Monday, February 20, 2012

Competing against Amazon EC2

Internal clouds were pioneered because of the emergence of public IaaS offerings from companies like Amazon EC2. This is placing pressure on corporate IT organizations to demonstrate that they can be as agile and cost effective as an external hosting provider. Indeed, if we break down the raw expenses for the underlying infrastructure, most companies can make a compelling case that hosting their servers internally is competitive or cheaper then migrating their virtual servers externally.
ESX Small Virtual Machine Instance (1 CPU) - 4 YR
Physical Server Cost (IBM xSeries 3850X5):
Server Tax (8%)
Vmware Enterprise Pro License ($2260.00 per CPU):
NetIQ License for 70 VMs ($750 per VM):
Norton Anti-Virus License for 70 VMs ($7.30 per VM):
Total Capital Server Costs:
Cluster HA Charge (10%)
Virtual Machine Cost per Host (70 VM density ratio):
Annual Expense Virtual Machine Impact Expense:
Annual Maintenance on Software (20%):
Annual Windows Datacenter License ($1553.28 per CPU):
Annual 160 GB of Tier 2 Storage Cost ($5.20 GB)
Total Annual Virtual Machine Expense:

Amazon EC2 Small Instance – 3 YR
Cost for Amazon Small Instance over 3 years
0.05 per hour for 3 years
Windows Standard License
NetIQ License
Norton Anti-Virus
Total Annual Cost
Amazon Small Instance Specification
1.7 GB memory
1 EC2 Compute Unit (1 virtual core with 1 EC2 Compute Unit)
160 GB instance storage (150 GB plus 10 GB root partition)
32-bit platform
I/O Performance: Moderate

So where does the problem reside? Organizational structure! Most large companies are still working under traditional organizational silos. They have a server team, storage team, network team, desk-side team, and probably several other specialty organizations.
Our Infrastructure Server organization deploys and maintains information technology products and services on physical and virtual servers. Our support ranges from server provisioning, incident management, resource monitoring, web support, database support, process orchestration, application deployment, and data center services. We work with our business partners on many information technology projects, particularly in the area of enterprise server support.
Infrastructure Server Base-Line Goals:
·         Support the companies need for responsive, flexible, and around the clock IT support.
·         Advise our business partners about infrastructure technology best practices.
·         Provide server consulting support to departments for the deployment and operation of applications on server resources.
·         Manage and maintain a dependable server infrastructure that is accessible to the corporate community.
·         Support cost-savings measures by managing and maintaining cost-effective infrastructure support solutions.  
·         Build a positive relationship with business partners through planned and coordinated communications about new or changing services and resources.
While this support is vital to the organization, it is also OPEX overhead that external hosting providers don’t account for in their pricing models. Our organization’s OPEX cost for Infrastructure Support per virtual machine is more than the CAPEX cost for the virtual machine. In most organizations, that is to be expected because the services provided are much more extensive. However, that doesn’t mean we can’t re-organize out of the traditional silos to show the core cost for infrastructure services. IT organizations need to move to a service oriented model that separates integration support from infrastructure support so it can demonstrate the fundamental cost for their internal compute cloud.

Changing to this support model reduces the infrastructure support cost dramatically making the internal cloud much more competitive compared to external providers like Amazon EC2. By my estimate, it will reduce infrastructure support costs by two-thirds.Then organizations can build upon their IT service catalog by developing additional costs for integration support. This is where the rubber meets the road for most of our business partners. They are much more reliant on interaction for integration support then base-line infrastructure support.
The journey to an internal cloud isn't just about technology, it is about looking at your organization and evolving it to support the hyper accelerated movement into the business marketplace.
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