A White Paper

https://in.linkedin.com/in/mathew-thomas-181a882

Public cloud costs demystified

Cloud Comparison
October 2016

By Mathew P M Thomas

Notices
This document is provided for informational purposes only. Customers are responsible for making their own
independent assessment of the information in this document and any use of the products or services listed in this
document, each of which is provided as is without warranty of any kind, whether express or implied. This
document does not create any warranties, representations, contractual commitments, conditions or assurances
from anyone. The responsibilities and liabilities of using the products by customers are controlled by respective
product agreements, and this document is not part of, nor does it modify, any agreement that a customer has.

Table of Contents

Table of Contents...................................................................................................................2
1.

Introduction.........................................................................................................................3

2.

Problem Statement..............................................................................................................3

3.

Overall Assumptions...........................................................................................................4

4.

Approach.............................................................................................................................4

5.

Private cloud stack..............................................................................................................4

6.

Public Cloud Stack..............................................................................................................7

7.

Cost Analysis......................................................................................................................9

8.

Summary.............................................................................................................................9

9.

Acknowledgments............................................................................................................10

10.

About the Author...........................................................................................................10

1. Introduction
Public clouds like Amazon web services (AWS), Microsoft Azure to name a few has
matured a lot over the years and many customer have already adopted it. There are
customers who are still planning or not yet started using it at it full capacity. One of
the reasons could be the doubt whether it is a cost effective proposition. There are
many examples explaining how public cloud is like a utility service and one needs to
pay as per usage. However the fact remains that in public clouds there are many
services and when you stack up all these services, then how does the spend per
month look like? This whitepaper is an attempt to demonstrate the cost comparison
using some of the standard services used by any enterprises.
How can I forecast budgets accurately?
Can public cloud really give me savings?
Can I architect public cloud the same way as my inhouse DC?
This white paper takes into account one of the common public clouds available in the
market. There are many TCO calculators available including the one at AWS
https://awstcocalculator.com/ but all of them require inputs from an experienced
solution architect. An attempt is made here to showcase typical IT components that
are required for any enterprise and then use it for TCO calculation. This also has
prices which are based on experiences handling different projects.
This whitepapers focus is not on the technical explanation of the architecture used
for building up the TCO but more on the infrastructure elements and the cost
associated with it. The architecture is also not a reference architecture and will
require modifications based on customers actual requirements.
2. Problem Statement
One of the concerns for any CIO is cost and always look at avenues to reduce it. Lot
of people gives suggestions, product vendors come up with new features highlighting
the need to adopt it, analysts have their point of view on the future trends and the
need to align with their view points, service providers speak about outsourcing,
transformation and reducing operational costs etc. However the realization of all
these savings happens after sometime. Some of them do proof of concepts and
some demonstrate capabilities done in other projects. Therefore service levels level
play a very important role in all such transactions to tie down costs upfront.
At some point we all dream to predict the future and have power to guide the
outcomes the way we want.
Any enterprise, thinking of transformation and adopting new technologies, always
think of
What will happen in the next three years?
Will the transformation being adopted last atleast 5 years?
How does the cost stack up?
What would be the Capex and Opex costs while moving to a private, public or
a hybrid model or adopting new technologies?

Asset refresh will happen in all organization due to the way IT is transforming. Time
of this cycle will be different for different organizations but it has to happen. During
this process focus will be to avoid capex expenses and look out for alternatives. This
is where utility based service comes in and focus will be to adopt it.
TCO calculators are available from almost all vendors, but all will have their inherent
interests protected while generating the reports. Is there a way to get an accurate
TCO?
3. Overall Assumptions
The assumptions to create the TCO is being stated upfront as this will help in
understanding the scenario better

Architecture considered is to baseline the infrastructure components in a

colocation environment and then map it to a public cloud
Open source products are considered in select places to avoid the license
costs in the calculation
Primary DC has HA components but not in secondary site
All costs taken are based on experience working with OEM. The actual costs
can vary.
VMware SRM cost is not factored in the calculation
IT labor and other services not factored in TCO calculation.
Cost for Windows operating system not factored as it would similar in both
scenarios
All prices are in USD

4. Approach
Initial thought process was to look at most of the TCOs available and see the output
generated by them, the parameters and the cost associated with it. Since most of
them required lot of input data, the approach taken in this document was to use a
reference architecture that is used commonly in any enterprise which will help people
connect quickly and then use that data as the reference point for TCO calculation.
The private cloud stack assumes that the hardware is purchased and installed in a
third party datacenter provider. Costs used are based on average price got for
different projects rather than using list price. These prices will vary for different
geographies and customers, and in some cases may be even lower.
5. Private cloud stack
To build a private cloud one can look at VMware, Hyper-V or Xen. For this
whitepaper, VMware ESXi stack has been considered. Lets take a look at what all
infrastructure components are required to build a private cloud stack. A typically
corporate environment applications would consists of
a.
b.
c.
d.

