Workshop What Will The Cloud Actually Cost Me

Gartner IT Infrastructure, Operations & Cloud Strategies Conference
09 – 12 December 2019 / Las Vegas
Workshop: What Will the

Cloud Actually Cost Me?
Angelina Troy
@AngelinaCTroy
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“[Insert Provider Here] does things at
such scale that they must do it cheaper
than we possibly can!”
1 © 2019 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. and its affiliates.
90% of Gartner survey
respondents believe that the
cloud will save them money
Source: Cloud Adoption and Usage, 2016 (n = 637)
“Don’t assume you will save money
unless you have done the hard work
of honestly analyzing the situation.”
Source: “The Top 10 Cloud Myths” (G00270265)
Key Issues
1. Understanding the economics of the public cloud IaaS market

2. Evaluating internal versus external costs for applications
3. Modeling exercise for on-premises versus off-premises
Key Issues

Can You Name the Following Business Model?
• Vendor buys complex machines in great quantity from supplier.

• Vendor distributes the machines to many locations where potential
customers are located.
• Vendor prepares the machines for use by the customers on an
on-demand basis.
• Vendor provides an online portal for customers detailing the
machine configurations, which address different needs, along with
hourly/daily/weekly/monthly pricing.
• Vendor allows customers to rent the machines via the portal using
a credit card and some additional information.
Car Rental
Midsize Sedan — Buy, Lease or Rent?
35000 Daily Rental Weekly Rental Monthly Rental Monthly Lease Monthly Finance
17500
10x
0
1
5
9
101
105
109
113
117
121
125
129
133
137
141
145
149
153
157
161
165
169
173
177
77
13
17
21
25
29
33
37
41
45
49
53
57
61
65
69
73
81
85
89
93
97
Why?
100%
(Theoretical) Likelihood of Cost Savings
9 to 5 Monday to Friday
50%
0%
10% 20% 30% 40% 50% 60% 70% 80% 90%
Duty Cycle of Application
Some Examples From Gartner Clients
• North American global energy company:

– “Went through a fairly detailed exercise on what 256 servers cost us internally … we figured
the mark was 48% usage or less … cost justification for putting it on the cloud. Above that, it
would be better putting it on-premises.”
• Large public sector agency:

– “Cost comparison of [agency] on-premises infrastructure costs and [leading IaaS provider]
costs.”
– 285 virtual machines used for estimation
Virtual Machine Location Monthly Yearly Five-Year

Leading Public Cloud IaaS Provider $13,000 $150,000 $750,000
On-Premises Infrastructure $7,000 $80,000 $405,000
Key Issues

How We Tend to Think About Cloud
Yes Go Cloud!
Will It
Cost Less? No Maybe
We need to broaden our scope and change our way of thinking!
Not Everything in Business Is All About Cost
Inflexible but inexpensive Flexible but more expensive
A proper cloud cost analysis must include both “tangibles” and “intangibles”
What are examples of
“intangibles” that
would be relevant to
our organization?
Time to market/Time to revenue 1
Increased internal efficiency 2
New products/capabilities that were never possible before 3

Examples of Accounting preferences for opex 4
Intangibles?
Free up internal resources for other tasks 5
Business models that can closely link expense to revenue 6
Loss prevention 7
Where to Focus on While Determining Your
Own Costs …
In-House IT
Data
App
VM
Server
Storage
Network
Data Center
Where to Focus on While Determining Your
Own Costs … Depends on Which Off-Premises
Service You Have in Mind
In-House IT Colocation Hosting
Provider Public IaaS Public PaaS Public SaaS
Data
Data
Data
Data
App Data
App Data
App
App
VM App
VM App
VM
VM
Server VM
Server VM
Server
Server
Storage Server
Storage Server
Storage
Storage
Network Storage
Network Storage
Network
Network
Data Center Network
Data Center Network
Data Center
Data Center
Data Center
Data Center
What are all the costs
to our organization?
In-House IT
Data
App
VM
Server
Storage
Network
Data Center
Detailed Categories of On-Premises IT Costs
Backup/HA/DR Costs IT Administration Staff Costs
Hardware
Software (Backup, Cluster, etc.) System Administration Storage Administration
(Servers, Storage, Network, etc.)
Remote Sites (Costs, Bandwidth, etc.) Network Administration Security Administration
Application Administration Other

Hardware Costs
Equipment Costs
Hardware Maintenance
(Servers, Storage, and Network)
Facility Costs
Taxes Upgrades Lease/Loan Payments Building Security
Facilities Staff Building Maintenance

