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Is there a point where a private cloud is cheaper than the public cloud?

Brandon Butler | Oct. 15, 2014
Private cloud vendors say they’ve found it, analysts say it’s not that easy.

A group of companies that sell products to build private clouds has determined a price at which it claims it is less expensive to operate a private cloud compared to using Amazon Web Service's IaaS public cloud.

A report from the vendors - which include a collocation provider, a cloud management vendor and a network operator - attempts to address a question many organizations may be considering: When is it better to use a public cloud versus a managed hosting or collocation environment? The case study finds that if an organization is spending more than $7,644 in Amazon's cloud each month, then it can be cheaper to operate a private cloud.

But analysts say it's difficult to put an exact dollar figure on when a private cloud will be more cost effective than a public cloud; there are just too many factors to consider, says IDC analyst Melanie Posey.

"It's very hard to make sweeping statements," she says in an email. Issues such as the type of workload that is being run, how much the infrastructure is being used, how highly available it has to be, if regulatory or compliance issues need to be addressed and if there are any performance or latency issues are all factors that could influence the costs. "These issues all come together in figuring out whether cloud is more cost-efficient than traditional collocation or hosting."

The group that developed the case study consists of Colovore (a co-location provider), OpenStack cloud management software firm Piston Cloud Computing Co., network virtualization vendor Plexxi and King Star servers. They used nine two-node servers, along with Plexxi's affinity Switch2 switches. They compared their system hosted in Colovore's data center to running Amazon Elastic Compute Cloud (EC2) on-demand m3.2xlarge virtual machines. Their basic conclusion was that the hosted private cloud system had a higher initial upfront cost, but if enough AWS resources are used - they say more than $7,644 per month - then it is more cost effective to run the system in the collocation facility.

Amazon Web Services declined to comment for this story, but there are some obvious advantages to using the public cloud. The case study created by the private cloud vendors, for example, concedes that for dynamic, "bursty" workloads - those that have spikes of compute or memory power - the public cloud is generally a good fit. AWS also has a variety of services on top of its cloud that are as easy to consume as literally clicking a few buttons and provisioning the machines. These range from advanced databases like the company's DynamoDB, to real-time analytics engines like Kenesis and mobile application development tools like Cognito. Public IaaS vendors like AWS and Google also provide discounts for volume usage. Amazon has reserved instances, for example, which allow customers to get up to a 60% discount compared to on-demand EC2 prices, AWS says, but they require customers to reserve the VM for an extended period of time.


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