The Many Costs Of Cloud Computing - InformationWeek

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John Foley
John Foley
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The Many Costs Of Cloud Computing

McKinsey & Co. has come under fire for suggesting that cloud computing may be more expensive than running servers inside your own data center. I have more bad news for would-be cloud users--the costs may be even higher than McKinsey suggests.

McKinsey & Co. has come under fire for suggesting that cloud computing may be more expensive than running servers inside your own data center. I have more bad news for would-be cloud users--the costs may be even higher than McKinsey suggests.McKinsey's analysis was a straight comparison of the costs of CPUs on Amazon Web Services versus within corporate data centers. In one scenario, McKinsey puts the total cost of ownership of Amazon's cloud at $366 per CPU per month compared to $150 per CPU/month in a typical data center, with associated labor costs included in both examples. (Here's my analysis of the McKinsey report and here's a link to the McKinsey report itself.)

McKinsey, however, doesn't include related, additional costs that enterprises may face in deploying applications in the cloud. Many cloud vendors are offering services that layer enterprise-class capabilities on top of Amazon's Elastic Compute Cloud, and those services entail costs that may be higher than what Amazon itself charges.

Heroku, for example, recently unveiled pricing for its EC2-based "platform as a service," which ranges from $5,000 to $10,000 per month for an enterprise application. I haven't done a cost comparison to see what a comparable app would cost on EC2 without Heroku's underlying platform (if such a comparison is even feasible), but companies like Heroku and Elastra generally charge a premium over what you would pay for plain vanilla EC2 instances.

Once you get your apps deployed, you need to test, manage, monitor, and integrate them. Cloud vendors offer services for all of those things, but most are not free, and they tend to be recurring.

At Dealmaker Media's recent Under The Radar event, more than a dozen cloud startups introduced subscription-style services. Zephyr charges $65 per user per month for its software testing management service.'s business workflow and integration capabilities run $50 per user per year. Twilio's telephony capabilities cost 3 cents per minute. And so on.

Of course, similar capabilities carry their own costs when done on-premises. My point is that the more you do in the cloud, the more it will cost, and it's a mistake to assume that the cloud approach will be cheaper. Developers, IT managers, and first-time cloud users need to think broadly about everything involved when doing the number crunching.

All of which is made harder by the fact that, in this rapidly evolving market, the data points keep changing. The good news: Will Forrest, the McKinsey analyst who authored that controversial report, told me that he expects there to be downward pressure on both public cloud services and companies' in-house alternatives.

"There's absolutely no doubt that there will be pricing action in the market before the year is out," Forrest said. "It will be an interesting race in pricing between the cloud providers and internal IT providers."

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