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BLOG: Red Hat CEO Jim Whitehurst: Private clouds can be cheaper than public clouds

Frederic Paul | Feb. 14, 2014
The question is, how big does an enterprise need to be to reach an efficient scale for a data center?

The ongoing, long-term battle between public clouds, private clouds, and hybrid clouds is one of the key structural issues for enterprise technology, with complex technology, security, and cultural factors in play. But even as enterprises cling to their own data centers, the larger momentum from consumers and small business seems to favor the eventual supremacy of the public cloud.

That's why I jumped at the chance to ask Red Hat president and CEO Jim Whitehurst for his take on the competition. "The dominance of the public cloud is not a fait accompli," Whitehurst responded. "It's a big, big, big open question."

So while he didn't quite say that private clouds were the long-term answer, he offered some insightful support for their continuing role. The direction of his argument wasn't particularly surprising for the leader of a company heavily invested in hybrid clouds, but I found his reasoning illuminating.

Cheap, cheaper, and cheap enough
"It's unclear that public clouds will be cheaper," Whitehurst argued. "The question is, how big does an enterprise need to be to reach an efficient scale for a data center? At what scale can an enterprise run a data center with the same or lower cost as Amazon?"

Now that enterprises can build and run data centers with modern, efficient infrastructure and tools, Whitehurst said, "It's a stretch to believe that a pretty decent size company can't do it at the same cost [as public cloud providers]... You don't have to spend $50 million or $100 million to get there."

Just as important, he added, private clouds don't have to match public clouds dollar for dollar on efficiency. "When you add the 15% to 20% marketing cost," Whitehurst said, claiming that's a typical industry figure, "the public's cloud scale advantage could disappear." If that's not enough, he concluded, any remaining price advantages are often eaten up by bandwidth costs.

Dueling analogies
"A lot of people use the electric power analogy," Whitehurst said, which holds that just as it's almost always cheaper and easier to buy power from the common electrical grid than to generate it yourself, it will eventually be same for computing. "But there are some issues with that," Whitehurst said. The economics of cloud computing are different and the electrical grid is not the best analogy.

For a more accurate analogy, he said, think about a common transport system. "Modern logistics isn't about what trucks to buy, or even whether to buy trucks, but about how to orchestrate my supply chain." It doesn't really matter who owns the trucks. For IT, Whitehurst said, "it's not about what thing to buy, but how the architectures can lower costs and get product and services out more quickly."


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