Comparing TCO in private and public cloud

This post discusses how the use of Platform as a Service (PaaS) greatly reduces the Total Cost of Ownership (TCO) of public cloud. When comparing the TCO of a private versus a public cloud implementation of an environment, many enter all CMDB entries into the cost calculator of a hyperscale cloud provider. This approach makes no sense and leads to the wrong conclusions.

Public versus private cloud TCO comparison; how to get it right!?
Traditional comparison of private and public cloud costs

In the period 2010-2013, I led the design and implementation of a private cloud for an enterprise client. We built a dual data centre running around 800 VM’s as well as AIX and IBMi midrange systems. We replicated production block storage synchronously and made disk-based deduplicated backup available in both data centres. It took us more than two years to complete the migration and go live.

Next, we built a financial model to charge out primitives such as compute, storage and back-up. Building a services catalogue is not trivial because all Capex and Opex components need to be included. We allocated costs to activities and activities to services. In addition, we had to make assumptions about the lifetime utilisation of the environment and the efficiency of our operations.

After we completed the services catalogue, I made a comparison to similar AWS primitives such as storage, compute and back-up. I still remember how relieved I was with the outcome. The in-house private cloud turned out to be 20% cheaper than the public cloud at AWS. With hindsight, I now know that my calculations were wrong.

How PaaS reduces public cloud costs

The public cloud is significantly cheaper than the private cloud. Even if you attach zero value to public cloud benefits such as increased flexibility and much shorter implementation times. The reason is the availability of PaaS in the public cloud. PaaS offers commonly used components as managed services. Think of infrastructural components such as a hypervisor, application and network load balancers. As well as server monitoring, server patching, server security & back-up. Furthermore, “higher level” services are also available as PaaS. Examples are relational database clusters, Active Directory servers and Windows File Shares. Finally, services that can be consumed directly by end users such as desktop as a service, app streaming and call centre systems are also available as PaaS. 

When comparing your private cloud with the public cloud TCO you should not copy paste your list of servers from your CMDB in the public cloud cost calculator. The number of servers you will be running in the public cloud will be significantly lower. Take Trend Micro as an example. In your private data centre, you need to run a Trend Micro VM on each ESX frame. In AWS, you can buy the Trend Micro service from the AWS marketplace. You only need to install the trend micro agent on each of your VM’s and the rest is taken care of for you. Similarly, you need no VM’s to manage your hypervisor and you can get rid of your Citrix or RDP stack by implementing services such as Amazon Workspaces and Amazon App Stream 2.0.

Advantages of PaaS for organisations

Some years later, when I was the IT responsible for an organisation we reduced the number of servers from 150+ to 20 by moving to the public cloud. By moving MS Office on-premise to SaaS, eliminating the Citrix stack and not needing many “infrastructural” servers made all the difference. In this case, the TCO reduction exceeded 60%. Another example: for one of our customers we moved its datawarehouse from IaaS to PaaS and reduced the TCO by 80%.

In addition to these “sizing” advantages, using PaaS helps you gain enormous speed and increase robustness. Whenever I had to build a database cluster across two data centres in the private cloud, the exercise was painful. You need to find and book the right engineer and the whole lead time can take weeks. Once you go live, any problems in the cluster are often very difficult to diagnose and resolve with your in-house team. Calling back an external engineer can take days. As for spinning up a new database cluster spanning two data centres at the drop of a hat in the private cloud… you can forget about it.

If you want to read more about PaaS services check this blog post here.

Significance of PaaS for public cloud providers

Steven Sinofsky (former President of the Windows Division at Microsoft) and Steven Ballmer (CEO of Microsoft from 2000-2014) were on Clubhouse last week discussing all matters IT. Steven Ballmer said:

With Azure, I wish we probably started two years earlier. And we started actually with Platform as a Service, instead of Infrastructure as a Service. Probably would do that a little bit differently. It cost us a little bit of time in the eventual battle with AWS.

Since PaaS is so important to customers, it is no surprise that PaaS is a key differentiator of the public cloud providers. AWS has had a massive head start and its portfolio of PaaS services is a strong differentiator. 

How to compare the TCO of private and public cloud

In order to compare your private cloud to your public cloud TCO you need to determine which PaaS services make sense for you. You will maximise the impact by focusing on minimising your IaaS footprint and moving as many functions as possible to SaaS and PaaS. 

Once you have mapped what goes where, you can utilise the costing calculator to make a first estimate. More iterations are nevertheless required because the public cloud offers many possibilities to optimise costs. Right sizing, optimising licenses, playing with spot, reserved or on demand instances or moving to open source components all contribute to lowering TCO. 

In my experience you reach steady state 6-12 months after going live in the public cloud. This is another difference to private cloud. In private cloud you reach steady state faster because there are fewer extra benefits to realise after go-live. The public cloud is the gift that keeps on giving. 

Are you interested to discover how we can help you design your public cloud environment, control your cloud spend and identify savings? Get in touch and send us a message.

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