Click here to close now.




Welcome!

@CloudExpo Authors: Pat Romanski, Elizabeth White, Dana Gardner, Liz McMillan, Stefan Bernbo

Related Topics: @CloudExpo

@CloudExpo: Article

Cloud Computing Economics, Part One

The Economics of Cloud vs Physical Computing

Chris Fleck's Blog

The economics of Cloud Computing do point out a major Cloud advantage when it comes to short term or variable workloads. On the surface though it's apparent that Amazon's EC2, for example, is significantly more expensive if the set up is utilized 24x7x365, even a 40 hour week yields a slightly higher cost.


Below is a simple comparison of Amazon EC2 vs. purchasing a set of servers for development purposes ( I have added some additional costs and scenarios). This example also assumes the servers fit in existing space and either environment would be managed by existing staff.

On the surface it's apparent that EC2 is significantly more expensive if the set up is utilized 24x7x365, even a 40 hour week yields a slightly higher cost. So where is all the savings? What's all the hype about?


Purchase - on Premise
$ 15,000
Quad-Core Servers ( 5 x 3,000 each )
$ 750
1/2 Rack + Gigabit Switch
$ 15,750
Total Hardware cost
$ 5,800
Annual amortized cost, 5% over 3 years
$ 0
Assuming no incremental real estate cost
$ 2,000
Annual power & AC cost
$ 7,800
Total annual cost on premise
Purchase - at Colo
$ 8,000
Colo fee's; 1/2 Rack + power + bandwidth
$ 5,800
Annual amortized cost
$ 13,800
Total annual cost at Colo
Cloud
$ 35,040
24x7x365 Amazon EC2
( $.80 per high CPU Server instance hour )
$ 8,320
40 hours x 52 weeks
$ 688
40 hours x 4.3 weeks


This simple example does point out that the Cloud is not always a more cost effective solution it really comes down to what is the particular use case and alternative costs. For example if there is no space available or the existing space has reached the power limits of the facility (a more common occurrence ).

That means that the likely scenario is finding a Co-lo facility to provide space power and bandwidth. Depending on location and bandwidth usage this could easily cost $8,000+ per year plus additional remote administration hardware and service fees, effectively increasing the annual cost of purchased equipment to near $ 14,000. Although this option is still less than Amazon if utilized 24x7x365, it now is significantly more than the cost of the 40 hour week at EC2 which may be reality for a development environment. And if you only need the setup for a month of dev or testing Amazon becomes a no brainier.. put on your credit card!

What both examples point out are the fact that there is single answer. In fact the right answer for many companies might be premise plus cloud. In order for this to work for a single workload however a seamless connection would be required, recognizing this has led to the Citrix Cloud Bridge based on our WANScaler acceleration technology. In fact, Citrix is in the unique position to be able to assemble the prerequisite technologies that make the C3 Citrix Cloud Center an optimized solution for many scenarios.

There are many other pros, cons and hidden costs of each option, I am interested to hear what the community has considered regarding Cloud economics and/or other factors.

 

More Stories By Chris Fleck

Chris Fleck is Vice President of Emerging Solutions at Citrix Systems. Chris started his career at IBM working across multiple engineering and product organizations leading to Business Unit Exec of the IBM Industrial Computer Group. As a pioneer of new technologies, Chris founded an IBM spin-off to commercialize the initial Server Blade products as CEO of OmniCluster Technologies. At Citrix Chris is responsible for Emerging Solutions and is involved with or leading strategic initiatives at the company. You can follow him on Twitter and his blog at TechInstigator.com

Comments (1) View Comments

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


Most Recent Comments
rosscooney 11/21/08 02:27:06 PM EST

Buying servers is capital intensive...and impossible for startups. Buying capacity from AWS is expensive in the long term, but for the startup phase it is very beneficial.

