Today I read this stupid comment on Slashdot equating the “cloud* vs on-prem” debate to the historical “horse and buggy vs. auto-mobile” debate and had to object to stupidity. (* note: for the purposes of this post “Cloud services” assumes IAAS. You get network and VMs, you may or may not install your own OS, but the service provider does nothing beyond patch a vanilla OS install)
>In reality a motorised carriage is more expensive and less safe in almost all cases….
This is a stupid analogy. A much better one is purchasing a car vs. taxi cab. Short-term a taxi is much cheaper, and the primary reason I don’t purchase a car to use for during my vacation. Depending on your usage levels it can be cheaper even long term. Many people who live in large metropolitan cities are quite happy without cars and rely on taxis for their short-term car needs. It is a costs-benefits analysis.
Cloud services vs. on-premises is the same. If you stop to think it is very obvious. The ONLY reason cloud can be cheaper is because the cloud service can have:
- Higher density in the data center which results in cheaper per server cost of space (fewer half full racks)
- Better hardware discounts due to greater purchasing power (they have your purchasing power as well as all their other customers purchasing power)
- Better labour utilization due to larger and more diverse workload (they have enough work to justify hiring a specialist and optimize their work assignments better)
- Better economies of scale in terms of quality of hardware purchased (eg. 36x HP DL360 vs 5x HP DL580)
Those savings, plus a healthy margin, have to save you enough money to off-set:
- The cost of an Improved network link to the cloud provider (You DO want to communicate with those servers right?)
- Increased uncertainty of heavily relying on the cloud provider (Are they paying their bills? Are they going to warn you if they lost backups of your data?)
- The cost of migrating to cloud service (This will probably cost as much as your first year of cloud service)
- Security (Talk to a security consultant or three about cloud)
- Loss of flexibility to cloud service “standards and procedures” (Don’t want any change while you diagnose an issue? You have an issue with the latest version of ESXi? Solaris VMs don’t work well with KVM? Tough!)
So it basically comes down to a cost-benefits analysis. And it turns out that many of the early adopters had unrealistic expectations and are now migrating back to on-premises. Economies of scale turn in to diminishing returns very quickly in the data centre world. If you have a very generic service need and your DC+hardware+OS licensing budget is over $300,000/year you are not going to save significant amounts of money going to the cloud and will be adding significant risk.
Many managers want to use “cloud” simply to remove it from their area of responsibility but most of the time that is not a good enough reason when weighed against the inflexibility cloud introduces. And with all things, the better and more flexible a cloud service you get, the greater the cost of going to the cloud.
Some organizations can save drastic amounts of money going to “the cloud”. Others would waste their money to an equal degree. As many are prone to point out when you replace “the cloud” with “someone else’s servers” the bloom comes off the rose pretty quick.