Active Directory Services,

File servers
Print servers
Anti Virus servers

e.
f.
g.
h.
i.
j.
k.
l.

Email Servers
Backup & restore servers
Monitoring Servers
Storage Solutions
Database Servers
Network components
Internet bandwidth
Datacenter Hosting

Lets look at the cost of hardware and software required to run this infrastructure.
Windows is being considered as the guest operating systems and VMware ESXi for
the hypervisor layer.
The high level architecture is given below. This assumes a primary DC and some
components for DR.

The colocation environment consists the following environments and the virtual
instances
Your Colocation environment
Environment : Virtual
# of
# of
RAM
Avg.
Environment
Cores
OS
Servers VMs
(GB)
Utilization
Prod
2
9
32
128
Linux 50%
On
Staging / Test 1
32
128
Linux 100%
demand
DR
1
7
32
128
Linux 50%

The storage factored is NAS with storage replication capability and most of the
features that are available with enterprise class storage. The capacity factored is
given below

DC1
DC2

Storage (TB)
SAN
NAS
0
45
0
20

Object
0
0

The cost for each of the components is given below

Infrastructure Costs
Infrastructure Costs
#
Unit price
6
$11,000.00
Server
45 TB
$48,000.00
Storage DC1
20 TB
$21,000.00
Storage DC2
4
$ 3,000.00
SAN switches
6.25 TB
$12,000.00
Tape Library
tape
Network Switches DC1 2
$ 7,500.00
$ 7,500.00
Network Switches DC2 1
Firewall HA DC1 with
2
$18,240.00
VPN
1
$18,240.00
Firewall Sec
Total

Total Cost
$ 66,000.00
$ 48,000.00
$ 21,000.00
$
11,000.00
$

12,000.00

$
$

15,000.00
7,500.00

36,480.00

$ 18,240.00
$2,33,220.00

Software costs

Hypervisor 1P Std 3yr

Mgmt Srv Std 3yr
Symantec Backup
OS - Windows
DB - Mysql
Monitoring - Nagios

#
6
1
1
18
2
1

Software Costs
Unit price Total Cost
$ 2,000
$ 12,000
$ 8,000
$ 8,000
$ 15,000
$ 15,000

Excluded license costs

Open Source
Open Source
Total

Hosting and Links costs

Remarks

$ 35,000

Items
DC Hosting
MPLS Pri DC
MPLS Sec DC
MPLS Office
Internet Pri Sec
1 GB dark Fibre

Hosting Costs & Link Costs

# Unit
Unit price / month
Term
2
$ 2,000
36
50 MBPS
$ 600
36
50 MBPS
$ 600
36
50 MBPS
$ 600
36
50 MBPS
$ 35
36
1 GBPS
$ 500
36
Total
Cost

$1,44,000
$ 21,600
$ 21,600
$ 21,600
$ 63,000
$ 18,000
$2,89,800

Total Cost for setting up a private cloud

Total Costs Three year spend
Item
Costs
$ 2,33,220
Infrastructure Costs
$ 35,000
Software Costs
Hosting Costs & Link
$ 2,68,200
Costs*
Total Costs
$5,36,420
* MPLS cost for office has not been factored as it would be required for public cloud
as well.
6. Public Cloud Stack
Lets analyze the architecture and infrastructure components required to setup in a
public cloud. In this example AWS is considered for public cloud and all costs are
taken from the AWS website.
Some assumptions taken into the design are
Only one office is considered for connecting to AWS
S3 bucket is factored only for one region. Cost for
EC2 instances are matched with on-premises servers and VMs based on CPU,
RAM, or storage I/O
For Backup S3 has only been factored
The instance type may change for different customers.
The design factored is a direct connect to AWS to have low latency. If IP VPN is
used, the costs will be lower.

