Cloud Delivery and Hosting Models - Deploying and Managing a Cloud Infrastructure - page 166

Comparing Total Cost of Ownership

On-premises hosting is generally not looked at as cloud computing, even though you might
be running the same virtualized infrastructure and software in a real cloud environment.
This is because a cloud is defined by its benefits and functions, not necessarily by the tech-
nology involved. This all sounds very ideological, but it really is technical. Let's say you
generate your own electricity instead of using it from the grid; you are not availing of the
electric utility grid even though you are using the same form of electricity. Or suppose you
make your own burgers instead of buying them from Burger King.
What we are getting at is that even though what you end up with is the same, the way
you get it may pose different advantages and disadvantages, depending on the circumstances.
Generating your own power, for example, would require large up front costs compared to
taking from the grid, but by making your own burgers, you have the advantage of knowing
exactly what ingredients you use, which can result in a cheaper and healthier alternative. So it
goes for on-premises and off-premises hosting. They might ultimately bring the same benefits,
but a lot of factors will vary. Pricing and costs will be the definitive distinction, especially for
SMBs and small office, home office (SOHO) businesses. Table 6.1 shows a rough compari-
son between costs for both hosting models. The values shown are not exact figures; they are
rough estimates because a lot of these costs will vary. The table is a cost comparison for an
SMB with 10 employees that must decide whether to host its application in-house or to avail
of a real cloud solution.

TABLE 6.1 Cost comparison

Feature
Up-Front Costs

On-Premises Off-Premises Description

Server hardware $8,000 $0 Actual server hardware

Server software $1,500 $0 Windows Server OS

licensing, hypervisors,
and cloud platform

Backup system $2,000 $0 Backup solution and

software

Miscellaneous
equipment

$500 $0 UPS, networking equip-

ment, server rack, and
so on

Installation or
migration

$3,000 $2000 Labor costs to set up

the server and migrate
the old system into the
new server

Total Up-Front Cost $15,000 $2,000