Cloud News & Insights

Cost Considerations in Cloud Deployment

Businessman on a laptop and calculator

I had discussed the case of Lillian White, the florist in my last two posts. The savings in terms of cost were obvious. I want to go  a bit further in this post and look at the possible scenarios while deploying infrastructure in the cloud.

The seasonal business model

Lillian White, the florist had ten dedicated production servers operating through the year – the base number required to serve her clients during off season. She had one server for testing which was used occasionally but paid for on an annual basis. Assuming that she paid $150/month for each server, her base cost was $150 x 11 servers x 12 months = $19800 ~ $20,000 per annum. She had one junior administrator for maintenance who was paid $50000 per annum. Essentially, Lillian White paid $70,000 per annum to keep her business going.

The florist business is highly seasonal. The business bulges to ten times or even more during season. Lillian had noticed that business started picking up around mid-December and kept rising and peaked on Christmas day and New Year time. It tapered down and came down to base demand by mid-January. The demand picked up again by beginning of February and peaked on Valentine’s Day. Obviously lovers liked flowers as much as she did. Besides flowers, Lillian had to deal with hard facts.  Traditional infrastructure calls for some tough decisions.

As a result, Lillian had to deploy 50 additional servers beginning from the month of December to the end of February. She could not deploy servers in the middle of the month simply because she was charged on a monthly basis. Moreover, her administrator took more than two weeks to make servers live and bring them online. As a result, she paid for a total of 60 servers for three months in a year.  Let’s rework the cost with these considerations in mind.

Base infrastructure of 11 servers for nine months – March to November
Cost of servers = $150 x 11 servers x 9 months = $14850 ~ $15,000
Cost of servers during peak season – December to February
Cost of servers = $150 x 61 servers x 3 = $27,450 ~ $27,500
Total cost of servers = $15000 + $27500 = $42500
Total cost of maintaining servers = $50000 + $42,500 = $92,500

Costing with cloud deployment

Now let’s look at the changed scenario with cloud deployment. Due to the flexibility afforded by cloud technology, Lillian could bring additional resources or servers into service as and when she desired. As a result, she decides to deploy additional server resources from 20th December to 10th January. She released the additional resources and redeployed them on 10th February and released them again on 20th February. Let’s see how this impacts on her cost.

Base infrastructure of 11 servers for twelve months = $150 x 11 servers x 12 months = $19800 ~ $20,000 per annum.

Cost of servers during peak season – 20 Dec to 10 Jan + 10 Feb to 20 Feb = 30 days

$150 per server x (one month) 30 days x 50 = $7500

Total cost of server infrastructure per annum
$20000 + $7500 = $27500

Let’s assume that Lillian does away with the junior server administrator and instead pays $10000 to the cloud service provider to assist her in setting up the server instances. The total cost of maintaining her online infrastructure is now = $27,500 + $10,000 = $37,500

Savings in cost by migrating to the cloud
= $92,500 – $37,500
= $ 55000
You might observe that a major cost saving has been from doing away with the administrator ($50,000)

Even if we do away with the cost for employing server administrator, the saving is still considerable. In addition, she now has the flexibility in deploying online infrastructure. I think most of you will agree with my arithmetic. I welcome comments from the readers who would like to add something here.  To look at actual costings, visit GMO Cloud’s resource pricing page.

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About the Guest Author:

Sankarambadi SrinivasanSankarambadi Srinivasan, ‘Srini’, is a maverick writer, technopreneur, geek and online marketing enthusiast rolled into one. He began his career as a Naval weapon specialist. Later, he sold his maiden venture and became head of an offshore Database administration company in Mumbai. He moved on as Chief Technology Officer of one of the largest online entities, where he led consolidation of 300 online servers and introduced several Web 2.0 initiatives. He holds a Master’s degree in Electronics and Telecommunication.

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