Welcome!

Search Authors: Elizabeth White, Carmen Gonzalez, Liz McMillan, Sematext Blog, Jnan Dash

Related Topics: Cloud Expo, Virtualization, AJAX & REA

Cloud Expo: Article

Amazon EC2 Reserved Pricing Changes the Equation

Cloud Computing Economics Part Three

Ulitzer Cloud Computing Blog

Things are changing fast in the world of Cloud Computing, however one question remains the same. Will it save me money and how much? To follow up on a previous post on Cloud Economics Part One, I looked at a fairly simple example of 5 Servers for a dev/test environment and identified the incremental costs of buying 5 servers and running them on premise or a Colo and then compared that to Amazon EC2. The analysis did not include many variables such as real estate costs and labor savings which may or may not apply to the particular situation. The results indicated that a Premise based deployment could provide the lowest "incremental" cost when compared to EC2 if the servers were running continuously. On the other hand EC2 provided significant savings for short term workloads with no upfront costs.

Purchase - on Premise

$ 15,000    Quad-Core Servers ( 5 x 3,000 each  )

$ 750         1/2 Rack + Gigabit Switch

$ 15,750   Total Hardware cost

$ 5,800     Annual amortized cost, 5% over 3 years

$ 0              Assuming no incremental real estate cost

$ 2,000     Annual power & AC cost

$ 7,800 Total annual cost on premise


Purchase - at Colo

$  8,000    Colo fee's; 1/2 Rack + power + bandwidth

$  5,800    Annual amortized cost

$ 13,800  Total annual cost at Colo


EC2 Cloud

$ 35,040  24x365x5 Amazon EC2 ( $.80 per high CPU Server instance hour )

$  8,320   40 hours x 52 weeks

$    688    40 hours x 4.3 weeks

What has changed recently at Amazon is a new pricing model that provides the option for "Reserved Instances" http://aws.amazon.com/ec2/#pricing which includes an upfront fee ( 1 year or 3 year term ) and a reduced per hour charge. The analysis below reflects the new pricing model applied to the same 5 server scenario as above. As indicated the new model results in a significant savings compared to EC2 standard pricing; 31% for the 1 year term and 48% for the 3 year term assuming the servers are running 24/7. However, when compared to the 40 hour per week scenario the cost at $16,146 ( or $10,229 3 year ) is higher than the EC2 Standard price of $8,320 or the Premise cost of $7,800.

Annual $               Reserved Pricing at EC2

24,162     24x365x5 ( $.80 high CPU ) 1 Year Reservered, $2,600x5 @ 5%
18,245     24x365x5 ( $.80 High CPU ) 3 Year Reservered, $4,000x5 @ 5%
16,146     40 hours x 52 x 5 ( $.80 High CPU ) 1 Year
10,229     40 hours x 52 x 5 ( $.80 High CPU ) 3 Year

So will the Cloud save money? the answer remains the same ... it depends. The new " Reserved Instance" pricing model provides substantial savings over standard pricing when used continuously but the standard pricing still is more effective for short time periods such as a 40 hour week workload. As noted in the earlier posts there are many other variable cost savings by putting workloads in the cloud such as real estate costs, facility upgrades plus the intangible but real benefit of reduced time to develop/test/deploy.


The "Reserved Instance" pricing will also impact the variable workload analyzed in Cloud Economics Part 2 - Premise Plus Cloud scenario, this should provide more content for an upcoming post. 

Cloud Economics Part 1 here.
Cloud
Economics Part 2 here.

More Stories By Chris Fleck

Chris Fleck is Vice President of Mobility Solutions at Citrix Systems. Chris started his career at IBM working across multiple engineering and product organizations leading to Business Unit Exec of the IBM Industrial Computer Group. As a pioneer of new technologies, Chris founded an IBM spin-off to commercialize the initial Server Blade products as CEO of OmniCluster Technologies. At Citrix Chris is responsible for mobilty solutions and alliances. As part of the Citrix CTO Office he is also involved with or leading multiple strategic initiatives at the company. You can follow him on Twitter and his blog at TechInstigator.com

