.
The essence of the transaction-based costing model lies in the 'pay as you go' approach. In the context of serverless and cloud computing, this means you pay for the compute power, storage, and other resources you use, rather than shelling out for fixed costs. This is the same as your electricity or water bill - you pay for what you use, not a flat rate.
This model offers several advantages, with cost-effectiveness being one of the most significant. You are only billed for actual usage, meaning that idle time, where your resources aren't in use, doesn't add to your costs.
But it's not just about cost-effectiveness. This model also brings tremendous scalability and flexibility. Because you're not limited by the resources of a specific server or data center, you can quickly scale up when demand increases, or scale down when it decreases. This 'elastic' nature of cloud computing is one of its most appealing features.
This leads us to the concept of auto-scaling, a core feature of cloud services. Auto-scaling dynamically adjusts the amount of computational resources based on the actual workload. It's like having a car that automatically adds more horsepower when you need to go faster and removes it when you need to go slower. It eliminates the need for manual intervention and ensures that your applications have the necessary resources to perform optimally at all times. It's an efficient approach, particularly when paired with transaction-based costing, because you only pay for the resources you need, when you need them.
Overall, transaction-based costing in serverless and cloud computing combines efficiency, flexibility, and financial savvy, offering businesses a more adaptable and cost-effective approach to managing their software development and delivery."
[Pause]
User:
Produce a script exploring the benefits to business - be sure to cover: * Elaborate on the flexibility and scalability that serverless and cloud provide. * Easier to adapt to changes in demand - Enables businesses to start small and scale as needed - Discuss how this could lead to more predictable costs, with fictional examples - Use of cost management tools that provide detailed insights into your spending - Budgeting and cost control: Pay for what you use, scale up or down based on need.
ChatGPT:
Host: "Let's now shift our focus to how this 'pay as you go' model, particularly when used with serverless and cloud architectures, benefits businesses.
First and foremost, the flexibility and scalability it offers cannot be overstated. In today's dynamic business environment, demand can fluctuate rapidly. One day you might be handling a few hundred users, the next day, a few thousand. Serverless and cloud computing allow you to easily adapt to such changes.
Imagine you run a small e-commerce business. During regular days, your user traffic is moderate. But during peak shopping seasons, your user count could multiply many times over. With a traditional infrastructure, you'd need to invest in a lot of hardware to manage these peaks, which would mostly sit idle during off-peak times. But with serverless and cloud computing on a transaction-based costing model, you start small, and as the demand increases, your resources scale up. When the peak passes, they scale down again. You're essentially paying for what you use, when you use it, saving considerable costs.
This scalability not only allows businesses to be agile but also leads to more predictable costs. Let's take the example of a fintech startup offering a new mobile payment app. In the early stages, user numbers are small, and so are the computational needs - and costs. As the user base grows, so do the computational needs and the costs. But because the costs are tied directly to the usage, they rise in a predictable manner, allowing the startup to plan its finances more effectively.
In addition, many cloud providers offer advanced cost management tools that give you detailed insights into your spending. These tools can break down your costs by service, region, or even specific functions, helping you understand where your money is going and how you can optimize your spending.
The transaction-based model combined with serverless and cloud is not only about cost control; it's about making your budget work smarter. It's about the ability to react quickly to changes, and the power to transform your software delivery to align perfectly with your business needs."
[Pause]
User:
Produce a script for the financial aspects - be sure to cover: * Delve deeper into the financial benefits of using a transaction-based costing model with serverless and cloud. * Illustrate how transitioning from capex to opex can free up capital for other areas of business. * Discuss how this model can lead to better return on investment in software development.
ChatGPT:
Host: "Now that we have an understanding of how this transaction-based model tied with serverless and cloud impacts businesses operationally, let's delve a bit deeper into the financial aspects.
The financial benefits of using this model are significant. First, the cost savings we've discussed previously can directly impact your company's bottom line. Lower costs mean higher profit margins, or the ability to reinvest those savings into other areas of your business.
Additionally, this model supports a shift from capital expenditure, or capex, to operational expenditure, or opex. Traditionally, businesses had to invest heavily upfront in servers and data centers - these are capex. But with serverless and cloud on a transaction-based model, you're turning those big, upfront costs into smaller, ongoing ones - that's opex.
This shift can free up capital for other parts of the business. Instead of sinking a large amount of money into physical infrastructure, you can invest in areas like product development, marketing, or customer service.
