When an IT Department is tasked with evaluating their enterprise’s cloud computing needs with a view to deciding between the public and private cloud, there is no clear answer on the horizon. Each company is different, has different evolving needs and the marketplace itself is very dynamic.
In this blog post we will discuss the public vs private question starting with Amazon’s recent announcement about their AWS Total Cost of Ownership Calculator.
Consider the Total Cost of Ownership
Amazon’s AWS does an excellent job of listing in detail the various cost bases that have to be considered, in terms of hardware and software, and then categorizing these costs based on the servers, storage and network elements. They also take into account overhead for space, power and cooling, as well as labor costs.
Amazon then gave an example of using their Total Cost of Ownership Calculator. Naturally, their example shows AWS coming out on top over an on-premises private cloud implementation. Over a three year period, their example provides a company with a saving of $450,000. Without a doubt, the tool is very useful and it gives an interesting breakdown and analysis of all the cost factors.
However, industry experts point out that private, on-premises clouds are sometimes more cost effective, based on interviews with companies that have found this to be the case. An article by John Cook describes his discussions with Moz, a Seattle-based marketing software company. Two interesting things stand out. First, Moz predicts that if working exclusively with AWS for their stateless processing needs, their annual bill could be as high as $7m! By combining their private cloud with AWS, they expect to pay Amazon between $500,000 and $1m – an enormous difference for a company the size of Moz.
Managing Cloud Costs is Critical
This leads to the second point. Moz’s cloud costs have a direct and material impact on their profit margin and overall profitability. By focusing on cloud costs alone, Moz’s profit margin will go from around 64% to 80% and this difference will swing the company from a loss to profitability. This second point alone underlines how critical it is to analyze and manage cloud costs.
So, having shown that public vs private is not so simple, what rules of thumbs can we come up with? Not surprisingly, we can say that when a company has a predictable workload, an in-house private cloud will serve its needs in a cost effective manner. However, outsourced solutions such as AWS can be the way to go for one-time projects, spiky usage or other unpredictable scenarios. Of course, as in the case of Moz mentioned above, sometimes savings can be gained by a carefully planned combination of public and private cloud use.
At Cloudyn, the public-private debate is at the heart of our offering to clients. We have found that the best approach is to avoid speculating on unknown factors, and analyze our customers’ existing deployments so we can recommend which clouds offer the best value for any given workload.
We also focus on identifying proven cost reduction opportunities and optimizing both private and public clouds for maximum efficiency by identifying unused or underutilized resources, streamlining capacity planning and cost allocation and much more.