As the name suggests, Infrastructure as a service (IaaS) is raw computing resources (CPU, stoage etc.) delivered online in the form of virtual server instances that can be turned on and off within minutes at the beck and call of the enterprise customer. No provisioning, no datacenter overheads, no playing catch-up with h/w technology and most importantly - no paying for what you don’t need. In days where CapEx is a forbidden word, this feels like the CIOs dream come true. The three largest cloud service providers today are Amazon, Microsoft and Google closely followed by the IBM, Cisco, Rackspace hosting, GoGrid etc. in the IaaS space.
Here is a CIO Magazine interview with the David Smith, CIO and CTO at Fujitsu with his views on IaaS:
Here is a CIO Magazine interview with the David Smith, CIO and CTO at Fujitsu with his views on IaaS:
The question that he gets asked near the end of the interview is a very important one. You start with zero upfront cost and unprecedented elasticity. But do you end up paying more in the end? I did some research to find a base cost model and the cost stacks up like this:
IaaS Costs :
IaaS Costs :
I took the Amazon EC2 as a representative cloud service for comparison. Based on this calculator at Amazon, 1 “extra-large” elastic server (15 GB, 4X2 EC2 virtual cores, 1.7 TB storage) – running windows, @100% utilization costs $713/month for on demand instance and $213/month for a reserved instance. So you pay about $8556 or $2556 / server/year for each server type respectively.
Data Center Costs:
Data Center Costs:
On the other hand, if you bought a higher configuration rack-able server like the IBM x3550 M3 (Intel® Xeon™ Processor X5650 6C / 2.66GHz , 24-192 GB Memory and 8TB storage) it would run about $5900. Of course that's not all. According to this study, the total cost of ownership of operating a data center (allocated costs of real estate, power, management, heating etc. minus the server cost) is $12,000 per rack per year. Assuming a modest 25 servers per rack (though it could ideally hold 42 1U servers) that works out to about $480 allocated overhead cost per server, . So all-in, the cost per server per year would be about $6380.
Conclusion:
The operating expense of a 100% utilized Amazon cloud based server (either on-demand or reserved) would overtake the all-in TCO of a fully owned server in a data center rack in a mere 9 months or 2.5 years respectively. This does not include financial benefits of owning assets like depreciation tax shield and salvage value, which, even assuming a typical cost of capital, will make it more attractive to own a server.
Of course there are other factors like security, reliability and switching-cost to consider, especially given Amazon’s recent headline making for the wrong reasons. But one thing is certain, if you are a business which has a steady computing demand, and hopes to be in business for 2.5 years or more, you are better off in a private data center rather than a public IaaS.
Conclusion:
The operating expense of a 100% utilized Amazon cloud based server (either on-demand or reserved) would overtake the all-in TCO of a fully owned server in a data center rack in a mere 9 months or 2.5 years respectively. This does not include financial benefits of owning assets like depreciation tax shield and salvage value, which, even assuming a typical cost of capital, will make it more attractive to own a server.
Of course there are other factors like security, reliability and switching-cost to consider, especially given Amazon’s recent headline making for the wrong reasons. But one thing is certain, if you are a business which has a steady computing demand, and hopes to be in business for 2.5 years or more, you are better off in a private data center rather than a public IaaS.
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