The True Cost of a Private Cloud

Rick Parker, IT Director, Fetch Technologies | 9/16/2010 | 18 comments

Rick Parker
I expect cost is one of the biggest reasons a lot of companies have not started building private clouds. The problem, I think, is that most companies assume it's just not a cost-effective use of their resources.

It's true that a private cloud may not always be the cheapest option, but it's definitely the most cost-effective way to build a truly reliable and scalable IT infrastructure. In fact, scalability is the key to a private cloud's value: The more you increase server capacity, the more cost-effective your router, firewall, and other networking systems get, and the more you reduce your server redundancy costs.

I won't go into an exhaustive study of the various costs -- and cost savings -- associated with private cloud computing. This is an area with a lot of established research, and a quick trip to a source like VMware Inc. (NYSE: VMW) will serve up some good case studies dealing with cost and ROI. Instead, I want to focus on a few issues that often get overlooked or downplayed when companies think about the costs and benefits of building a private cloud.

Hardware and software costs. A typical company already has most of the hardware components it needs to start building and running a private cloud. That's because there's really no such thing as "cloud hardware," although there are options (such as enterprise-class, chassis-based systems) that are more cost-effective and probably necessary for a production cloud for scalability reasons.

For the most part, however, a private cloud is defined by the software and configuration choices your company makes, not by the hardware. At Fetch Technologies, our own private cloud solution is based on VMWare's vSphere Essentials kit and the Platform Computing ISF private cloud management software -- both of which probably cost much less to license than you think. We also use high-density appliances such as Juniper Networks Inc. (NYSE: JNPR) SSG integrated systems that combine router, firewall, and VPN functionality into a single appliance, allowing us to make very cost-effective use of limited data center space.

Infrastructure costs. This is worth discussing because it represents such a huge waste of resources. I once worked at a company that spent more than $500,000 just to provision the cooling and power systems for a server room -- and that didn't even include the cost of the servers. And it was still exposed to power outages because the building it was housed in wasn't capable of supporting a diesel backup generator.

That server room was practically useless -- and a private cloud architecture makes these kinds of planning and infrastructure disasters easy to avoid.

Staffing and IT productivity. Here at Fetch Technologies, we have one cloud administrator supporting 250 virtual servers. Compare this to my previous company, where six people managed 500 physical servers. And with end-user provisioning and management, we're still cutting days or weeks off service requests.

Scaling and redundancy. How big do you want a data center to be? I think there's a simple answer to this question: How many servers do you feel comfortable losing at any one time? Smaller, faster, cheaper data center designs -- the hallmark of a private cloud architecture -- make it possible to build more scalable, redundant IT infrastructures. Most companies that take the opposite approach, concentrating growth in a single data center, never achieve true redundancy -- it simply becomes too expensive to duplicate.

Your own organization's mileage will vary, of course, in terms of what a cloud computing solution costs you to build and operate. Cloud computing isn't necessarily cheap, but it is more cost-effective in the long run than a traditional IT infrastructure. And if you're focused on the big picture, that's what really matters.

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Matthew McKenzie   The True Cost of a Private Cloud   9/23/2010 11:08:40 AM
Re: Cost of a Private Cloud, don't forget productivity
But one thing that I find when in the cloud is that it is slow and it throws off my cadence and disrupts my work flow

@DBK:  Not clear on what you mean here. It sounds like you're talking about SaaS in particular, and certainly latency is a problem for a lot of SaaS apps.

With a REAL cloud solution, though, if an end-user can even tell that the app isn't running on a dedicated server in the closet down the hall, somebody isn't doing their job.

nimanthad   The True Cost of a Private Cloud   9/22/2010 11:27:49 PM
Re: Justice Department Private cloud cost
Hahaha.. Good one mate.. Well if you start to think on it, certainly your head will spin towards both ways. 
DBK   The True Cost of a Private Cloud   9/22/2010 11:06:43 PM
Re: Cost of a Private Cloud, don't forget productivity

Certainly all great points about staffing, deployment, support all these are true.  But one thing that I find when in the cloud is that it is slow and it throws off my cadence and disrupts my work flow.  Don’t forget productivity, and how do you put a dollar amount on that, not sure.  That is one of those intangibles that frequently gets over looked.


