"cloud adoption" entries

Public vs. private cloud: Price isn’t enough

The risk relative to the savings isn’t enough to justify a shift to public cloud.


This post was originally published on Limn This. The lightly edited version that follows is republished with permission.

Last October, Simon Wardley and I stood on a rainy sidewalk at 28th St. in New York City arguing politely (he’s British) about the future of cloud adoption. He argued, rightly, that the cost advantages from scale would be overwhelming compared to home-brew private clouds. He went on to argue, less certainly in my view, that this would lead inevitably to their wholesale and deep adoption across the enterprise market.

I think Simon bases his argument on something like the rational economic man theory of the enterprise. Or, more specifically, the rational economic chief financial officer (CFO). If the costs of a service provider are destined to be lower than the costs of internally operated alternatives, and your CFO is rational (most tend to be), then the conclusion is foregone.

And, of course, costs are going down just as they are predicted to. Look at this post by Avi Deitcher: Does Amazon’s Web Services Pricing Follow Moore’s Law? I think the question posed in the title has a fairly obvious answer. No. Services aren’t just silicon; they include all manner of linear terms, like labor, so the price decreases will almost certainly be slower than Moore’s Law, but his analysis of the costs of a modestly-sized AWS solution and in-house competition is really useful.

Not only is AWS’ price dropping fast (56% in three years), but it’s significantly cheaper than building and operating a platform in house. Avi does the math for 600 instances over three years and finds that the cost for AWS would be $1.1 million (I don’t think this number considers out-year price decreases) versus $2.3 million for DIY. Your mileage might vary, but these numbers are a nice starting point for further discussion.

These results raise an interesting question: if the numbers are so compelling, why did Walmart just reveal that they are building a ginormous private cloud? Why would anyone? Read more…