@ThingsExpo Stories
In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect at GE, and Ibrahim Gokcen, who leads GE's advanced IoT analytics, focused on the Internet of Things / Industrial Internet and how to make it operational for business end-users. Learn about the challenges posed by machine and sensor data and how to marry it with enterprise data. They also discussed the tips and tricks to provide the Industrial Internet as an end-user consumable service using Big Data Analytics and Industrial Cloud.
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happens, where data lives and where the interface lies. For instance, it's a mix of architectural styles ...
Almost everyone sees the potential of Internet of Things but how can businesses truly unlock that potential. The key will be in the ability to discover business insight in the midst of an ocean of Big Data generated from billions of embedded devices via Systems of Discover. Businesses will also need to ensure that they can sustain that insight by leveraging the cloud for global reach, scale and elasticity.
The Industrial Internet revolution is now underway, enabled by connected machines and billions of devices that communicate and collaborate. The massive amounts of Big Data requiring real-time analysis is flooding legacy IT systems and giving way to cloud environments that can handle the unpredictable workloads. Yet many barriers remain until we can fully realize the opportunities and benefits from the convergence of machines and devices with Big Data and the cloud, including interoperability, data security and privacy.
The Internet of Things (IoT) promises to evolve the way the world does business; however, understanding how to apply it to your company can be a mystery. Most people struggle with understanding the potential business uses or tend to get caught up in the technology, resulting in solutions that fail to meet even minimum business goals. In his session at @ThingsExpo, Jesse Shiah, CEO / President / Co-Founder of AgilePoint Inc., showed what is needed to leverage the IoT to transform your business. He discussed opportunities and challenges ahead for the IoT from a market and technical point of vie...
IoT is still a vague buzzword for many people. In his session at @ThingsExpo, Mike Kavis, Vice President & Principal Cloud Architect at Cloud Technology Partners, discussed the business value of IoT that goes far beyond the general public's perception that IoT is all about wearables and home consumer services. He also discussed how IoT is perceived by investors and how venture capitalist access this space. Other topics discussed were barriers to success, what is new, what is old, and what the future may hold. Mike Kavis is Vice President & Principal Cloud Architect at Cloud Technology Pa...
Dale Kim is the Director of Industry Solutions at MapR. His background includes a variety of technical and management roles at information technology companies. While his experience includes work with relational databases, much of his career pertains to non-relational data in the areas of search, content management, and NoSQL, and includes senior roles in technical marketing, sales engineering, and support engineering. Dale holds an MBA from Santa Clara University, and a BA in Computer Science from the University of California, Berkeley.
The Internet of Things (IoT) is rapidly in the process of breaking from its heretofore relatively obscure enterprise applications (such as plant floor control and supply chain management) and going mainstream into the consumer space. More and more creative folks are interconnecting everyday products such as household items, mobile devices, appliances and cars, and unleashing new and imaginative scenarios. We are seeing a lot of excitement around applications in home automation, personal fitness, and in-car entertainment and this excitement will bleed into other areas. On the commercial side, m...
"People are a lot more knowledgeable about APIs now. There are two types of people who work with APIs - IT people who want to use APIs for something internal and the product managers who want to do something outside APIs for people to connect to them," explained Roberto Medrano, Executive Vice President at SOA Software, in this SYS-CON.tv interview at Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
Performance is the intersection of power, agility, control, and choice. If you value performance, and more specifically consistent performance, you need to look beyond simple virtualized compute. Many factors need to be considered to create a truly performant environment. In his General Session at 15th Cloud Expo, Harold Hannon, Sr. Software Architect at SoftLayer, discussed how to take advantage of a multitude of compute options and platform features to make cloud the cornerstone of your online presence.
An entirely new security model is needed for the Internet of Things, or is it? Can we save some old and tested controls for this new and different environment? In his session at @ThingsExpo, New York's at the Javits Center, Davi Ottenheimer, EMC Senior Director of Trust, reviewed hands-on lessons with IoT devices and reveal a new risk balance you might not expect. Davi Ottenheimer, EMC Senior Director of Trust, has more than nineteen years' experience managing global security operations and assessments, including a decade of leading incident response and digital forensics. He is co-author of t...
SYS-CON Media announced that Splunk, a provider of the leading software platform for real-time Operational Intelligence, has launched an ad campaign on Big Data Journal. Splunk software and cloud services enable organizations to search, monitor, analyze and visualize machine-generated big data coming from websites, applications, servers, networks, sensors and mobile devices. The ads focus on delivering ROI - how improved uptime delivered $6M in annual ROI, improving customer operations by mining large volumes of unstructured data, and how data tracking delivers uptime when it matters most.
DevOps Summit 2015 New York, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that it is now accepting Keynote Proposals. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long development cycles that produce software that is obsolete at launch. DevOps may be disruptive, but it is essential.
The Internet of Things will greatly expand the opportunities for data collection and new business models driven off of that data. In her session at @ThingsExpo, Esmeralda Swartz, CMO of MetraTech, discussed how for this to be effective you not only need to have infrastructure and operational models capable of utilizing this new phenomenon, but increasingly service providers will need to convince a skeptical public to participate. Get ready to show them the money!
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
"There is a natural synchronization between the business models, the IoT is there to support ,” explained Brendan O'Brien, Co-founder and Chief Architect of Aria Systems, in this SYS-CON.tv interview at the 15th International Cloud Expo®, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The Internet of Things will put IT to its ultimate test by creating infinite new opportunities to digitize products and services, generate and analyze new data to improve customer satisfaction, and discover new ways to gain a competitive advantage across nearly every industry. In order to help corporate business units to capitalize on the rapidly evolving IoT opportunities, IT must stand up to a new set of challenges. In his session at @ThingsExpo, Jeff Kaplan, Managing Director of THINKstrategies, will examine why IT must finally fulfill its role in support of its SBUs or face a new round of...
The BPM world is going through some evolution or changes where traditional business process management solutions really have nowhere to go in terms of development of the road map. In this demo at 15th Cloud Expo, Kyle Hansen, Director of Professional Services at AgilePoint, shows AgilePoint’s unique approach to dealing with this market circumstance by developing a rapid application composition or development framework.

ARMONK, N.Y., Nov. 20, 2014 /PRNewswire/ --  IBM (NYSE: IBM) today announced that it is bringing a greater level of control, security and flexibility to cloud-based application development and delivery with a single-tenant version of Bluemix, IBM's platform-as-a-service. The new platform enables developers to build ap...