Outsourcing Cloud: Colocation or Cloud hosting?

Eleven years ago Amazon launched Amazon Web Services (AWS) and kicked off perhaps the most transformative shift in the history of the $300B data center industry. The idea stemmed from something simple: Amazon had built such a massive and highly efficient data center that it could sell off capacity with pay-as-you-go pricing. But Amazon started a revolution that’s on track to completely redefine how computers work in the enterprise. While there are several remote computing options currently on the market, two of the most widely implemented solutions are cloud hosting and colocation.

 

Colocation (e.g: Equinix)

Colocation providers rent out physical space for servers, hardware, and other equipment. Colocation costs include power, storage, climate control and bandwidth. When businesses colocate, they are outsourcing storage and maintenance of physical hardware and servers while retaining ownership of the equipment. Colocation is especially valuable for organizations that have invested heavily in physical equipment, or for those that simply lack the space and power required to maintain the hardware at their own facility. Additionally, some businesses use colocation as a backup system or implement colocation as a way to preserve staff time and company resources. Ultimately, colocation is an excellent option for businesses that wish to outsource data management while retaining control of their hardware.

 

Cloud Hosting (e.g: AWS, Azure etc.)

Cloud hosting providers administer off-site, cloud-based software, storage, and infrastructure. Providers own the equipment and they manage system security, maintenance, and upgrades. The provider hosts and delivers the system and equipment as a service. Cloud hosting providers supply and manage the full hardware and software infrastructure. Servers, software, and network are delivered to businesses as a service. Cloud hosting is an excellent option for businesses that don’t have an existing data management infrastructure, or simply don’t want to maintain or invest in one. Businesses should also consider cloud hosting if they intend to replace existing infrastructure easily and efficiently.

 

Which one is cheaper?

The math around this issue tends to get very fuzzy because a true apples-to-apples comparison requires capturing a lot of soft costs. The cost of a CPU chip is easy to measure. But the calculus gets more complicated when considering that on the public cloud you get a lot more than a bare chip—you get a fully managed service. Therefore you need to capture the cost of labor associated with deploying and maintaining the server. This cost is nontrivial, and the measurements I’ve seen vary widely depending on which outcome one is rooting for—on-premise servers or cloud-based servers. And the cost of cloud computing is dropping faster than on-premise equipment, which needs to be factored in as well. When comparing costs, however, we must also consider utilization, which is a key parameter. On the public cloud, you pay only for what you use. When you rent your own server, you pay for it all the time—whether it’s busy or not. If you’re running an application at 100 percent utilization, then 50 percent of the time it might be cheaper to build the server yourself. But in practice, it’s really hard to keep a server running at 50 percent or more utilization around the clock. Very few apps work this way. Gartner estimated that properly managed storage infrastructure has server utilization of less than 15 percent, CIO Magazine cited a Gartner analyst calling it at about 25 percent, and most recently AWS pegged on-premise utilization at less than 20 percent. When I talk to actual IT ops people, they smirk and say, “More like 10 percent.”

 

Where does the truth lie?

In my opinion, it doesn’t matter. The driver for using the public cloud is not a 10 percent or even a 90 percent cost improvement. It’s about something more important- the desire that has been pent up in the enterprise for decades. The business needs agility—the freedom to deploy new services as soon as they are ready, and not be bogged down in forecasts that are almost certainly wrong.

 

References:

https://www.forbes.com/sites/tomgillis/2015/09/02/cost-wars-data-center-vs-public-cloud/2/#6882b45e74bd

www.selecthub.com/cloud-technology/colocation-vs-cloud-hosting

https://www.atlantech.net/blog/private-cloud-vs.-data-center-which-is-your-best-bet

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