AWS typical cloud architecture for corporate environment

The instances considered in public cloud are

Closest AWS Instances
#
Instance
s

Instance
type

vCPU

RAM
(GiB)

Instance
type

c3.xlarge

7.5

3 Yr. Partial
Upfront RI

c3.xlarge

7.5

3 Yr. Partial
Upfront RI

db.t2.large

3 Yr. Partial
Upfront RI

Remarks
Backup,
Monitoring not
required
Backup,
Monitoring not
required
Backup,
Monitoring not
required

The cost for these instances are calculated based on 3 year partial upfront reserved
instances.
Environmen
t
Prod
Staging / Test

# of
AWS
instances Instance
c3.xlarg
5
e
c3.xlarg
2
e

Upfront

Hou
rly
$ $ 0.05
1,016.00
$ $ 0.05
1,016.00

Total Costs
$ 11,009
$ 4,404

c3.xlarg

DR

5
1

DB Multi AZ

e
db.t2.large

$
1,016.00
$ 872.00

$ 0.05

$ 11,009

$ 0.03

Total

$ 1,689
$

28,111

The storage costs considered are for S3 bucket only

Cost Per
Total Costs 3
Type
Capacity Unit
years
Storage S3
50 TB
$ 0.0300
$ 54,000
Storage S3
15 TB
$ 0.0295
$ 15,930
Total
$ 69,930
The network costs of AWS is mentioned below
Items

Bandwidth

AWS Direct
Connect * 2
MPLS Direct
Connect
MPLS Office
VPN price
NAT Gateway
Internet

Total Costs 3 years

50 MBPS

$ 52

$ 3,744

50 MBPS

$ 600

$ 21,600

50 MBPS

$ 600
NA
NA
NA
Total

$ 21,600
$ 439
$ 395
$ 5,580
$ 58,938

2000 GB / month

AWS cost for a three years term

3 year AWS cost

$15,698 $28,111
$58,938
$69,930

Compute

Storage

Network

Support Cost

Compute
Storage
Network
Support @10%
Total

Cost Per Unit

$ 28,111
$ 69,930
$ 58,938
$ 15,698
$ 1,72,677

7. Cost Analysis
The three year cost for private cloud setup in Colocation and public cloud setup in
AWS is given below

Colocation vs. AWS

$600,000

$536,420

$500,000
$400,000
$300,000
$172,677

$200,000
$100,000
$-

Colocation

AWS

3 Yr. Total Cost of Ownership

Colocatio
AWS
n
Server
$ 28,111
$ 2,33,220
Storage
$ 69,930
Hosting
&
$ 2,68,200
$58,938
Network
Software
$ 35,000
NA
Support
$15,698
Total
$ 5,36,420
$ 1,72,677
.
8. Summary
The comparison clearly shows that using public clouds has significant savings. Even
if higher configuration instances used, savings are still in the range of 60% to 50%.

One of the major costs for this is the investment in hosting and networking. which
public clouds are able to offer to due economies of scale. There are many
Datacenter / Colocation providers that provide switch ports and firewalls on per port
basis. So if the organization policies allow such usage, the costs would be
significantly lower for private cloud setup.
Every organization will have a mandate to use private or public cloud, based on
compliance or business reasons, and cost may not be the only factor that decides it.
Most of the public cloud providers also give PAAS and SAAS offering which can be
quickly integrated.
This whitepaper focus was on cost comparison and providing guidance for cost
estimations. Each use case will be unique but if applications and business policies
allow using public cloud, then start the journey quickly.
9. Acknowledgments
Amazon Web Services, Microsoft, VMware, NetApp, Symantec, Juniper
All brands and products referenced in this document are acknowledged to be the
trademarks or registered trademarks of their respective holders.
Rahul Taneja ((https://in.linkedin.com/in/rahul-taneja-a169256)) for proof
reading and refining this whitepaper. He is a solution architect for all Cloud at
ValueLabs
10. About the Author
Mathew Thomas is the Vice President for Datacenter Practice at ValueLabs. He has
more than 25 years of experience in the IT industry. He has spent more than two
decades in Wipro Technologies. He has handled multiple infrastructure projects in
private and public cloud setup, creating customized solutions for customers and
providing next generation transformative solutions. He can be reached at
https://in.linkedin.com/in/mathew-thomas-181a882