There is an interesting debate going on over on the Google cloud computing group that also helps point out some of the appropriate use cases for cloud computing. The example used is a simple comparison of Amazon EC2 vs. purchasing a set of servers for development purposes ( I have added some additional costs and scenarios below ) This example also assumes the servers fit in existing space and either environment would be managed by existing staff.

Purchase – on Premise
$ 15,000 Quad-Core Servers ( 5 x 3,000 each  )
$ 750 1/2 Rack + Gigabit Switch
$ 15,750 Total Hardware cost
$ 5,800 Annual amortized cost, 5% over 3 years
$ 0 Assuming no incremental real estate cost
$ 2,000 Annual power & AC cost
$ 7,800 Total annual cost on premise
Purchase – at Colo
$  8,000 Colo fee’s; 1/2 Rack + power + bandwidth
$  5,800 Annual amortized cost
$ 13,800 Total annual cost at Colo
$ 35,040 24x365x5 Amazon EC2 ( $.80 per high CPU Server instance hour )
$  8,320 40 hours x 52 weeks
$    688 40 hours x 4.3 weeks

On the surface it’s apparent that EC2 is significantly more expensive if the set up is utilized 24x7x365, even a 40 hour week yields a slightly higher cost. So where is all the savings ? What’s all the hype about ? This simple example does point out that the Cloud is not always a more cost effective solution it really comes down to what is the particular use case and alternative costs. For example if there is no space available or the existing space has reached the power limits of the facility ( a more common occurrence ). That means that the likely scenario is finding a Colo facility to provide space power and bandwidth. Depending on location and bandwidth usage this could easily cost $8,000+ per year plus additional remote administration hardware and service fees, effectively increasing the annual cost of purchased equipment to near $ 14,000. Although this option is still less than Amazon if utilized 24x7x365, it now is significantly more than the cost of the 40 hour week at EC2 which may be reality for a development environment. And if you only need the setup for a month of dev or testing Amazon becomes a no brainier.. put on your credit card !

What both examples point out are the fact that there is no single answer. In fact the right answer for many companies might be premise plus cloud. In order for this to work for a single workload however a seamless connection would be required, recognizing this has led to the Citrix Cloud Bridge based on our WANScaler acceleration technology. In fact, Citrix is in the unique position to be able to assemble the prerequisite technologies that make the C3 Citrix Cloud Center an optimized solution for many scenarios.

There are many other pro’s, con’s and hidden costs of each option, I am interested to hear what the community has considered regarding Cloud economics and/or other factors.

Part 2 – Premise Plus Cloud

Part 3 – Reserved Pricing

Part 4 – Amazon EC2 vs Terremark vCloud

Part 5 – Amazon EC2 Micro AMI

Part 6 – Rackspace Does Windows

Part 7 – Amazon Lowered the Bar Again