Ed Byrne, October 2012

Practical Cloud Economics

About Me

Cloud and Enterprise IT Entrepreneur

CEO, CloudVertical - “Reducing IT Waste”

Previously GM, Hosting365 (now SunGard)

@edbyrnewww.edbyrne.meblog.cloudvertical.com

Agenda

What is Cloud Economics

The Myths of Cloud Computing

Variables and Cost Models

Resources

Principles of Cloud Economics

IT as a Utility - Available and Scalable

IT is Paid for using a Consumption based model

Theoretically 100% capital efficient

Capacity is CapEx and Cyclically Driven

Usage follows predictable patterns

Cost increases with time and complexity

IT Cost Model

Capacity scales up and down in line with demand

Usage follows predictable patterns (no change)

Cost matches capacity - pay as you consume

Cloud Cost Model (Theory)

Capacity is provisioned based on expected load

Usage follows predictable patterns

Cost goes up and to the right, with an **** moment

IT Cloud Cost Model (Actual)

Cloud Economics Reality

The Cloud is not analogous to the Electricity model.

The Cloud is not Pay as You Go. It’s Pay as You Provision.

Utilisation is the problem -> the traditional capacity planning model has migrated to the Cloud.

• Physical Hardware - 20% Utilisation Average• Virtualised Infrastructure - 30% Utilisation Average • Cloud Deployments - 30% Utilisation Average

IT / the Cloud isn’t inefficient

You are

Traditional Culture

IT has never been responsible for Cost metering

Budgets are aspirational targets

Existing tools focus on Uptime, Usage and Performance Monitoring

Efficient Computing

You can’t manage what you don’t measure

Create Accountability, Visibility, Reporting

Meter Cost, Capacity and Usage

Show-back reports for each use type

1. Inform 2. Improve 3. Maintain

Myths

Myth # 1Cloud is Cheap

Like for Like - More Expensive

But it’s not Like-for-Like

• Scalability & Flexibility

• Resilience & Redundancy

• OpEx not CapEx

More Cost Effective for a lot of workloads

Truth

Myth # 2The Cloud is

Cheaper than DIY

Versus Fully Loaded Server Cost - True 90% of time

Do you know the true costs of your IT infrastructure?

Cloud often ‘looks’ more expensive but is not.

Netflix vs Zynga models -> both right

Truth

Myth # 3Pay for What You Use

Pay for What you Provision

Truth

Myth # 4“I can migrate easily”

Data IN is FREE

Data OUT is NOT. For a reason.

Data Gravity : Data attracts more Data

More Data = More Costly to Move

Truth

Myth # 5The Cloud is Managed

Cloud Providers manage their Cloud

Not Yours

Ops is going Nowhere

Truth

Myth # 7Cloud is more Efficient

Jevon's Paradox : The easier it becomes to consume a resource, the more of it that will be consumed.

The Cloud has enormous efficiency capabilities.

Waste is not a technology problem, it’s a people one.

Truth

Time KeyDay = 24 Hours Week = 168 HoursMonth = 730 HoursYear = 8,760 HoursMonth = 2,628,000 Seconds

AWS Costs Cheat Sheet

On-Demand Instance CostsInstance Hour Day Week Month Year

MicroSmallMediumLargeExtra LargeExtra Large High MemoryDouble Extra Large High MemoryQuadruple Extra Large High MemoryMedium High CPUExtra Large High CPUQuadruple Extra Large Cluster ComputeEight Extra Large Cluster ComputeQuadruple Extra Large Cluster GPUQuadruple Extra Large High I/O SSD

0.02 0.48 3.36 15 1750.08 1.92 13.44 58 7010.16 3.84 26.88 117 14020.32 7.68 53.76 234 28030.64 15.36 107.52 467 56060.45 10.8 75.6 329 39420.9 21.6 151.2 657 78841.8 43.2 302.4 1314 15768

0.165 3.96 27.72 120 14450.66 15.84 110.88 482 57821.3 31.2 218.4 949 113882.4 57.6 403.2 1752 210242.1 50.4 352.8 1533 183963.1 74.4 520.8 2263 27156

Regional Cost DifferencesRegion Variation

US East (Virginia) BASE US West (Oregon) 0%US West (California) 12.5%EU (Ireland) 8%Asia (Singapore) 8%Asia (Toyko) 15%South America (Sao Paulo) 45%

All Prices in Dollars, from US East Virginia as published 11 October 2012. Tiered Discounts and Free Tier Amounts Not Applied. For more info go to www.cloudvertical.com

StorageInstance Storage N/A EBS Standard 10c /gb-month (provisioned)EBS PIOPS 12.5c /gb-month (provisioned)EBS Requests 10c per million EBS Provisioned IOPS 10c /month (2.628m requests)EBS Snapshot 12.5c /gb-month (stored)S3 Standard 12.5c /gb-month (stored)S3 Reduced Redundancy 9.3c /gb-month (stored)Glacier 1c /gb-month (stored)

NetworkData IN FREEData OUT 12c /gbData within AZ FREEData within Region 1c /gb Managed Data (EIP/ELB) 1c /gb Load Balancer 2.5c /hourLoad Balanced Traffic .8c /gbIP Address Per Instance FREEExtra or Unused IP Address .5c /hour

Instance SizesAPI name Compute Memory Hourly Cost

t1.mirco < 2 0.613 0.02m1.small 1 1.7 0.08m1.medium 2 3.75 0.16m1.large 4 7.5 0.32m1.xlarge 8 15 0.64m2.xlarge 6.5 17.1 0.45m2.2xlarge 13 34.2 0.9m2.4xlarge 26 68.4 1.8c1.medium 5 1.7 0.165c1.xlarge 20 7 0.66cc1.4xlarge 33.5 23 1.3cc2.8xlarge 88 60.5 2.4cg1.4xlarge 33.5 22 2.1hi1.4xlarge 35 60.5 3.1

Average Reserved Instance SavingsType % Saving Yr 1 % Saving Yr 3

Light 40 56Medium 48 65Heavy 53 70

Know the Units

24 hours /day 168 hours /week730 hours /month8,760 hours /year

40 hours working week173 hours working month2,076 hours working year

Compute - CPU/hour Memory - GB/hour Storage - GB/storedNetwork - GB/managed

Optimise - Rightsize

Development Environment : 40 hours per week (24% available time)

Load Test / System Patch / Software Upgrade: 8 hours / 1 day - once-off

Back-office Applications : 40 hours per week ‘heavy’; outside hours 25% capacity

Travel / E-Commerce Site : Busy Consumer Hours. Seasonal. Marketing Driven.

ResourcesDeck: blog.cloudvertical.com

AWS Economics Centre : http://aws.amazon.com/economics/

Cloudonomics Book: http://www.amazon.com/Cloudonomics-Website-Business-Value-Computing/dp/1118229967

Microsoft Cloud Economics: http://www.microsoft.com/en-us/news/presskits/cloud/docs/the-economics-of-the-cloud.pdf

AWS Costs Cheat Sheet: https://blog.cloudvertical.com/2012/10/aws-cost-cheat-sheet-2/

On-Premise vs. Cloud Cost Model: http://andrewmcafee.org/2012/10/mcafee-cloud-costs-google-model

Data Gravity: http://datagravity.org/

www.cloudvertical.com