Pricing out cloud computing? Look at your workloads first

New report suggests that many cloud costs are underestimated due to variations in workloads.
Written by Joe McKendrick, Contributing Writer

Let's face it, it's not easy to figure out the various costs aspects of cloud. Obviously, there are the low monthly charges that are appealing, or savings from consolidation. But for companies with well-run IT operations, the benefits of moving to cloud may be negligible.

World Trade Center NYC construction Aug 2012-Photo by Joe McKendrick
Image: Joe McKendrick

In calculating cloud financials, too many organizations "overlook or underestimate cloud's true, core costs at the enterprise workload level," states a new report from Saugatuck Technology.

First, a well-run IT environment may not see much in the way of savings. Organizations that already have highly optimized IT environments should not assume that a move to cloud will deliver significant infrastructure savings, the report, authored by Saugatuck analysts Charles Burns and Bruce Guptill, cautioned. "On an optimized in-house infrastructure, costs for running a workload in a public cloud could actually be greater than the costs for running the workload in-house."

Burns and Guptill define an "optimized" IT environment as one having a "higher-than-average ratio of servers to operational support staff", as well as "extensive use of virtualization (rather than dedicated hardware) so as to minimize low resource utilization and avoid idle excess capacity)." In addition, optimized IT shops usually have figured out ways to acquire resources — compute capacity, memory, storage — "at an attractive discount below vendor 'list' prices".

Most IT operations, however, are "average", which means that they are potential candidates for cloud computing. But the value seen depends on the types of workloads that are sent to the cloud, be it public, private or hybrid.

The report's authors say that failure to account for workloads in cloud financial calculations leads to underestimating enterprise cloud costs, over-spending on cloud services, increasing the actual costs of using and managing IT resources, and reducing the effectiveness of IT resources and departments. "Our bottom line? Cloud resource use makes terrific sense to help reduce enterprise IT costs — when cloud is used in the right ways for the right workloads," said Burns and Guptill.

The type of workload will help determine whether organizations should go with public or private clouds, Saugatuck said. For example, companies running smaller-sized workloads can regularly save between 6 percent and 70 percent using public cloud service. Companies running medium-sized workloads can save 10 percent to 35 percent using a hybrid cloud. Companies running larger-sized workloads can save 5 percent to 20 percent using a private cloud.

Vendors need to work more closely with, and provide more information to customers on how workloads will shape the prices charged for cloud services, said Saugatuck. Workloads will depend on variables such as the size of the compute resources required, as well as operational factors such as average utilization of infrastructure resources. Higher utilization, of course, means higher charges.

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