David Merrill

Cloud Economics - Redux

Blog Post created by David Merrill Employee on Oct 14, 2016

A few years ago, I posted a series of blogs (on an older HDS blog site) on the economics of cloud computing. Some of these posts are 2-3 years old, but hold some historical significance in defining and understanding how cloud costs behave over time. I will be rehydrating a few of these older posts, and then with that foundation set be able to expand on current trends and costs associated with storage and compute PaaS in the cloud.




Cloud Storage Economics  - Original Posting June 2014



Hybrid Cloud Economics


Over the last 5-6 years, I have done extensive modeling and writing about the economics of storage (and VM) in the cloud. Like most vendors, we have worked to find defensive positions against public cloud offerings. These public offerings offer an extremely low consumption price, and that has been attractive to many, despite the variety of technical and business concerns with public clouds. Most of my own economic work has been to define total costs of cloud options, as compared to hosting infrastructure in your own data center. Not surprisingly, there is a always a cross-over point for where the sweet spot begins or ends for any technology.


Over the years, I have built several public and HDS-use models to compare cloud options for:

  • Tier 4 very low cost storage
  • Archive and backup storage
  • Very long term
  • Cross-over points for private and public cloud architectures
  • And a few others that I have probably forgotten…


In the early days of cloud adoption, there was a significant shift in costs by moving to the cloud, with questionable results relative to if hard costs really went down. Cloud computing introduced net-new costs that have to be considered in TCO calculations (on-boarding, over-use penalty, latency risk, etc.). I have used economic methods and simulations to show where the cross-over point exists for a given technology. Some of these cloud economic cross-over points can be  measured in terms of:

  • Time
  • Growth rate
  • Access rates, frequency
  • Overall capacity
  • Elasticity
  • Risk

The graph below is a simulation to show total cumulative costs with owning an object store solution (HDS HCP) vs. consuming object storage capacity in a cloud offering. You can see the cloud shows economic superiority after 4 years, and this is primarily due to the lack of migration or remastering needed from the cloud offering.



Given cloud shortcoming, there has always existed situations where storage in the cloud made sense from an operational and economic perspective. There are also many situations where it does not make sense.


Recently, the discussion around cloud and DIY has been less adversarial and more cooperative. More customers want the best of both worlds in having fast access to some data, with low cost and elasticity for other kinds of data. The management needs to be unified, using open standards and avoiding vendor lock-in. Simply put, the time is right for highly integrated hybrid clouds. My next few blogs will outline the economic efficiencies of hybrids, and how the economics change with these new options.