Dave Bartoletti, Senior Analyst Webinar Will You Save Money In The Cloud? Understanding The True Cost Of Cloud Computing Dave Bartoletti, Senior Analyst Andrew Reichman, Principal Analyst September 20, 2012. Call in at 10:55 a.m. Eastern time

Introductions Dave Bartoletti, Senior Analyst Coverage: server and storage virtualization, virtualization management, cloud platforms and cloud management, and data center infrastructure Andrew Reichman, Principal Analyst Coverage: data storage systems, networking, and management software; IT financial analysis, business cases, and NPV

Agenda Buyers question whether cloud saves money. Comparing cloud to your costs is difficult. Using our cloud cost modeling tool Cloud is cheaper for most workloads. What it means: Do the math for yourself. Recommendations

Pop quiz Is cloud just another name for outsourcing? FOR I&O PROFESSIONALS Is cloud just another name for outsourcing? Is cloud the future of the data center? Is the cloud always cheaper?

Today: multiple infrastructure deployment options Figure 7 Source: Source: May 29, 2012, “Assess Your Cloud Maturity” Forrester report

Report focus: public cloud IaaS Figure 7 Source: May 29, 2012, “Assess Your Cloud Maturity” Forrester report

Speed and cost: biggest drivers for IaaS adoption Source: June 20, 2012, “Understand The True Cost Of Cloud Services” Forrester report

But enterprises question whether cloud costs less Source: June 20, 2012, “Understand The True Cost Of Cloud Services” Forrester report

Our analysis: the bottom line Cloud probably will beat your internal costs: When your application scales up and down easily. When your application load is variable. When you only pay for what you use (on demand). Cloud might beat your internal costs: For static workloads if you reserve capacity in advance. But you have to do the math yourself . . .

Will The Cloud Be Cheaper For You? Introduction to the Forrester cloud cost modeling report and tool

How to make an accurate comparison Build a baseline on-site cost model first. Based on virtualized workloads (not P2C) Use derived numbers to simplify your analysis. Use Forrester’s “Relative Cost Of Operations Approach.” Easier to get started Uses derived values wherever possible Focuses on what changes Determines key sensitivities quickly

How our model differs Vendor-neutral Combines compute, network, and storage costs Takes your virtualization maturity into account Simplifies many costs to % uplift Includes administrative costs on-site and in cloud

Start with your baseline on-site costs Source: June 20, 2012, “Understand The True Cost Of Cloud Services” Forrester report

Start with your baseline on-site costs (cont.) Source: June 20, 2012, “Understand The True Cost Of Cloud Services” Forrester report

Results: on-site costs for 100 VMs Source: June 20, 2012, “Understand The True Cost Of Cloud Services” Forrester report

Key costs to modify for your analysis Identify and validate server/storage/network costs: Baseline server and virtual server configuration Consolidation ratios and OS costs Current storage and network costs Estimate maintenance, energy, data, and admin costs. Hardware and software maintenance Virtual server to admin ratio Data transfer charges Facilities and energy cost per physical server (% uplift)

Comparing your costs to different cloud and traditional hosting options The model includes two deployment options: Public cloud IaaS Example used: Amazon Web Services EC2, S3, and EBS Traditional VM hosting Example used: Go Daddy Plus, four public cloud IaaS sample scenarios

Four cloud sample scenarios Cloud baseline 80% usage (static workload) 50% on-demand, 50% one-year reserved instances Cloud no reserved 90% usage (very static workload) 100% on-demand instances (most expensive) Cloud highly variable 25% usage (highly variable workload demand) 50% on-demand instances Cloud highly variable (three-year) Highly variable example with three-year reserved instance term

Cloud baseline cost model inputs Key inputs: Instance upfront charges Instance hourly price Mix of instance types % of time using on-demand (proxy for load variability) Source: June 20, 2012, “Understand The True Cost Of Cloud Services” Forrester report

Cloud baseline cost model inputs (cont.) Source: June 20, 2012, “Understand The True Cost Of Cloud Services” Forrester report

Results: cloud costs for 100 VMs Source: June 20, 2012, “Understand The True Cost Of Cloud Services” Forrester report

Traditional VM hosting model Comparing cloud costs to traditional VM hosting Hosting costs are typically monthly. Versus hourly granularity in the cloud Typically, there are fewer pricing options. We chose VM types to match our cloud choices. Administrative costs will vary. Based on how much remote hands support you buy

Traditional hosting costs Source: June 20, 2012, “Understand The True Cost Of Cloud Services” Forrester report

Comparing costs: sample results Source: June 20, 2012, “Understand The True Cost Of Cloud Services” Forrester report

Demonstration Modifying the example scenarios to compare your current on-site and potential cloud costs

Recommendations When does cloud make sense for you?

Identify your “best cloud fit” workloads Not everything is right for the cloud, nor should be. Look for: Applications that are virtualized and componentized. Applications designed to be elastic and scale out. Applications with variable and fluctuating demand. Then, model your costs for these applications first.

Start with systems of engagement Source: February 13, 2012, “Mobile Is The New Face Of Engagement” Forrester report

Beware of the uneven handshake Source: May 29, 2012, “Assess Your Cloud Maturity” Forrester report

Know the three stages of cloud economics Source: September 16, 2011, “Executive Spotlight: Top Priorities For It Infrastructure & Operations Leaders, 2H 2011” Forrester report

Become a cloud services broker Source: August 10, 2011, “Cloud Broker — A New Business Model Paradigm” Forrester report

More recommendations Pennies per hour seem cheap but add up quickly. Especially if you’re not using what you’re paying for Right-size your workloads to fit the cloud. Not the other way around You can’t immediately write down new investments. Take refresh cycles into account when prioritizing. If you have the skills, try private cloud in parallel. Build expertise with your own pay-per-use infrastructure. Revisit your assumptions often. To continue to optimize your cloud spend

What It Means: pop quiz answers FOR I&O PROFESSIONALS Is cloud just another name for outsourcing? No. Cloud services are metered at a more granular level, consumed only when needed, in a self-service manner. Is cloud the future of the data center? No. Cloud is just one deployment option among many. It won’t be better for every workload. Is the cloud always cheaper? No. But if your application is designed to scale automatically, has variable demand, and you can reserve capacity in advance, it probably will be. Do the math. Your mileage will vary.

Next step: Explore the Forrester cloud computing playbook

Selected Forrester Research September 7, 2012, “Optimize IT Infrastructure Around Key Workloads” June 20, 2012, “Understand The True Cost Of Cloud Services” June 14, 2012, “Cloud Brokers Become Change Agents” May 2, 2012, “Achieve Cloud Economics For Operations And Services”

Dave Bartoletti dbartoletti@forrester.com Twitter: @DaveBartoletti Andrew Reichman areichman@forrester.com Twitter: @reichmanIT