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Why benchmarking cloud vs. current IT costs is so hard

By Bernard Golden | Dec. 4, 2009
Cloud providers make their services' costs quite transparent, says virtualisation and cloud computing specialist Bernard Golden. The trouble is, for most companies, current data centre costs remain opaque. Will new tools help?

At this event HP discussed a new (or pretty new, anyway) product called "IT Financial Management" (certainly not the most compelling of names, one must admit). It is designed to enable fine-grained cost assignment through an examination of existing expenses and assignment of them to a structured chart of accounts which can then be applied to individual applications. In short, the product (and service, since shoveling through existing costs and assigning them to appropriate categories and ultimately to individual applications is labour-intensive) helps show the "current cost" side of the today-vs-cloud TCO comparison that is such a hot topic.

Intrigued, I asked about the product after the event. I got the impression that the product is new enough that there are not a lot of concrete results from customers, but that there is a lot of interest in it. The HP executive who described it, Ramin Sayar, used system admin span as an example of cost comparison. He noted that cloud providers are able to obtain spans of one admin to 10,000 machines, perhaps, while internal IT groups run ratios of around one admin to 70 machines.

I believe that the data a product like this turns up will be in high demand over the next couple of years, as the battleground around cloud computing shifts from "what is it? I don't trust it" to "how much benefit will I realise if I use cloud computing?" A key metric for this latter question will be TCO comparisonand a discussion that leaves out half the comparison because the data is hard to get won't be acceptable in the future.

And what might be turned up if such a comparison were performed?

A year ago Bechtel, the giant construction firm, benchmarked its costs (www.networkworld.com/news/2008/102908-bechtel.html?page=1) for a number of common IT resources against cloud providers. Remember, this was Bechtel, a very large and financially well-off company which one would assume would be a very capable IT user, with as efficient an operation as could be obtained.

In fact, Bechtel found that its cost structure was wildly higher than the best-of-breed cloud providers. Here are some of the numbers from Bechtel's benchmarking exercise:

1. Internet traffic cost Bechtel US$500/MB; in the cloud that cost US$10-US$15/MB (YouTube.)

2. With regards to sys admins Bechtel had one admin per 100 servers; in the cloud, one admin per 17,000 servers (Google.)

3. Storage cost Bechtel US$3.75/GB/month; in the cloud that cost US$0.10/GB/month (Amazon).

As a result of this benchmark exercise, Bechtel re-engineered its IT. It built three super-efficient data centres with high utilisation rates. It raised storage utilisation rates from single digits to 70 per cent. Likewise, its server utilisation rates grew to 70 per cent. And it stopped using public Internet providers and installed its own fiber optic connectivity to Internet peering points.

 

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