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Monday, December 5, 2016

Are you running away from the cloud too ?

The last handful of years has seen an en-masse migration away from dedicated servers for businesses and government into virtual servers (sometimes called Virtual Machines, or VMs) that are generally hosted within large data centres.

Providers such as Amazon Web Services (AWS) or Microsoft Azure are well known to many of us as "cloud providers" that can help take the worry out of hardware purchasing and maintenance by providing a slice of a machine's computing power and storage instead of the entire thing.

The size of the slice can change with your needs, and so a scalable solution can be found for many things.

In this way, "cloud" providers were seen as generally being able to provide a more cost-effective way of hosting your online services (public or private) and could increase the computing power very quickly if the need arose.

That's a great theory ... but you know what they say about theory and practice ... "In theory, there is no difference between theory and practice - but in practice, there is".

The reality of cloud providers is that they are there to make money like any business - and so even though they have a very wide scope to spread the cost of their hardware across many customers per physical server (or the equivalent thereof, depending on how they have built their cloud), they will always tend towards a less-than-fair model for pricing because the whole question of server resources is rather opaque to most users.

So whilst the trend for the past few years has been to migrate to the cloud, there is an increasing trend in the last 6 months or so for some business bean counters to have done what they do best (counted their beans) and worked out that - in actual fact - they are worse off economically for being in the cloud than before when they had some of their dedicated servers located within their own premises or co-located within data centres.
Some of our own dedicated servers

This is giving rise to a new trend of migrating quite a lot of services away from the cloud and back into on-premise, private cloud, or co-located dedicated servers - creating hybrid service offerings that can take advantage of the best that cloud offers but keeping others away from the cloud and remaining more economical for doing so.

As an exercise, we recently priced up the computing power, storage and data traffic for just a single one of our dedicated servers to work out the equivalent cost of an Amazon AWS instance.

This was for a fairly basic dedicated server that we originally provisioned in 2011 (8 cores, 2.5TB storage, 16GB RAM). We priced it based on its past 30-day utilisation, running at about 20% average CPU. It's a fairly busy server, but nothing extraordinarily flat-chat and frankly it's getting a little old and slow compared to our newer resources.

Our dedicated server costs, for hardware (upgraded every 36 months), the rack space with power and 200GB of traffic came to just shy of $800.00 per month (including amortising the hardware costs over 3 years).

Amazon's equivalent was an i2.8xlarge EC2 instance which would cost $3,300.00 per month (as a reserved resource) or $6,900.00 per month as "On-Demand"

That's a massive difference between cloud and dedicated hardware and can prove unbelievably uneconomical if you're not managing the instances well and - as many businesses tend to do - forget to regularly check that you're getting good value for money along the way.

The news is better if you compare one of our newer servers that currently has only a handful of shared-tenancy clients sitting on it and isn't terribly busy by most measures. This dedicated server would cost close to the same for us as the busy one in the example above (in this case about $700.00 per month) because we have to amortise the hardware costs, but from AWS would only cost about $120.00 per month.

Our solution, obviously, is to put more customers on this server over time so it becomes more profitable.

What would Amazon EC2 cloud cost us for one fairly busy server per month (USD) ?  Yikes!

We're obviously a little different to most businesses because we provide hosting ourselves and therefore keep a close eye on our resources, maintenance costs, etc - and in most cases we share the hardware resources across several customers at a time by providing shared tenancy hosting (one server, many websites) ... so our monthly charge--out rate for a small business website hosting (100MB storage and up to 5GB of traffic per month) is only $10.00 (+GST).

But you could imagine if we were, for instance, a mid-tier accounting firm who had moved our busy email server into the cloud a couple of years ago because our IT consultant said it would be a good idea - before we then doubled in size. With a cloud provider like AWS or Azure, we could be paying the equivalent of a brand new server every 3 months over-and-above the cost of the service itself - and would never actually have a server we could call our own.

Give us a shout if you need hosting for any size of business and if you're a bit of a greenie, check out our environmentally-friendly "GreenServe" solution that offsets the power used to run and cool the server (try doing that with your giant data centres, Amazon!).