For example, imagine you are the CEO of a startup that's just secured funding. Instead of using a chunk of that funding to buy servers, you can use it to hire top talent, ramp up your marketing efforts, or enhance your product offering. The servers? They're handled by your cloud provider, and you pay a manageable monthly fee based on your usage.
In essence, this transition from capex to opex can lead to a better return on investment in software development. You're not just saving money; you're making your money work more effectively for your business. It's about being lean and efficient, and focusing your investments where they can make the most impact.
In the end, this transaction-based model, combined with serverless and cloud, provides businesses with a flexible, scalable, and financially savvy approach to modern software development."
[Pause]
User:
Provide a script for the episode conclusion - be sure to cover: * Recap main points: transaction-based coding's alignment with serverless and cloud architecture, the cost-effectiveness, flexibility, and predictability it offers. * Encourage listeners to consider how these technologies could be integrated into their own software development practices.
ChatGPT:
Host: "As we wrap up today's episode, let's quickly recap the main points. We delved into how transaction-based coding aligns seamlessly with serverless and cloud architectures. The 'pay as you go' model coupled with these technologies offers numerous advantages, including cost-effectiveness, flexibility, and scalability.
By shifting from capital expenditure to operational expenditure, businesses can make their money work more efficiently, freeing up capital for other strategic areas. Plus, this model can lead to more predictable costs, allowing better financial planning and management.
Remember, in a world where business needs are constantly changing, the ability to quickly scale resources up or down is crucial. Serverless and cloud architectures with transaction-based costing offer exactly that capability, giving you the agility to meet your business demands head-on.
So, as a non-technical CXO or manager, I urge you to consider how these technologies can be integrated into your software development practices. You don't need to be an expert in serverless or cloud computing. Instead, focus on understanding how they can enhance your business operations, reduce costs, and ultimately deliver better results.
That's it for today's episode. I hope you found it informative and helpful. As always, if you have any questions or thoughts on this topic, we'd love to hear them. Until our next episode, keep exploring, keep learning, and keep pushing the boundaries of what's possible in software development."
[Episode Ends]
User:
Provide a script which discussed why transaction-based costing, serverless and cloud fit a dynamic environment - and why the traditional CapEx/ OpEx based costing and physical server buy fits a more static environment
ChatGPT:
Host: "Hello and welcome back to another episode of the 'Better ROI from Software Development' podcast. I'm your host, [Your Name], making the complex world of software development digestible for non-technical CXOs and managers.
In previous episodes, we've explored the transaction-based costing model, serverless, and cloud computing. Today, we're going to discuss why these concepts fit so well in a dynamic environment and why traditional CapEx/OpEx based costing and physical server buys might be more suited to a static environment.
Let's start with transaction-based costing, serverless, and cloud computing. These three concepts are like pieces of a puzzle that fit together perfectly to create an adaptable and flexible software delivery model. With transaction-based costing, you only pay for what you use, making it a more economical choice. Serverless takes care of server management, allowing you to focus on your application's core functionality. Cloud computing provides on-demand access to resources, enabling easy scalability.
Now, imagine a dynamic business environment where user demand varies significantly from day to day, or even hour to hour. In such a scenario, this trio offers immense flexibility and cost-effectiveness. You can scale resources up or down based on demand, and you pay only for what you use. It's like a tap – you turn it on when you need water, and you turn it off when you're done. You're not paying for water that's just sitting there.
On the other hand, traditional CapEx/OpEx based costing and physical server buys work differently. In this model, you make a significant upfront investment in servers and other hardware - that's your CapEx. Then, you have ongoing costs for maintenance and upgrades - your OpEx. This model is like buying a water tank. You pay for the entire tank, even if you're not using all the water it holds.
This traditional model could work well in a more static environment where user demand is relatively constant, and you can accurately predict your resource needs. Since you own the hardware, you have complete control over it, which can be beneficial for businesses with specific regulatory or security requirements.
However, it's important to note that in today's fast-paced business world, such static environments are becoming less common. User demand is unpredictable, and businesses need to be agile and ready to adapt. That's why transaction-based costing, serverless, and cloud computing are becoming increasingly popular. They provide the flexibility and scalability that modern businesses need to thrive in dynamic environments.
So, as a non-technical CXO or manager, it's crucial to understand your business environment and user demand patterns. Then, you can choose the software delivery model that best meets your needs - whether that's transaction-based costing with serverless and cloud, traditional CapEx/OpEx based costing with physical servers, or a hybrid approach.
In the end, it's not about which model is better - it's about which model is better for your specific situation. And that's the key to getting a better ROI from your software development efforts."
[Episode Ends]