Kate's Comment

Thoughts on British ICT, energy & environment, cloud computing and security from Memset's MD

McKinsey report saying “Cloud costs more” is Wrong!

McKinsey issued a report today stating that outsourcing to the Cloud will actually cost more money! They are just, plain, wrong.

There are a number of reasons why:

  1. They used Amazon as a pricing basis (see below)
  2. They are only considering mega-corps (>$500m turnover), who could indeed probably run their infrastructure cheaper if they want the bother.
  3. They undervalue virtualisation. We can consolidate roughly 10:1 and get CPU utilisations up well over 50% – they were saying a norm would be 18%, and 30% at best.

Lets look at the pricing in detail; the report concludes that Cloud costs more is because they have based the calculations on the only provider perceived as offering “Cloud” or Utility computing services, Amazon, are massively overcharging for their Elastic Compute Cloud (EC2) resources! We (Memset) end up being up to half the price for comparable amounts of compute & storage resource.

An Amazon EC2 compute unit is approx. half a modern Xeon core. One instance costs $0.11/hour = £0.07/hour = £51.07/month

A Memset virtual machine VM4000 has about the same CPU, a bit more RAM and costs £39.95/month.

This is further compounded by the fact that a basic EC2 instance is actually a lot more resource than most small apps need! Our smallest Miniserver VM is 512MB with a tiddly amount of CPU, and that is plenty for the most online apps in the SME domain (ie. the majority of apps by number). Oh, and we charge £9.95/mo for those, so their calculations will be way, way out in terms of price per instance.

An “extra large” instance is basically a quad-core machine with 15GB RAM and 1.7TB disk, and costs >£400/month. For a dedicated quad-core server with 8GB RAM and 2×1.5TB disks we would charge around £250/month.

S3 is even worse! Amazon charge $0.15/GB-month ) which is about £0.11 /GB-month. A 22TByte storage array from Memset costs £499/mo, which is £0.02 /GB-month (79% cheaper)!

When you factor all those in, we are a lot cheaper – and we do not contend the resources. Many providers contend their CPU and RAM resources, but our Xen VM’s are 100% dedicated – you get what you pay for.

McKinsey need to realise that “Cloud Computing” is just what we dedicated hosts have been doing for years but on smaller time frames. If you want a decent definition of Cloud, see the BCS Data Centre Specialist Group Web, or my original version of that definition.

Cloud/Utility computing of the likes of Amazon only makes sense for people with dynamic load profiles. If you just need to outsource a bunch of servers, then go to a normal IT host like Rackspace or Memset. We have an online case-study example / breakdown of how outsourcing can halve the IT infrastructure costs of many companies.


PS. Update from the Information Age conference on 28th April: Sure enough, people are now referring to “Utility” computing as the answer, which is what they actually meant when they said “Cloud” anyway, but following McKinsey that has become a bad word. *sigh*