Cloud Computing Economics
Ville Volanen vvolanen@cc.hut.fi
Packaged Software
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There are several fixed costs
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OpEx
CapEx
Scaling is problematic
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Licence
Hardware
Datacenter
Maintanance staff
Scaling up can be expensive and require of expertice and time
if you need to invest to hardware
Scaling down might not save much as fixed costs stay the
same
Difficult to estimate costs
High barrier of entry
Cloud
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Service provider builds and maintains the capacity
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Customer pays what s/he uses
Scaling is simple
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Hardware
Datacenter
Maintanance staff
OpEx
Costs of customer depend on usage
No investment to hardware required
Service provider has less need for scaling (average usage)
Costs are easy to estimate
Low barrier of entry
Datacenter, traditional way
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Build datacenter componen by component
Each component needs to be handled separately
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Ordering and shipping
Unpacking, racking, installing
Maintanance is continuous
Lots of skilled labour is needed
Increasing capacity increases costs
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More ordering, shipping, unpacking, maintanance etc
New workforce needed
Datacenter, better option
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Build datacenter module by module
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Modules need only electricity, network connection and
cooling water
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Each module with 1000 (or so) systems
No unpacking or installing
Shipped once (instead of thousand times) and dropped to place
Modules are not serviced during their life span
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Due to high number of systems in module broken hardware
has only a small impact of module performance
Aged modules are shipped back to manufacturer and recycled
Datacenter, better option, cont
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Adding capacity has only minimal effect to costs (as long
as there is room)
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Module assembly can be automated
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No service, installations, etc.
Economies of scale drop costs
Again, economies of scale drop costs
Some extra challenges if the modules need to store
information
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Broken disks are not replaced since there is no service
For example networking does not have this problem
Is cloud always a good option?
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Would it be economical to buy a couple of virtual servers
for every day use from cloud?
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But also virtual servers need maintanance (install and
update apllications, performance monitoring etc).
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Initial costs would be lower but is that relevant?
Cost per server could be around €1000
Cost per technician could be around €50.000 each year
Acquiring a relatively small number of servers from cloud
is not necessarily very economical
Applications ”blocks”
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For example services provided by Amazon and Google
for system development
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Simple databases http://labs.google.com/papers/bigtable.html
Data storage http://aws.amazon.com/s3/
…
Developing similar capabilities from scrath would cost
huge amounts of money (datacenter costs plus software
development)
Allows faster time to market as some blocks are already
there. Also development can be done in production-like
enviroment.
Internal services as cloud
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Typically cloud computing is seen as a service for external
customers
Company internal clouds are possible as well.
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IT department is seen more like an internal service provider
This increases control to resources and adds
accountability
Direct cost savings smaller compared to external clouds
due to smaller number of ”customers”
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Economies of scale
Conclusions
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Cloud computing can potentially create huge savings
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Cost profile is different between cloud and traditional
computing
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Calculations from analysts suggest savings up to 80% in
business applications are possible
CapEx to OpEx
Cloud computing is not always cheaper
In addition to dropped unit costs cloud can reduce
barrier of entry and time to market
Thank you
Kiitos
References
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Architecture for Modular Data Centers
http://arxiv.org/ftp/cs/papers/0612/0612110.pdf
The Benefits of Virtualization and Cloud Computing
(http://virtualization.sys-con.com/node/870217 )
Cloud computing economics
(http://www.cloudcomputingeconomics.com/)
http://en.wikipedia.org/wiki/Cloud_computing