A very insightful post from George Reese, author and founder of Valtira and enStratus, on the Economics of Cloud Computing on O’Reilly. He gives a side-by-side comparison of the cost of Internal IT versus Managed Services versus The Cloud.
Don’t miss his final analysis:
Cloud savings over internal IT jump to 29% without getting into the discussion of buy for capacity versus buy what you use!
Between managed services and the cloud, the cloud provides 18% savings.
While 18% and 29% savings are nothing to sneeze at, they are just the start of the financial benefits of the cloud. It goes on.
- No matter what your needs, your up-front cost is always $0
- As the discrepancy between peak usage and standard usage grows, the
cost difference between the cloud and other options becomes
- The cloud option essentially includes a built-in SAN in the form of
the Amazon Elastic Block Storage. The internal IT and managed services
options would go up significantly if we added the cost of a SAN into
- Cheap redundancy! While the above environment is not quite a “high
availability” environment, it is very highly redundant with systems
spread across multiple data centers. The managed services and internal
IT options, on the other hand, have single physical points of failure
as the application servers and database servers are likely located in
the same rack.
Let’s say, however, that you need 10 servers to handle peak usage
for 1 hour each year and just 2 to operate the rest of the year.
Ignoring the impact of the cost of capital:
- Internal IT adds another $40,000 in total costs over 3 years.
- Managed services adds another $144,000 in total costs over 3 years.
- The Amazon Cloud adds about $24 in total costs over 3 years.
No, that was not a typo. That’s forty THOUSAND dollars against one
hundred forty-four THOUSAND dollars against 24 dollars. And as I
mentioned earlier, this setup is based on an actual Valtira client that
was considering a dedicated managed services option before Valtira
began deploying customers in the Amazon cloud. It is not some contrived
Go, George. Finally something with numbers. Thanks for sharing!