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Things are changing fast in the world of Cloud Computing, however one question remains the same. Will it save me money and how much? To follow up on a previous post on Cloud Economics 101 Part 1, I looked at a fairly simple example of 5 Servers for a dev/test environment and identified the incremental costs of buying 5 servers and running them on premise or a Colo and then compared that to Amazon EC2. The analysis did not include many variables such as real estate costs and labor savings which may or may not apply to the particular situation. The results indicated that a Premise based deployment could provide the lowest "incremental" cost when compared to EC2 if the servers were running continuously. On the other hand EC2 provided significant savings for short term workloads with no upfront costs.
| |
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 |
24x |
| $ 8,320 |
40 hours x 52 weeks |
| $ 688 |
40 hours x 4.3 weeks |
What has changed recently at Amazon is a new pricing model that provides the option for "Reserved Instances" http://aws.amazon.com/ec2/#pricing which includes an upfront fee ( 1 year or 3 year term ) and a reduced per hour charge. The analysis below reflects the new pricing model applied to the same 5 server scenario as above. As indicated the new model results in a significant savings compared to EC2 standard pricing; 31% for the 1 year term and 48% for the 3 year term assuming the servers are running 24/7. However, when compared to the 40 hour per week scenario the cost at $16,146 ( or $10,229 3 year ) is higher than the EC2 Standard price of $8,320 or the Premise cost of $7,800.
| Annual $ | Reserved Pricing at EC2 |
|---|---|
| 24,162 | 24x365x5 ( $.80 high CPU ) 1 Year Reservered, $2,600x5 Upfront amortized at 5% |
| 18,245 | 24x365x5 ( $.80 High CPU ) 3 Year Reservered, $4,000x5 Upfront amortized at 5% |
| 16,146 | 40 hours x 52 x 5 ( $.80 High CPU ) 1 Year |
| 10,229 | 40 hours x 52 x 5 ( $.80 High CPU ) 3 Year |
So will the Cloud save money? the answer remains the same ... it depends. The new " Reserved Instance" pricing model provides substantial savings over standard pricing when used continuously but the standard pricing still is more effective for short time periods such as a 40 hour week load. As noted in the earlier posts there are many other variable cost savings by putting workloads in the cloud such as real estate costs, facility upgrades plus the intangible but real benefit of reduced time to develop/test/deploy.
The "Reserved Instance" pricing will also impact the variable workload analyzed in Cloud Economics Part 2 - Premise Plus Cloud scenario, this should provide more content for an upcoming post.
Cloud Economics 101 Part 1 - Premise vs Cloud vs Colo
Cloud Economics 101 Part 2 - Premise Plus Cloud
Cloud Economics 101 Part 4 - Amazon EC2 vs Terremark vCloud
Comments (1)
Sep 07
Anonymous says:
Pretty large prices. I doubt anyone with large needs is dumb enough to go to the...Pretty large prices. I doubt anyone with large needs is dumb enough to go to the cloud, instead of deploying several racks in a datacenter, or going with a cheap HA provider like [478east.com] (which runs on Xenserver).
One of the big turn offs for me is still the bandwidth, as well as the whole shared infrastructure.
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