Cloud

Why arguments for private cloud cost competitiveness are 'almost always false'

Bernard Golden summarily dismantles the notion that enterprises can run clouds more efficiently than the public cloud leaders. Here's why.

Let's be frank: You may have good reasons to use private cloud resources. But let's be equally clear: Cost isn't one of them.

Oh, sure. You've heard that public cloud is "obscenely expensive at scale." You've seen that companies like Facebook and Twitter build out their own private clouds (even as Netflix does not and Etsy, which told me it can better optimize IT resources in its own data centers, is now being pressured by activist investors to give up this dream and go public cloud). You want to be like them?

Well, you're not. And, as Navica CEO and cloud expert Bernard Golden has written, everything you've been told about public and private cloud costs is wrong. So wrong, Golden said, that most of the arguments for private cloud cost competitiveness are "almost always false."

Scale matters, and you don't have scale

Again, there are good reasons to run private data center workloads, as I've written. Security and governance are two of the most cited reasons, but probably the best one, as Red Hat CMO Tim Yeaton informed me, is that while CIOs are not blind to the ultimate public cloud prize, they get paid to manage their IT as it is, guiding it to where they'd like it to be. That means public cloud is a guiding goal, and not a magic elixir that can be immediately applied to every business application immediately.

Even so, those who cling to cost as a reason to stay private are deluding themselves.

SEE: Cloud is cheaper than VMs and containers for most new applications (TechRepublic)

Golden calls out a number of factors—from hardware and software infrastructure, to bandwidth, to energy, to labor, to the cost of capital—and every single one favors public cloud in terms of cost. Using hardware as an example, Golden noted: "Providers buy in much larger quantities than almost every IT organization, so receive volume discounts. Moreover, most of them have moved to internal design and direct purchase from Asian ODMs, so they avoid paying the profit margin imposed by a systems vendor. And for sure, none of the webscale providers buy 'enterprise-grade' equipment, unlike most enterprises."

Of course, as Golden said, most organizations have no clue what their costs are, given that those costs are strewn across different departments. At best, enterprises are engaged in wishful thinking when they presume to engage in a cost competition with the AWS, Microsoft Azure, or Google Clouds of the world.

Making margin on you

Of course, just because a public cloud provider's costs are lower than those of a private enterprise doesn't mean that they're passing on those savings to you. AWS has been Amazon's primary profit center for some time, even as it relentlessly lowers prices (followed or prompted by Microsoft and Google). AWS, in other words, has plenty of margin to burn.

SEE: How Red Hat's strategy helps CIOs take baby steps to the cloud (TechRepublic)

And burn it will. To win, the public cloud providers need to maintain a cost advantage, even with all the other benefits that come from the cloud. As Golden stressed: "[E]veryone talks about how cloud computing enables agility, but the reality is that cloud computing makes agility affordable. Absent its cost advantages, its ability to enable users to more rapidly access resources and roll out applications would be meaningless."

Otherwise put, "[I]f agility's too expensive, no one's going to take advantage of it," he stated elsewhere.

Cost matters, and cost considerations favor public cloud. Again, there may be very good reasons enterprise CIOs stick with private/hybrid cloud computing for some workloads, but cost should not be one of them.

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About Matt Asay

Matt Asay is a veteran technology columnist who has written for CNET, ReadWrite, and other tech media. Asay has also held a variety of executive roles with leading mobile and big data software companies.

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