We provide an email filtering service to SMB's through a group of resellers and xSP partners. We released the service a year ago with only four 'real' servers in a datacenter in Newcastle-upon-Tyne. We plugged it into AWS in September last year and moved four of our ISP partners to the AWS network. Earlier this year we setup a partnership with Flexiscale to give us some backup power. We used these providers to 'bootstrap' our business into month-on-month cash positivity. We are now using that cash flow to buy our own servers. Due to a few strikes of good luck we now have a network of 50 servers located in Newcastle and Liverpool. Before buying the new servers we used cloud computing providers to run our network, now we use it for scale. Basically, we used cloud computing to bootstrap our business so that we could afford to transition to our own network. All this without VC funding.

Ross Cooney
Web: http://www.emailcloud.com
Blog: http://www.spoutingshite.com

@CloudExpo Stories
The Internet of Things will challenge the status quo of how IT and development organizations operate. Or will it? Certainly the fog layer of IoT requires special insights about data ontology, security and transactional integrity. But the developmental challenges are the same: People, Process and Platform and how we integrate our thinking to solve complicated problems. In his session at 19th Cloud Expo, Craig Sproule, CEO of Metavine, will demonstrate how to move beyond today's coding paradigm ...
Internet of @ThingsExpo has announced today that Chris Matthieu has been named tech chair of Internet of @ThingsExpo 2016 Silicon Valley. The 6thInternet of @ThingsExpo will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
SaaS companies can greatly expand revenue potential by pushing beyond their own borders. The challenge is how to do this without degrading service quality. In his session at 18th Cloud Expo, Adam Rogers, Managing Director at Anexia, discussed how IaaS providers with a global presence and both virtual and dedicated infrastructure can help companies expand their service footprint with low “go-to-market” costs.
So you’ve heard how click-to-call widgets can really enhance a website’s potential for customer interaction and you want to try it out for yourself. Or you’re considering offloading pieces of your VoIP infrastructure, but want to see how that would unfold first. Where can you find this technology, that’s free and available to try out? Spotting the potential in a space where customers can experiment with these types of features, Voxbone is launching The Workshop.
When it comes to cloud computing, the ability to turn massive amounts of compute cores on and off on demand sounds attractive to IT staff, who need to manage peaks and valleys in user activity. With cloud bursting, the majority of the data can stay on premises while tapping into compute from public cloud providers, reducing risk and minimizing need to move large files. In his session at 18th Cloud Expo, Scott Jeschonek, Director of Product Management at Avere Systems, discussed the IT and busin...
The cloud market growth today is largely in public clouds. While there is a lot of spend in IT departments in virtualization, these aren’t yet translating into a true “cloud” experience within the enterprise. What is stopping the growth of the “private cloud” market? In his general session at 18th Cloud Expo, Nara Rajagopalan, CEO of Accelerite, explored the challenges in deploying, managing, and getting adoption for a private cloud within an enterprise. What are the key differences between wh...
"My role is working with customers, helping them go through this digital transformation. I spend a lot of time talking to banks, big industries, manufacturers working through how they are integrating and transforming their IT platforms and moving them forward," explained William Morrish, General Manager Product Sales at Interoute, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
The pace of innovation, vendor lock-in, production sustainability, cost-effectiveness, and managing risk… In his session at 18th Cloud Expo, Dan Choquette, Founder of RackN, discussed how CIOs are challenged finding the balance of finding the right tools, technology and operational model that serves the business the best. He also discussed how clouds, open source software and infrastructure solutions have benefits but also drawbacks and how workload and operational portability between vendors ...
SYS-CON Events has announced today that Roger Strukhoff has been named conference chair of Cloud Expo and @ThingsExpo 2016 Silicon Valley. The 19th Cloud Expo and 6th @ThingsExpo will take place on November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. "The Internet of Things brings trillions of dollars of opportunity to developers and enterprise IT, no matter how you measure it," stated Roger Strukhoff. "More importantly, it leverages the power of devices and the Interne...
"We work in the area of Big Data analytics and Big Data analytics is a very crowded space - you have Hadoop, ETL, warehousing, visualization and there's a lot of effort trying to get these tools to talk to each other," explained Mukund Deshpande, head of the Analytics practice at Accelerite, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
