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TCO: Does the cloud really stack up?

Before embarking on new public or private cloud projects, it's critical for business to understand the potential costs associated with such initiatives.

Before embarking on new public or private cloud projects, it's critical for business to understand and measure the potential costs associated with such initiatives. A typical yardstick against which corporate IT proposals have been assessed historically is the total cost of ownership (TCO). This type of measurement is based on a formula that considers all direct and indirect costs and benefits attached to the implementation of a given project. Traditional TCO models included broadly defined categories such as licensing, infrastructure, installation and maintenance, and training and support costs. When it comes to private versus public cloud-based solutions, however, these metrics are not quite so clear, and it can be challenging for organisations to determine exactly which cloud model is suitable for their business needs.

Some public cloud providers offer their own basic TCO calculation services to demonstrate value and savings afforded to businesses using their services. The total cost of implementing a private cloud can be somewhat less transparent, and requires careful examination of all cost areas to draw appropriate conclusions. Intel provides tools to help demystify some of these calculations.


Public cloud providers generally do not directly charge software licensing fees. However, it is important to note that the per-hour compute instance charges are generally higher when using proprietary operating systems such as Microsoft Windows than for open-source operating systems such as Linux. Open-source private cloud software such as OpenStack is also free of licensing fees; however, proprietary cloud computing vendors charge a licence fee for their virtualisation software based on the number of CPUs or CPU cores used. Intel provides guidance on the cost benefits of using open-source software to build private and public clouds.


One of the greatest contrasts in cost allocation between public and private cloud implementations is infrastructure. Construction of a private cloud requires a significant upfront capital investment in compute, networking, and storage hardware resources, while typical public cloud pricing models charge on a pro-rata, per-hour basis, allowing a company to only pay for the resources they are using as an operating expense. Other considerations when building a private cloud (regardless of technology) include datacentre rent, power, and cooling costs. These types of charges are not necessarily accountable when using a public cloud, but are generally incorporated into the hourly metered usage charges. Intel hardware-assisted virtualisation technology plays a significant role in increasing modern datacentre efficiencies, and has been documented to reduce hardware TCO by more than 50 percent through virtualisation and consolidation.

Support and maintenance

Support programs for public cloud service and proprietary private cloud software providers are primarily offered at a premium by the vendor. Service-level agreements can also be sourced more competitively from third-party systems integrators and support firms. Open-source cloud computing software such as OpenStack offers the most flexibility and cost-effective options when selecting a support partner. For mission-critical applications, it is essential to maintain appropriate support agreements with hardware vendors to ensure the health and continuity of private cloud operations. While it can be challenging to distinguish between similar offerings from a range of companies, Intel Cloud Finder seeks to simplify the process of finding suitable cloud service providers.


A key business expense borne in the early stages of any cloud computing implementation is technical training for IT staff. A plethora of information, tutorials, and documentation for both private and public cloud platforms can be accessed for free online, and specialised training and certification offered by companies such as Red Hat and IBM ensure that IT staff members have the proper knowledge and skills to support the enterprise.

While there are several fundamental cost metrics which can used to measure and compare the total cost of ownership of private verses public cloud computing ecosystem, it's important to understand that the TCO of cloud computing is highly specific to the individual enterprise. The benefit realised from any cloud-based platform is dependent on many extraneous factors such as the type of organisation, the business processes supported, staff skill levels, and investment in existing infrastructure. Through careful analysis of tangible project costs within the framework of the larger corporate climate, it's possible to determine which private, public, or hybrid cloud solution is best for your business.

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