Disrupt my work flow and the next new thing may get disrupted too and the world will never know.

Matthew McKenzie   The True Cost of a Private Cloud   9/20/2010 10:55:00 AM
Re: Justice Department Private cloud cost
Imagine trying to sell Cloud computing 3 years ago, there wasn't even a name fot it.

You got me wondering about the origins of the term, and I think you're not far off the mark. The term "cloud was being used sporadically" as far back as the mid-1990s, but the consensus seems to be that Eric Schmidt popularized the term at an August, 2006 conference.

Having said that, I noticed that the word "cloud" was being placed in quotation marks by a lot of folks well into 2007. (As in, "isn't this 'cloud computing' fad silly? It'll go away soon, don't worry...)

Matthew McKenzie   The True Cost of a Private Cloud   9/20/2010 10:48:18 AM
Cloud-based clouds
This is a type of Private cloud, CaaS,  Cloud as a Service, that I think will become very big because the potential market is huge, probably a few billion dollars a year.

A cloud-based, umm, cloud service. My head is starting to hurt....

Rick Parker   The True Cost of a Private Cloud   9/18/2010 10:59:00 AM
Re: Cost of a Private Cloud
"To give some perspective a small private cloud can be built with app. $100k worth of hardware and software and $5k / month in recurring costs. Its important to consider that most companies ALREADY have the hardware needed and paying the recurring costs (datacenter hosting)

This estimate inlcudes redundant firewall, router, vpn, server, switches, remote access, and SAN storage for 40 virtual servers."

I am interested in some feedback, is anybody suprised at the $100k cost? Is it less than expected, more than expected? For some comparison about 4 years ago I was quoted over $100k to setup a redundant Exchange system, just to run Exchange for 300 mailboxes on 2 servers.

Rick Parker
Fetch Technologies


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Rick Parker   The True Cost of a Private Cloud   9/17/2010 6:33:04 PM
Re: Justice Department Private cloud cost

I dont think there is enough detail to have an opinion if they should have followed the Justice Dept.

"Can the cloud still be private if shared?" is a good question.

This is a type of Private cloud, CaaS,  Cloud as a Service, that I think will become very big because the potential market is huge, probably a few billion dollars a year. This type of Cloud is for companies that need 5 to 20 servers or so, too small for their own private cloud but big enough to need more then 1 or 2 servers. 

Verizon introduced their version 3 days ago on 9/14, I introduced a more complete service (Bedouin Networks) 3 years ago, since closed. Imagine trying to sell Cloud computing 3 years ago, there wasn't even a name fot it.



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fbpmt   The True Cost of a Private Cloud   9/17/2010 6:14:52 PM
Re: Justice Department Private cloud cost
Rich, now i read an article by J. Nicholas Hoover ( in InformationWeek magazine, Sept. 13th, 2010 edition entitled "Avoid These Pitfalls On Road To The Cloud" (,  the Department of Labor has also joined a cloud. but these folks joined a shared service managed by Global Computer Enterprises (GCE).

Implementation took 18 months, including a three month delay at end of conversion. No mention of cost. No mention who the cloud was being shared with. Can the cloud still be private if shared?

In retrospect, should't they have followed the Justice Department?
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fbpmt   The True Cost of a Private Cloud   9/17/2010 1:56:48 PM
Re: Justice Department Private cloud cost
why the lady picture?
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CMTucker   The True Cost of a Private Cloud   9/17/2010 12:35:09 PM
Re: Justice Department Private cloud cost
I think that's pretty easy to guess:


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