The idea of comparing data in motion (at the sensor level) to data at rest (in a Big Data server warehouse) with predictive analytics in the cloud is very appealing to the industrial IoT sector. The problem Big Data vendors have, however, is access to that data in motion at the sensor location. In his session at @ThingsExpo, Scott Allen, CMO of FreeWave, discussed how as IoT is increasingly adopted by industrial markets, there is going to be an increased demand for sensor data from the outermos...
The initial debate is over: Any enterprise with a serious commitment to IT is migrating to the cloud. But things are not so simple. There is a complex mix of on-premises, colocated, and public-cloud deployments. In this power panel at 18th Cloud Expo, moderated by Conference Chair Roger Strukhoff, Randy De Meno, Chief Technologist - Windows Products and Microsoft Partnerships at Commvault; Dave Landa, Chief Operating Officer at kintone; William Morrish, General Manager Product Sales at Interou...
As organizations shift towards IT-as-a-service models, the need for managing and protecting data residing across physical, virtual, and now cloud environments grows with it. Commvault can ensure protection, access and E-Discovery of your data – whether in a private cloud, a Service Provider delivered public cloud, or a hybrid cloud environment – across the heterogeneous enterprise. In his general session at 18th Cloud Expo, Randy De Meno, Chief Technologist - Windows Products and Microsoft Part...
Dialogic has announced that ZVRS chose Dialogic® PowerMedia™ XMS software media server as part of its latest video relay and translation service offering. ZVRS uses Dialogic’s PowerMedia XMS technology to provide a robust solution that supports a broad range of legacy devices and any-to-any video capabilities with its flagship Z70 videophone. ZVRS selected Dialogic’s solution to facilitate a release of Z70 that met its stringent requirements for legacy device support (H.263 and H.264) with high...
CenturyLink has announced that application server solutions from GENBAND are now available as part of CenturyLink’s Networx contracts. The General Services Administration (GSA)’s Networx program includes the largest telecommunications contract vehicles ever awarded by the federal government. CenturyLink recently secured an extension through spring 2020 of its offerings available to federal government agencies via GSA’s Networx Universal and Enterprise contracts. GENBAND’s EXPERiUS™ Application...
Basho Technologies has announced the latest release of Basho Riak TS, version 1.3. Riak TS is an enterprise-grade NoSQL database optimized for Internet of Things (IoT). The open source version enables developers to download the software for free and use it in production as well as make contributions to the code and develop applications around Riak TS. Enhancements to Riak TS make it quick, easy and cost-effective to spin up an instance to test new ideas and build IoT applications. In addition to...
In addition to all the benefits, IoT is also bringing new kind of customer experience challenges - cars that unlock themselves, thermostats turning houses into saunas and baby video monitors broadcasting over the internet. This list can only increase because while IoT services should be intuitive and simple to use, the delivery ecosystem is a myriad of potential problems as IoT explodes complexity. So finding a performance issue is like finding the proverbial needle in the haystack.
You are moving to the Cloud. The question is not if, it’s when. Now that your competitors are in the cloud and lapping you, your “when” better hurry up and get here. But saying and doing are two different things. In his session at @DevOpsSummit at 18th Cloud Expo, Robert Reeves, CTO of Datical, explained how DevOps can be your onramp to the cloud. By adopting simple, platform independent DevOps strategies, you can accelerate your move to the cloud. Spoiler Alert: He also makes sure you don’t...
Edge Hosting has announced a partnership with and the availability of CloudFlare, a web application firewall, CDN and DDoS mitigation service. “This partnership enhances Edge Hosting’s world class, perimeter layer, application (layer 7) defensive mechanism,” said Mark Houpt, Edge Hosting CISO. “The goal was to enable a new layer of customer controlled defense and compliance through the application of DDoS filters and mitigations, the web application firewall (WAF) feature and the added benefit ...
Digital Initiatives create new ways of conducting business, which drive the need for increasingly advanced security and regulatory compliance challenges with exponentially more damaging consequences. In the BMC and Forbes Insights Survey in 2016, 97% of executives said they expect a rise in data breach attempts in the next 12 months. Sixty percent said operations and security teams have only a general understanding of each other’s requirements, resulting in a “SecOps gap” leaving organizations u...