Software Costs
Infrastructure Management Tools
OS/Hypervisor Licenses
(Servers, Storage and Network) Taxes Upgrades Power/Cooling
Software Development Application Management Tools

(Change, Service and Perf.)
Software Maintenance Application Software Security Software
Additional Modeling Considerations
• Some costs do not just neatly go away:

– Some costs are immediately eliminated.
– Some costs evolve or change.
– Some costs do not change.
• Be cautious about compounding errors within models!
Check Your Bias!
Key Issues

Excel
http://bit.ly/giocsworkshop
Your Cost Modeling Goals
•Ultimately,
Ultimately,aim
aimtotoget
getthe
the rough base components:
– Cost/kW/hour – Cost/CPU/hour
– Cost/rack/hour – Cost/tier-x disk/hour
– Cost/square feet/hour – Cost/[small | medium | large | HA]

VM/hour
– Cost/GB RAM/hour
• Ranges are acceptable and potentially preferred

• Location variances likely warrant multiple models
Modeling IaaS Provider Costs
Preparing for Cloud Cost Calculations
Investigate the Provider’s Identify the Migration Path

Identify Potential Workloads Select the Cloud Provider
Billing Models for Each Workload
Gathering Cloud Cost Data
Compute Costs Identify Constants Licensing Costs
Management and
Storage Costs Networking Costs Ancillary Costs
Operations Costs
Calculate Cloud Costs
Carefully Consider the Less Obvious Costs
Compute, Storage, Network
Premium Support
Training
Integration
Retrofitting Processes
X = Cost of app on-premises
Y = Cost of app in cloud
Z = Intangibles
if (X > (Y + Z)) {
System.out.println ("Go to cloud!");
} else {
System.out.println ("Do not go to cloud!");
}
Missed the Target?
That’s Okay …
• What was off (X, Y, and/or Z)?
• By how much and why?
• How do we correct it?
Recommendations
Start at the “ground floor” — literally! — in terms of figuring out what physical
facility costs exist for your entire organization.
Reach out to teams (HR, facilities) that have the data points you need for a
proper analysis.
Build out a cost model using Gartner’s frameworks for calculating on-premises
infrastructure costs.
Garbage-in, garbage-out: A model is only as good as its data sources!
Remember that not all costs go away immediately!
If X > Y + Z, go!
If X, Y or Z was wrong … investigate, remediate, reiterate.
Recommended Gartner Research
 Calculating and Comparing Data Center and Public

Cloud IaaS Costs
Angelina Troy and Elias Khnaser (G00334805)
 Calculating x86 Per-VM Costs in the Data Center
Jim Burton (G00331447)
 How to Accelerate Rehosting to Public Cloud IaaS
Angelina Troy (G00370361)
For information, please contact your Gartner representative.

Thank You!
Angelina C Troy
@AngelinaCTroy

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Gartner IT Infrastructure, Operations & Cloud Strategies Conference

09 – 12 December 2019 / Las Vegas

Workshop: What Will the

Source: Cloud Adoption and Usage, 2016 (n = 637)

Source: “The Top 10 Cloud Myths” (G00270265)

1. Understanding the economics of the public cloud IaaS market

1. Understanding the economics of the public cloud IaaS market

• Vendor buys complex machines in great quantity from supplier.

• North American global energy company:

• Large public sector agency:

Virtual Machine Location Monthly Yearly Five-Year

1. Understanding the economics of the public cloud IaaS market

We need to broaden our scope and change our way of thinking!

Inflexible but inexpensive Flexible but more expensive

Increased internal efficiency 2

New products/capabilities that were never possible before 3

Business models that can closely link expense to revenue 6

Remote Sites (Costs, Bandwidth, etc.) Network Administration Security Administration

Application Administration Other

Facilities Staff Building Maintenance

Software Development Application Management Tools

Software Maintenance Application Software Security Software

• Some costs do not just neatly go away:

• Be cautious about compounding errors within models!

1. Understanding the economics of the public cloud IaaS market

– Cost/rack/hour – Cost/tier-x disk/hour

– Cost/square feet/hour – Cost/[small | medium | large | HA]

• Ranges are acceptable and potentially preferred

Investigate the Provider’s Identify the Migration Path

Gathering Cloud Cost Data

Compute Costs Identify Constants Licensing Costs

Calculate Cloud Costs

Compute, Storage, Network

 Calculating and Comparing Data Center and Public

For information, please contact your Gartner representative.

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