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Are Clouds Cheaper?
Larry Smith|Tuesday, May 19, 2015
Enterprise Application Specialist

The real answer is...sometimes. One must consider that the computer technology available to you is not that different from the gear the cloud provider is using. Cloud providers have the advantage of economies of scale. Their price point to buy an extra server to host your application is generally much less than your cost to buy one of the same device. Cloud providers get a great discount because they buy in large volumes. Their setup and config costs are low because they use highly automated processes to load an O/S and configuration. The price equalizer is the Cloud provider must add back in a margin for profit and overhead. So for the sake of comparison, let's call the acquisition price even.

Next we ask how much of the server capacity will you use. Computer resources are the most cost effective when idle resources are kept to a minimum. Trouble is the utilization rate for applications tend to grow over time. If you buy this machine just big enough to handle the initial load you will run into capacity problems very quickly. You must buy them bigger than you need for today's workload to accommodate future growth. The cloud option doesn't have a cost for reserve capacity. When you need more computing resources you just use them. The cloud provider promises to keep enough reserves on hand for all your future needs all at no upfront cost.

The final consideration in the cloud cost equation is how long will you run this application on this server? If the useful life of the application will be longer than the useful life of the server you may squeeze more dollars out of the on-premise machine. It's similar to buying a car. If you buy a car that dies before the payments end, the economic cost is high. If your car lasts for many years beyond the final payoff you will have made a better buying choice. This reminds me of one of my very first economic lessons. I was sitting outside the local malt shop feeling very proud of my very first new Chevrolet. An elderly gentleman drove up in an older but well-kept Mercedes Benz. As he passed by I quipped something to the effect of "Why would anyone spend that much money on a car?" I saw a confident grin come over Mr. MB. He said, "I'll be right back." I've seen that look before. On the face of my grandfather just before he disclosed the hidden wisdom behind another life lesson. Mr. MB did return with a caramel sundae in hand. He said, "So you think I overpaid for old Belle?" "I looked at a Benz." I said. "It was three times what I had to pay for that Chevy." "That's a very nice car you have. And it sounds like you got a very good deal." he said although sounding just a little patronizing. "How many miles do you expect to get out of your new ride?" he asked. "I'd be happy with 100,000." I replied. "Sounds about right. My Belle over there has over 1 million miles on her. I got 10 times the miles for only three times the cost. So who got the better deal?" I could not find the math to muster an economic retort. I left the malt shop that day feeling a lot less excited about my new Chevy and very curious about why these thousands of drivers I pass on the road weren't also driving a million mile Mercedes. The answer I came to discover was that very few had the cash resources to buy a new Mercedes. Cash flow dictates the buying options for most of us. The same holds true for technology purchases. The cloud offers an entry point with a very low total cost of acquisition (TCA). The total cost of ownership (TCO) over time may be more equal especially for those who can get more mileage out of their hardware purchases.

QLogic adapters are favored by both cloud providers and architects of on-prem systems because they have the reliability and durability for the long haul. It's the brand most ask for by name in systems that matter.

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