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Is there hard ROI to use a cloud IaaS instead of a server in your garage/basement/on-premise datacenter? I think there increasingly is and justifying self-hosting is getting increasingly tough.

I would actually go as far as posit that you can now get a server in a public datacenter at price comparable to your electricity bill alone!

If you don’t believe me – let’s do a quick math.

Mark Kolich noticed in his blog that the server he had running at his home was consuming 220 W, which at the consumer electricity costs of 12-cents per kWh means:

0.220 kWh * 12 cents = 2.64 cents per hour

Almost 3 cents/hour for electricity alone not taking into account: labor, server hardware amortization, data-storage costs (replacing a failed disk), cooling costs, ISP costs, security costs (routers, firewalls, etc.), power backup costs (a UPS) and so on. Mark notes that he could have probably bought a newer more energy efficient server – but the required investment would not justify the savings.

The shocking part is that the recent price competition of cloud infrastructure (IaaS) and platform (PaaS) vendors took the current cloud servers costs to roughly the same order of costs. Here’s a quick survey of a few major cloud players:

  • Microsoft is rolling out their 5 cent/hour option (with additional further discounts if you pre-pay for reserved use – e.g. say you have a bunch of instances which you have running all the time and you are willing to pre-pay for the next few months).
  • Same thing with Amazon: minimal price (although for a slightly more limited version) is already in 2 cent for Linux / 3 cent for Windows instance area, with reserved/pre-paid option getting as low as 0.7 cents/Linux & 1.3 cents/Windows.
  • Rackspace pricing starts at 1.5 cents/hour for Linux, and 8 cents/hour for Windows.

My take on these numbers is that you need to have a really good reason to go into hosting when there is so much price competition in that space and the margins are going down so fast.

The only good reason I can think of is hosting being your competitive advantage in some way. For example, being a local hosting company in a country which legislation is making it hard to use foreign datacenters. Or offering some level of compliance which public hosters cannot provide. And as a matter of fact both of these differentiators are gradually going away with the vendors quickly getting all the possible certifications and compliance stamps you can think of, as well as opening datacenters around the globe.

Cloud is cheaper than your own hosting regardless on how you calculate the costs. Get used to it.

Dmitry

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Here are my notes from the third day of SYS-CON’s Cloud Computing Expo (see also my notes from day 1 and day 2):

Peter Nickolov – President & CTO of 3tera – gave a pitch on how their technology (AppLogic) lets customers use cloud computing for high-availability solutions.

In a nutshell, Peter had an instance of SugarCRM which in his demo could fail-over from one datacenter to another. No changes in the code were required everything was set in the configuration of the application and AppLogic: he copied the application (front-end machines, back-end machines, load-balancers, etc.) to another cloud and set MySQL replication between them. Then when one application goes down their load-balancers detect unavailability of the primary site and give the IP address to the secondary one.

Peter said it took a couple of days to set up the demo. Obviously, SugareCRM was a relatively easy target because all the state information is in a single database, so MySQL replication was sufficient to have the application ready for the hot switch. But nevertheless this was a pretty impressive demo of how AppLogic’s building blocks can provide the additional layer of management and datacenter independence you might want to have with your hosters.

Andrew Comas from CORDYS gave a fairly boring general session on their Process Factory product – basically some kind of mesh-up editor for corporate use.

VMware had 2 sessions that day – by Dan Chu (Vice President of Emerging Products and Markets – which at VMware includes everything from overseeing the SMB space, to virtual appliances, to cloud computing) and by Preeti Somal (Vice President R&D Cloud Computing).

Basically, these were a pitch for the upcoming vCloud solution. The basic idea is actually very close to what we get from 3tera and rPath: the cloud is just a set of virtual machines, let’s make them standardized across the datacenters and provide administrators the ability to manage them as a system – and we got a great flexible solution without a hosting vendor lock-in.

vCloud is definitely more of a roadmap rather than a solution you can try:

VMware vCloud Roadmap

Today, they have their existing on-premise Virtual Infrastructure which a lot of us are using in our companies. In addition to that they have over a 100 hosting partners committed to providing this infrastructure in their datacenter – thus providing the flexibility to choose the hosting vendor.

