Cloud Computing Economics

Ville Volanen vvolanen@cc.hut.fi

Packaged Software There are several fixed costs

Licence Hardware Datacenter Maintanance staff

Scaling is problematic Scaling up can be expensive and require of

expertice and time if you need to invest to hardware

Scaling down might not save much as fixed costs stay the same

Difficult to estimate costs High barrier of entry

OpEx

CapEx

Cloud Service provider builds and maintains the capacity

Hardware Datacenter Maintanance staff

Customer pays what s/he uses Scaling is simple

Costs of customer depend on usage No investment to hardware required Service provider has less need for scaling (average

usage) Costs are easy to estimate Low barrier of entry

OpEx

Datacenter, traditional way Build datacenter componen by component Each component needs to be handled

separately Ordering and shipping Unpacking, racking, installing Maintanance is continuous

Lots of skilled labour is needed Increasing capacity increases costs

More ordering, shipping, unpacking, maintanance etc

New workforce needed

Datacenter, better option Build datacenter module by module

Each module with 1000 (or so) systems Modules need only electricity, network

connection and cooling water No unpacking or installing Shipped once (instead of thousand times) and

dropped to place Modules are not serviced during their life span

Due to high number of systems in module broken hardware has only a small impact of module performance

Aged modules are shipped back to manufacturer and recycled

Datacenter, better option, cont Adding capacity has only minimal effect to

costs (as long as there is room) No service, installations, etc. Economies of scale drop costs

Module assembly can be automated Again, economies of scale drop costs

Some extra challenges if the modules need to store information Broken disks are not replaced since there is no

service For example networking does not have this problem

Is cloud always a good option? Would it be economical to buy a couple of

virtual servers for every day use from cloud? Initial costs would be lower but is that relevant?

But also virtual servers need maintanance (install and update apllications, performance monitoring etc). Cost per server could be around €1000 Cost per technician could be around €50.000 each

year

Acquiring a relatively small number of servers from cloud is not necessarily very economical

Applications ”blocks” For example services provided by Amazon and

Google for system development Simple databases

http://labs.google.com/papers/bigtable.html Data storage http://aws.amazon.com/s3/ …

Developing similar capabilities from scrath would cost huge amounts of money (datacenter costs plus software development)

Allows faster time to market as some blocks are already there. Also development can be done in production-like enviroment.

Internal services as cloud Typically cloud computing is seen as a service

for external customers Company internal clouds are possible as well.

IT department is seen more like an internal service provider

This increases control to resources and adds accountability

Direct cost savings smaller compared to external clouds due to smaller number of ”customers” Economies of scale

Conclusions Cloud computing can potentially create huge

savings Calculations from analysts suggest savings up to 80%

in business applications are possible Cost profile is different between cloud and

traditional computing CapEx to OpEx

Cloud computing is not always cheaper In addition to dropped unit costs cloud can reduce

barrier of entry and time to market

Thank youKiitos

References Architecture for Modular Data Centers

http://arxiv.org/ftp/cs/papers/0612/0612110.pdf

The Benefits of Virtualization and Cloud Computing (http://virtualization.sys-con.com/node/870217 )

Cloud computing economics (http://www.cloudcomputingeconomics.com/)

http://en.wikipedia.org/wiki/Cloud_computing