27 Sep 2008 03:22 PM EDT
[ Tags: cloud,  wanscaler,  xenserver ]

There is an interesting debate going on over on the Google cloud computing group that also helps point out some of the appropriate use cases for cloud computing. The example used is a simple comparison of Amazon EC2 vs. purchasing a set of servers for development purposes ( I have added some additional costs and scenarios below ) This example also assumes the servers fit in existing space and either environment would be managed by existing staff.


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


 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 ? 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 Colo 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 pro's, con's and hidden costs of each option, I am interested to hear what the community has considered regarding Cloud economics and/or other factors.

Check out Part 2 here

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Chris,

PERFECT!!!  I've been watching the threads over on Google Cloud Computing Group too and was thinking about this. I have been saying it over and over to folks that cloud doesn't fit every scenario and it's not for everyone.  Cloud computing is the way that things are going but that isn't for another five years or so.  I know of some companies that are staking their future on the fact that everyone will be moving to the cloud sooner rather than later.  Now there are some great use cases for using the cloud; bursting to the cloud to cover an increase in resources, test/dev, DR, etc.  But to move mission critical workloads, I don't think we are even close to being there yet.  Not just from a cost perspective either, there are other issues that need to be hammered out like security, management, etc.

Let me cover the one scenario I'm working on right now; Disaster Recovery to the cloud.  I think this is the first step of getting people to move into this new computing model.  The sheer technical complexity and overhead has always made DR out of reach for most customers, until now.  I can't share the revenue model with you here unfortunately but it's compelling.  The big value proposition to the customer is a complete DR solution but the CapEx cost for hardware and software is eliminated and they now have a much smaller monthly OpEx.  C3 is playing a critical part in the architecture.  It was playing a critical piece even before Citrix released Cloud Center.  

Thanks for posting this up Chris.  I'll keep you up-to-date on my progress and I'll be happy to share the architecture once it's completed.

Cheers
Michael Keen

Posted by Michael Keen at Sep 27, 2008 16:10 | Reply To This

Michael, thanks for the insightful comment. I agree DR is a great fit for a Cloud solution. Existing Disaster Recovery solutions are prohibitively expensive due to the duplication of hardware and infrastructure. The potential for the Cloud to reduce these intrinsic costs is huge. Please do keep us informed of your plans.

Posted by Chris Fleck at Sep 28, 2008 08:40 | Reply To This

Good analysis , we have been doing the same calculations. When you add the time factor of justifying, buying and setting up servers to the equation it makes the cloud look even better. Right now that means dev and test for us.

Posted by Anonymous at Sep 27, 2008 23:52 | Reply To This

The "Cloud" is the latest marketing re-packaging for an old concept. Whether you call it the "Cloud" or "Grid" or ASP, it is all the same thing.

You left out the biggest cost that corporations want to minimize - labor. That is what the "Cloud" is all about - slashing labor costs. But it really isn't a surprsie you failed to mention it. No one wants to talk about what the "Cloud" really means - reducing expenditures on payroll and benefits, pensions and health care for IT personnel.  If you cannot out source the labor to India or some other distant land, then outsource the entire operation to the "Cloud". It sounds so perfectly harmless when you call it the "Cloud". A "Cloud" couldn't hurt anyone, could it?

Technology companies like Citrix, VMWare, Microsoft, Dell, IBM and HP all hope to convince corparations to cut expenditures on labor and spend those dollars on the "Cloud" so those tech companies can get that money in software, hardware and service sales. More than a few CIO's will be willing to move a bit of thier operations in this "Cloud" in the sky in hopes of cutting labor costs and improving the bottom line. And more than a few readers of this blog and other tech blogs will lose their jobs to the "Cloud".

As more and more CIO's put their head and budget into the "Cloud", NASDAQ  will creep up. Options and bonuses will rain down from the "Cloud" for a while.Tech execs will be ditching comercial first class for private jets again and be getting double the expense account (including the one for their spouse).

But this "Cloud" does not have a silver lining. The "Cloud" will be filled with over hyped products built and tested by mostly out sourced developers who could care less about the final product. Patches will be released with ridiculous time outs (sound familiar?) or obvious bugs that will poison the entire "Cloud". Security will be about as difficult to penetrate as a - cloud. Personal data will slowly drizzle from the "Cloud". One day, there will be a torrential downpour and the "Cloud" will pour down like acid rain and wash away into the sewer.

No worries though. Soon tech companies will come up with a new metaphor, and CIO's will have a new euphemism for cutting the jobs of the very people who built their entire infrastructure and keep it running day to day. And the whole cycle will begin again.

I wonder what you will call it next time around.  

Posted by Anonymous at Sep 28, 2008 01:52 | Reply To This

Thanks for your perspective. Your comment brings up some additional challenges that "Cloud" adoption will face both in terms of the impact on IT issues such as security and resources but also the impact on IT personnel. It is true that the "Cloud" does offer the opportunity to save on labor costs, however the same could be said of most innovations of the industrial age. In fact many IT jobs where probably justified and created by replacing manual or paper driven work done by others. I am not diminishing the concerns you bring up but putting them in another perspective. Also consider a real life example as it relates to the Cloud. Most web startups that are creating new jobs are depending on the cloud for their infractructure. Without the Cloud more money would be spent on capital vs salaries if they could even afford to attempt a new business at all.

Posted by Chris Fleck at Sep 28, 2008 09:07 | Reply To This

Very well said. I am sick of hearing about the cloud already. It is just another attempt to get rid of the people who do all the work so someone else can get a bigger bonus.

Posted by Anonymous at Sep 28, 2008 10:52 | Reply To This

Any one know if or when Amazon will offer windows server images ?

Posted by Anonymous at Sep 28, 2008 14:56 | Reply To This

Chris,

Thanks for the analysis.  One thing that is missing is any notion of "elasticity."  You are granular at a "weekly" level (40 hours).  If the applications are packaged and managed correctly, you could turn them on and off "on-demand."  If setup and additional capacity are automated functions, an "elastic" approach yield true variable costs associated with true demand.

Now, I don't want to argue that an hourly level of granularity around system capacity is critical all the time, but it certainly makes sense to shut down what you don't need.  Kind of like turning off a light when you leave a room.  As long as you are comfortable that getting the light back on is a simple flip of a switch, why not save the energy cost?  In this case save all of the costs.

I believe the sentiment on this post generally is correct.  Build an internal architecture that enables an elastic approach to application delivery through a seamless "scale out" capability to a cloud provider.  I think the foundation for this approach is hypervisor technology coupled with application packaging and lifecycle management (which is what we do at rPath) and data federation technology to share data across datacenters.  Good post.  Keep them coming.

Billy Marshall, rPath

Posted by Anonymous at Sep 29, 2008 14:16 | Reply To This

Billy

you are right on with your reply.  I'm working on this very model right now (elasticity in an application delivery and virtual infrastructure to ensure that servers are available and provisioned "on demand" and powered down when not needed.  I think it's this model that will make the biggest impact around the adoption of the "cloud" computing model along with DR to the cloud.

Great post.

Cheers
Michael

Posted by Michael Keen at Oct 01, 2008 15:30 | Reply To This

Very nice post, Chris.  The "premise plus cloud" idea is spot-on, IMHO, and I'm just thinking about security and privacy issues.
 
So, when is Part 2??  I await with baited breath....  (I'm in the Google Group, too, but it's a challenge to keep up with their volume)

Posted by Scott Novack at Oct 03, 2008 13:34 | Reply To This