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Public vs. private cloud cost comparison finds enterprise winners

Nearly half of enterprises do not save money with the public cloud, and say they have figured out how to beat public cloud costs with their own private cloud.

A fresh batch of evidence shows that more companies than you may think can run a private cloud for less money than...

it costs to run the same number of virtual machines in the public cloud.

It's cheaper to run private cloud infrastructure than public cloud on a per-virtual machine basis for 41% of the 150 executive-level IT leaders that contributed to a recent survey by 451 Research LLC in New York. In some cases, the savings were dramatic -- 9% of the respondents indicated they saved at least 50% in a private cloud versus what they paid for public cloud consumption.

A previous study in a 2016 study pinned down the breakeven point that makes private cloud less expensive than public cloud, said Owen Rogers, a 451 analyst. But it didn't clarify how many enterprises crossed that line to beat public cloud on price through their own in-house efficiencies.

"We didn't have a clear sense [of] how many users are in that Goldilocks zone," he said.

The results were a surprise -- Rogers expected only 10% to 20% of respondents would say their private cloud costs less in a public vs. private cloud cost comparison. Instead, the results were double his prediction.

Many companies keep a close eye on private cloud costs. They either manually track key performance indicators with spreadsheets, or with IT business management software, such as VMware vRealize Suite or software from Apptio Inc. Many turn to Chef and Puppet to squeeze out further efficiency, Rogers said.

Wow, $120,000 a month [for public cloud] -- you could build a nice data center with that kind of money.
Jimmy HurffCTO, Clearsense

Clearsense LLC, a Jacksonville, Fla., healthcare analytics company, discovered that it made financial sense to move off of Amazon Web Services (AWS).

When the company first started using AWS in 2015, its monthly bill was $20,000. That figure quickly doubled to $40,000 per month. Jimmy Hurff, Clearsense CTO, forecast that the company would spend $120,000 monthly by the end of 2017. Given the rapid increases, Hurff decided that the company could run its platform for less on its own infrastructure.

"[Those] were two points on a graph that caused us to pause and reassess our strategy," he said, referring to the $20,000 and $40,000 monthly expenses. "Wow, $120,000 a month -- you could build a nice data center with that kind of money."

The company hosted its Hadoop big data healthcare analytics platform on EC2, mainly m4.2xlarge and c4.2xlarge instances, but did not use any other AWS services.

Now, in a colocation data center owned by TierPoint LLC, Clearsense uses the same number of logical nodes as it ran in AWS but with 11 times the core capacity and 18 times the storage capacity, Hurff said. The six-month move lowered its costs from $40,000 a month in AWS to $15,000 per month, based on a three-year hardware refresh cycle. The company built its infrastructure on Dell R630 1U servers, Dell MD3000 storage and an adapter from DriveScale Inc.to scale out storage across the JBODs. The company still uses AWS for disaster recovery.

Most enterprises grapple with the public vs. private cloud cost comparison, said Vinu Thomas, CTO at Presidio Inc., a systems integrator in Iselin, N.J.

Typically, they do not fully grasp the scope of all the costs associated to run a private cloud vs. a public cloud. It's not just about the IT infrastructure and applications, but also processes and staff.

"It is remarkable when we show them how much it will cost in AWS or Azure, because a lot of customers are not aware of the true cost of a public cloud," Thomas said.

Many users overlook hidden charges, such as network bandwidth, and instead focus on small per-hour charges for an instance. Companies often perform a cost analysis after a consideration of security, governance, compliance, performance and dependency requirements. Moreover, some on-premises applications are inefficient and would cost more to run in the public cloud.

"Cost is almost always on the top of their minds, but we can't get to cost if the application doesn't clear the security, interdependency or performance issues," Thomas said.

Many customers prioritize cost less than others do. Nearly a quarter of respondents in the 451 report said they pay up to 10% more to use a private cloud rather than a public cloud.

"When I think about buying coffee, I am usually willing to pay 10% more to get a really good cup of coffee compared to one that isn't really what I want," 451's Rogers said.

Cloud cost comparison aside, private cloud involves more work, from management of the data center space to hardware evaluation and purchase. But it might be worth it if a company wants more control over data or it needs to meet compliance requirements, provided the additional cost is not prohibitive.

These survey results are the newest piece of the puzzle in the public vs. private cloud cost comparison debate. Other updates to the 2016 study could shed new light on how efficient a private cloud must be to cost less than a public cloud. Prices in the public cloud could continue to drop, while private clouds in enterprise data centers incorporate better capacity planning and automation along with analytics and artificial intelligence advancements, he said.

Robert Gates covers data centers, data center strategies, server technologies, converged and hyper-converged infrastructure and open source operating systems for SearchDataCenter. Follow him on Twitter @RBGatesTT or email him at rgates@techtarget.com.

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How do you do the calculations for a public vs. private cloud cost comparison?
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Interesting. I am wondering if all the costs of having a private cloud are included in the calculation. Of course there is the easy to capture initial capital costs, but what about depreciation? How about on-going vendor support? Real estate costs? Utility costs? What about security (both physical and logical), what are the costs attached to those resources? I think when you start to add up all of those costs (to be fair, most people rarely get to see the entire field of costs) you will find that the public/private cloud costs aren't that different.
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Great questions dcase99. It seems possible to miss some factors when calculating private cloud cost.
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