Cloud Computing Economics, Part One
The Economics of Cloud vs Physical Computing
Dec. 3, 2008 08:55 AM
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
||Quad-Core Servers ( 5 x 3,000 each )
||1/2 Rack + Gigabit Switch
||Total Hardware cost
||Annual amortized cost, 5% over 3 years
||Assuming no incremental real estate cost
||Annual power & AC cost
||Total annual cost on premise
|Purchase - at Colo
||Colo fee's; 1/2 Rack + power + bandwidth
||Annual amortized cost
||Total annual cost at Colo
||24x7x365 Amazon EC2
( $.80 per high CPU Server instance hour )
||40 hours x 52 weeks
||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.