Next year we will start getting into the second phase – so called “vCloud Services”: which basically means that we will get OVF-based way of grouping virtual machines into systems together with associated policies. And we might get a few sample solutions like the “flex capacity” scanario which was demoed during the VMWorld keynote in September.

Finally, they will provide full Virtual Center integration so you can manage your VMs in one console regardless of whether they are deployed in your network or by a hoster (they are calling that Federation) and more advanced architecture capabilities.

It is yet unknown how much will vCloud move beyond just VMs into additional services such as message queuing to VM interaction, storage and so on. They are saying that some of the infrastructure will be provided (for example load balancing) but not everything because they want to stick to creating the common platform which partners will use for the actual solutions.

My bet is that if they want to compete effectively against Microsoft’s Windows Azure and Amazon’s ever increasing set of Web Services they will have to move up the stack and provide more than the basic VM infrastructure. The question is how fast they can move into these new areas and how much the task of keeping all the datacenter partners happy will slow them down.

Their main bets are on application compatibility – just re-use any VMs you have today – and broad hosting partner range. They are also hoping that their vCloud APIs (RESTfull web services) will enable broad ISV ecosystem.

[Download VMware slides]

Erik Carlin from Rackspace‘s cloud computing division – Mosso talked about cloud standardization. This included:

  1. Common taxonomy: Software-as-a-Service (e.g. Salesforce), Platform-as-a-Service (e.g. Google App Engine) and Infrastructure-as-a-Service (e.g. Amazon EC2).
  2. APIs for storage, compute, network, and data. Right now, even when APIs are common across datacenters (e.g. with vCloud and 3tera) you still get locked into application vendor providing you these. Something like Red Hat’s Libvert abstract hypervisor API could help. Ruben from Enomaly pushing that through the Cloud Interoperability Forum.
    Other issues include identity (Erik thinks that OpenID has the biggest potential here while WS-* will probably be used by Microsoft only), and dependencies on particular cloud services.
  3. Pricing Complexity. How do you actually calculate the compute power provided and what is the Standard Processing Calculation unit? Work on virtualization benchmarks by VMware and Intel can help.
  4. Compliance issues: depending on the industry and application you might get to adhere to HIPAA, SAS70, PCI, or Safe Harbor (Rackspace is certified for the latter, European thing for datastorage).

Overall, common standards should provide for interoperability, lock-in avoidance, fail-over scenarios, better tools for all, cloud bursting and multi-cloud applications – which will enable positive network effects and increase the overall market for everyone.

[Download Erik’s slides]

Next we had Rich Wolski presenting his Eucalyptus project – an open-source clone of Amazon’s EC2 and S3.

Rich is absolutely amazing and his sessions are definitely a must-attend. He talked a lot about the architecture of their solution and how people are using it to try/test their EC2 solutions before deploying them with Amazon:

  • They currently have about 80 downloads a day. Download requires no registration so they do not know how exactly they are being used.
  • The biggest installation Rich knows includes 260 nodes.
  • He does not believe that Eucalyptus can be used to compete against Amazon – you still need people, datacenter infrastructure, know how to do machine rollover and so on
  • They currently have 5 engineers on the project and drop monthly releases. At the moment they do not accept external contribution but might start doing that in spring when they stabilize.

[Download Rich’s slides]

Finally we had Gerrit Huizenga – Solutions Architect from IBM and part of their cloud taskforce share his views on cloud computing. I was surprised that he was actually downplaying the role and newness of cloud computing as much as he could but I guess that is part of being from an established corporation with huge established software and consulting business.

[Download Gerrit’s slides]

That is it for my day to day notes. I will also publish my summary notes once I recover from all the recent traveling and catch up on my email.

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The posts on this blog are provided “as is” with no warranties and confer no rights. The opinions expressed on this site are mine and mine alone, and do not necessarily represent those of my employer Jelastic or anyone else for that matter. All trademarks acknowledged.

© 2008-2012 Dmitry Sotnikov

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