Agile Computing Authors: Elizabeth White, Pat Romanski, Liz McMillan, Carmen Gonzalez, Jim Kaskade

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
$ 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

@ThingsExpo Stories
In his keynote at 19th Cloud Expo, Sheng Liang, co-founder and CEO of Rancher Labs, will discuss the technological advances and new business opportunities created by the rapid adoption of containers. With the success of Amazon Web Services (AWS) and various open source technologies used to build private clouds, cloud computing has become an essential component of IT strategy. However, users continue to face challenges in implementing clouds, as older technologies evolve and newer ones like Docke...
As ridesharing competitors and enhanced services increase, notable changes are occurring in the transportation model. Despite the cost-effective means and flexibility of ridesharing, both drivers and users will need to be aware of the connected environment and how it will impact the ridesharing experience. In his session at @ThingsExpo, Timothy Evavold, Executive Director Automotive at Covisint, will discuss key challenges and solutions to powering a ride sharing and/or multimodal model in the a...
SYS-CON Events announced today that Embotics, the cloud automation company, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Embotics is the cloud automation company for IT organizations and service providers that need to improve provisioning or enable self-service capabilities. With a relentless focus on delivering a premier user experience and unmatched customer support, Embotics is the fas...
Just over a week ago I received a long and loud sustained applause for a presentation I delivered at this year’s Cloud Expo in Santa Clara. I was extremely pleased with the turnout and had some very good conversations with many of the attendees. Over the next few days I had many more meaningful conversations and was not only happy with the results but also learned a few new things. Here is everything I learned in those three days distilled into three short points.
SYS-CON Events announced today that Coalfire will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Coalfire is the trusted leader in cybersecurity risk management and compliance services. Coalfire integrates advisory and technical assessments and recommendations to the corporate directors, executives, boards, and IT organizations for global brands and organizations in the technology, cloud, health...
The IoT industry is now at a crossroads, between the fast-paced innovation of technologies and the pending mass adoption by global enterprises. The complexity of combining rapidly evolving technologies and the need to establish practices for market acceleration pose a strong challenge to global enterprises as well as IoT vendors. In his session at @ThingsExpo, Clark Smith, senior product manager for Numerex, will discuss how Numerex, as an experienced, established IoT provider, has embraced a ...
Cloud based infrastructure deployment is becoming more and more appealing to customers, from Fortune 500 companies to SMEs due to its pay-as-you-go model. Enterprise storage vendors are able to reach out to these customers by integrating in cloud based deployments; this needs adaptability and interoperability of the products confirming to cloud standards such as OpenStack, CloudStack, or Azure. As compared to off the shelf commodity storage, enterprise storages by its reliability, high-availabil...
SYS-CON Events announced today that MathFreeOn will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. MathFreeOn is Software as a Service (SaaS) used in Engineering and Math education. Write scripts and solve math problems online. MathFreeOn provides online courses for beginners or amateurs who have difficulties in writing scripts. In accordance with various mathematical topics, there are more tha...
@ThingsExpo has been named the Top 5 Most Influential Internet of Things Brand by Onalytica in the ‘The Internet of Things Landscape 2015: Top 100 Individuals and Brands.' Onalytica analyzed Twitter conversations around the #IoT debate to uncover the most influential brands and individuals driving the conversation. Onalytica captured data from 56,224 users. The PageRank based methodology they use to extract influencers on a particular topic (tweets mentioning #InternetofThings or #IoT in this ...
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smar...
Complete Internet of Things (IoT) embedded device security is not just about the device but involves the entire product’s identity, data and control integrity, and services traversing the cloud. A device can no longer be looked at as an island; it is a part of a system. In fact, given the cross-domain interactions enabled by IoT it could be a part of many systems. Also, depending on where the device is deployed, for example, in the office building versus a factory floor or oil field, security ha...
SYS-CON Events announced today that Transparent Cloud Computing (T-Cloud) Consortium will exhibit at the 19th International Cloud Expo®, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. The Transparent Cloud Computing Consortium (T-Cloud Consortium) will conduct research activities into changes in the computing model as a result of collaboration between "device" and "cloud" and the creation of new value and markets through organic data proces...
Donna Yasay, President of HomeGrid Forum, today discussed with a panel of technology peers how certification programs are at the forefront of interoperability, and the answer for vendors looking to keep up with today's growing industry for smart home innovation. "To ensure multi-vendor interoperability, accredited industry certification programs should be used for every product to provide credibility and quality assurance for retail and carrier based customers looking to add ever increasing num...
In an era of historic innovation fueled by unprecedented access to data and technology, the low cost and risk of entering new markets has leveled the playing field for business. Today, any ambitious innovator can easily introduce a new application or product that can reinvent business models and transform the client experience. In their Day 2 Keynote at 19th Cloud Expo, Mercer Rowe, IBM Vice President of Strategic Alliances, and Raejeanne Skillern, Intel Vice President of Data Center Group and ...
@ThingsExpo has been named the Top 5 Most Influential M2M Brand by Onalytica in the ‘Machine to Machine: Top 100 Influencers and Brands.' Onalytica analyzed the online debate on M2M by looking at over 85,000 tweets to provide the most influential individuals and brands that drive the discussion. According to Onalytica the "analysis showed a very engaged community with a lot of interactive tweets. The M2M discussion seems to be more fragmented and driven by some of the major brands present in the...
Machine Learning helps make complex systems more efficient. By applying advanced Machine Learning techniques such as Cognitive Fingerprinting, wind project operators can utilize these tools to learn from collected data, detect regular patterns, and optimize their own operations. In his session at 18th Cloud Expo, Stuart Gillen, Director of Business Development at SparkCognition, discussed how research has demonstrated the value of Machine Learning in delivering next generation analytics to impr...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, will discuss the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
What happens when the different parts of a vehicle become smarter than the vehicle itself? As we move toward the era of smart everything, hundreds of entities in a vehicle that communicate with each other, the vehicle and external systems create a need for identity orchestration so that all entities work as a conglomerate. Much like an orchestra without a conductor, without the ability to secure, control, and connect the link between a vehicle’s head unit, devices, and systems and to manage the ...
Virgil consists of an open-source encryption library, which implements Cryptographic Message Syntax (CMS) and Elliptic Curve Integrated Encryption Scheme (ECIES) (including RSA schema), a Key Management API, and a cloud-based Key Management Service (Virgil Keys). The Virgil Keys Service consists of a public key service and a private key escrow service. 

Web Real-Time Communication APIs have quickly revolutionized what browsers are capable of. In addition to video and audio streams, we can now bi-directionally send arbitrary data over WebRTC's PeerConnection Data Channels. With the advent of Progressive Web Apps and new hardware APIs such as WebBluetooh and WebUSB, we can finally enable users to stitch together the Internet of Things directly from their browsers while communicating privately and securely in a decentralized way.