In the previous parts of this series, I blogged about issues commonly raised in objection to cloud computing: difficulty of migrating existing applications, managing risk, and meeting SLAs. In this post, I'd like to address an issue I've heard raised a number of times: that cloud computing, far from saving IT organizations money, actually costs more than providing the same services in-house.
I hear this most commonly identified as an issue with Amazon EC2, put in this way: A large instance of a Linux server (15 GB memory 8 EC2 Compute Units (4 virtual cores with 2 EC2 Compute Units each); 1,690 GB instance storage (4 by 420 GB plus 10 GB root partition) 64-bit platform I/O Performance: High) costs $.80/hr, or $576/month). A Windows instance is even more expensive: A large instance with Windows Server 2003, Microsoft Authentication Services, and SQL Server costs $3.20/hr, or $2304/month. A like-for-like comparison for a similarly-sized Windows instance sans the additional software is $1.20/hr, or $864/month).
By comparison, Amazon's small instances (1.7 GB of memory, 1 EC2 Compute Unit (1 virtual core with 1 EC2 Compute Unit), 160 GB of instance storage, 32-bit platform) are $.10/hr, $72.00/month for Linux, and $.125/hr, $90/month for Windows.
So certainly we can see that large instances of Amazon EC2 instances are pretty expensive. On the other hand, those are pretty beefy machines-they could do some serious computing. For many light load systems, the cost is much lower. One can recognize the obvious conclusion: the monthly cost varies according to how much capacity you purchase. Purchase more capacity, pay more. Purchase less, pay less.
However, despite the obvious conclusion, the argument raised is that Amazon is more expensive for equivalent computing capacity compared to other options. In discussing this with one person, he noted that even if an IT organization didn't want to host a machine itself, it could use an outsource provider. His opinion is that Amazon ends up being more expensive than the established ways of obtaining computing capacity.
He derives this opinion based on the obvious: $2300 per month for a Windows server? That's got to be more expensive than it costs for a Windows box in the data center! After all, how much can a server run? $1500? Maybe $2000? Throw in a Windows Server license and a SQLServer license and you're still in for less than $10,000-compared to $25,000 per year at Amazon! And even if the IT organization isn't very good at operations, it can always turn to an outsourcer, and everyone knows they can do it really cheap.
Do the Maths Correctly
In evaluating the (supposed) high cost of Amazon EC2, that raises the question: compared to what? In other words, to assert that Amazon (or one of the other cloud providers) is more expensive than doing it internally or outsourced, one has to know exactly what it costs to run a machine internally or via an outsourcer. And I'm not convinced those costs-despite the opinion expressed by my colleague-are truly known. In fact, I would go so far as to say that most IT organizations really don't have much of an idea what their true cost of, say, provisioning a 1U pizza box server actually is. But having an intuition on this topic is not the same as facts, so I decided to do some research.
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