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Understanding the Cost of Cloud: Cost analysis of In-house vs. Cloud-based Hosting Options

September 28, 2011 • Finance & Economics, TECHNOLOGY

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http://www.europeanbusinessreview.com/understanding-the-cost-of-cloud-cost-analysis-of-in-house-vs-cloud-based-hosting-options/
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By Byung Chul Tak, Bhuvan Urgaonkar, and Anand Sivasubramaniam

Will cloud-based hosting be economically feasible for any given application if it migrated into the cloud? It is not straightforward to answer this question.

Cloud-based hosting presents many advantages over traditional in-house (on-premise) hosting such as better scalability, ease of management, and cost savings. It is not difficult to understand how cloud-based hosting can be used to address some of the existing limitations and extend the capabilities of many type of applications. However, one of the most important questions is whether cloud-based hosting will be economically feasible for any given application if it migrated into the cloud. It is not straightforward to answer this question because it is not clear how an application will benefit from the claimed advantages, and, in turn, be able to convert them into tangible cost savings. Within cloud-based hosting offerings, there is a wide range of hosting options one can choose from, each impacting the cost in a different way. Answering these questions requires an in-depth understanding of the cost implications of all the possible choices specific to an application’s circumstances.

In this study we identify a diverse set of key factors affecting the costs of deployment choices. Using benchmarks representing two different applications (TPC-W and TPC-E) we investigate the evolution of costs for different deployment choices. We consider important application characteristics such as workload intensity, growth rate, traffic size, storage and software license to understand their impact on the overall costs. We also discuss the impact of workload variance and cloud elasticity, and certain cost factors that are subjective in nature.



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