How Much Does Your Cloud Really Cost?

Getting To The Bottom Of Cloud Economics

How much does your cloud really cost? That's a question 451 Research set out to answer with its latest Cloud Price Index, a rigorous analysis of the total cost of cloud computing.

451 compared the costs and value of public Infrastructure-as-a-Service and hosted private clouds to those of home-brewed clouds deployed and managed on-premise.

The researcher also took a deep look into the economics of OpenStack clouds and found that it's not necessarily the cheapest option.

Here are the results.

OpenStack Economics

While OpenStack may appear, at first glance, cheaper than proprietary cloud solutions, the open-source cloud operating system actually costs more to use because of the high price of engineers with expertise in the technology, according to 451 Research.

The typical costs of small-scale enterprise private clouds powered by VMware and Microsoft (as well as Red Hat's open-source offerings) are all within half a cent of each other -- about 10 cents per virtual machine hour.

OpenStack distributions cost, on average, 8 cents per virtual machine hour, an apparent 20 percent savings from the commercial alternatives.

But when factoring in other elements, including the scarcity of OpenStack skills, 451 Research concludes "that for a typical deployment, buyers could hire 3 percent more engineers to support a commercial cloud environment, and still have a lower cost of ownership compared to an OpenStack distribution."

OpenStack Talent Search

"Finding an OpenStack engineer is a tough and expensive task that is impacting today's cloud-buying decisions," Dr. Owen Rogers, senior analyst at 451 Research, noted in the report.

"Commercial offerings, OpenStack distributions and managed services all have their strengths and weaknesses, but the important factors are features, enterprise readiness and the availability of specialists who understand how to keep a deployment operational," Rogers said.

Buyers need to balance all of those considerations with a long-term strategic view, being mindful of total cost of ownership, to figure out what solution will be most economical for their unique needs, he said.

OpenStack Potential

While OpenStack clouds might be more expensive, overall, in the current market, that can change.

Proprietary clouds have their own risks that can tip the balance to OpenStack, including vendor lock-in, dwindling support and features being decommissioned, according to Rogers.

"As OpenStack matures and the pool of available engineering staff increases, buyers can expect the TCO of deploying OpenStack to improve," Rogers said.

The report notes that OpenStack distributions managed by commercial vendors can provide cost savings over the DIY approach for small enterprise deployments because of their simpler implementation and operations.

That benefit typically is achieved when the commercial distribution results in 45 percent manpower savings, according to 451.

Public Versus Private Pricing And Procurement

451 noted that while public clouds are sold with openly available pricing schemes, and customers are charged based on consumption, private clouds are still procured like traditional IT, "with pricing, design and payment terms specified on a per-customer basis."

Engineer To VM

451 calculated the "golden ratios" of virtual machines deployed to engineers that achieve the greatest value from managed clouds.

The cost benefits of managed and public clouds compared to self-managed implementations come down to how many virtual machines a team of engineers is able to support in a small-scale enterprise scenario.

'Golden Ratio' For Managed Clouds

If a private cloud is being successfully operated with a ratio of at least one engineer to about 100 virtual machines, it may be turning a better total cost of ownership than a typically priced managed private cloud, according to 451.

If each engineer is not able to fully support that minimum amount of machines, however, an average managed cloud is likely to be cheaper, the research reveals.

"For mission-critical, resource-intensive workloads installed on a private cloud, this ratio might not be achieved, and thus managed services offer better TCO," 451 Research noted.

'Golden Ratio' For Public Clouds

The constantly dropping prices of public clouds relative to the typical costs of a private cloud exaggerate that ratio even more.

For a small, self-managed enterprise private cloud to come in cheaper than a public cloud, the golden ratio needs to be at least 250 virtual machines per engineer, according to 451 Research.

Beyond the 'Golden Ratio'

Because there are huge disparities in price and services offered by major providers, the golden ratios at which managed or public clouds yield cost benefits to the self-managed approach vary quite a bit, and they shouldn't be the only calculation guiding buying decisions for enterprise IT managers.

"Considering the security, regulatory and control benefits of private cloud, paying more for private can certainly be worthwhile for mission-critical environments," 451 noted.