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Cloud TCO: How to Avoid the Myopic Mindset Trap

Some CIOs and IT managers will point to complexity within the solution evaluation process to excuse their delay in adopting cloud-based offerings. In response, 451 Research has introduced its latest Cloud Price Index (CPI), detailing an objective investigation of the complete cost of cloud computing.

The Index is intended to enable enterprise buyers to have transparency into the pricing models of both public and private clouds, analysis of the total cost of ownership (TCO), and insight into what 451 Research calls the "golden ratios" that determine when private or public cloud options deliver superior value.

"The CPI is a tool that will benefit buyers weighing the most appropriate venues to run applications and workloads or to source services and providers determining pricing strategies," said William Fellows, vice president at 451 Research.

The "Cloud Price Index: Private Edition" reveals that equivalent solutions from commercial software vendors have TCO advantages over OpenStack -- primarily due to the relative high-cost and limited-supply of adequately skilled and experienced software engineers.

According to their assessment, the typical cost of small-scale enterprise private clouds powered by VMware, Red Hat and Microsoft are all within half a cent of each other -- at about $0.10 per virtual-machine hour -- while OpenStack distributions cost, on average, $0.08 per VM hour, theoretically producing a 20 percent saving.

But when factoring other elements -- including the apparent scarcity of technical talent with proven OpenStack skills -- 451 Research believes that for a typical deployment, buyers could hire 3 percent more engineers to support a commercial cloud environment, and still have a lower cost of ownership compared to an OpenStack distribution.

Their market study reveals that OpenStack distributions can provide a TCO advantage over the DIY approach for a typical small-scale enterprise deployment, but only where the use of a distribution results in a 45 percent technical staff saving.

Considering the simpler implementation and operations afforded through a distribution, 451 analysts believe such a saving can be achieved, therefore giving OpenStack distributions a lower TCO for most deployments.

Why Golden Ratios Matter

In their calculations, the value of managed and public clouds compared to self-managed implementations depends on how many virtual machines a team of engineers is able to successfully support.

Using the CPI as a tool, 451 Research has analyzed the "golden ratio" of how many virtual machines a team of engineers must be able to support on a private cloud for a TCO advantage to be achieved in a small-scale enterprise scenario.

If a private cloud is being successfully operated with a ratio of at least one engineer to about 100 virtual machines, it may be deriving better TCO than the averagely-priced managed private cloud.

Furthermore, if each engineer is not able to fully support this minimum amount, an average managed cloud is likely to be cheaper. For mission-critical, resource-intensive workloads installed on a private cloud, this ratio might not be achieved, and thus managed services offer better TCO.

Achieving Business Outcomes Matter More

Given this latest market assessment by 451 Research, it's easy to be left with the impression that cloud computing is being viewed as a commodity by the typical IT organization and the CFO that oversees their budget allocation -- it's merely a resource to be consumed, in the most efficient manner.

That being said, from a savvy CEO perspective, the full potential is so much greater than this view. The application of cloud computing platforms -- when combined with DevOps current best practices -- is a means to a end objective that can potentially deliver a much-needed business outcome.

Attainment of a strategic competitive advantage is of paramount importance to senior executives that have placed huge bets on the promise of Digital Business Transformation projects that have yet to be planned and executed. My point: while a cloud TCO assessment tool is helpful in the procurement process, one should be mindful of the big picture and not lose sight of the ultimate goal.

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