“Is colocation cheaper than using a cloud computing service to run the same workload?”

This quote comes from an analysis of the costs of cloud-based computing vs. traditional colocation as a function of the work load and duty cycle. This type of analysis is increasingly germane for companies that are looking to make a transition to cloud-based service providers in the hope that it will allow them to lower their overall IT costs. The results, while not surprising, do raise some interesting points. First, here’s the link:

https://vijaygill.wordpress.com/2010/08/09/cloud-economics/

The crux of the argument here is the concept of the duty cycle. The duty cycle for a deployed application is the percentage of available hardware resources that are being consumed at any given moment in time. Intuitively, a higher duty cycle corresponds to more efficient and cost-effective use of the underlying hardware. One of the fundamental promises of cloud computing is that it will allow you to run applications in a way that will produce a much higher duty cycle through elasticity, i.e. idle resources can be released without impacting the ability to scale back up in the future.

The analysis includes a spreadsheet with some hard data for one specific style of application, and the result is that an equivalent workload for this style of application would cost $118,248 at Amazon and $70,079 in a colocation facility, with the implication that a higher duty cycle can be achieved via colocation. However, this result is not as clear cut as it might seem, owing to the fact that the “application style” is an extremely subjective and important attribute for any given application. In my experience, it is rare to find an application that can be characterized in this way; instead, most applications that I have run across are inherently custom in some important way. I would think that this analysis would need to be performed on a case-by-case basis for any application that is considering a move to the cloud, and the specific result of that analysis would apply only to that application.

A subtle conclusion of this type of analysis is that duty cycle optimization for a given application should be a key criterion for cost reduction. And, somewhat conversely, if an application already has a high duty cycle then the opportunities for cost reduction through cloud-based resources will be limited at best. Or, more simply: if you already run highly-utilized servers then you might do better with collocation.

Hope this helps.