Learn how to choose your e-commerce infrastructure, and how to forecast the TCO based on a simple model, including the explanations on how public, private and hybrid cloud computing work.

1. Cloud Economics:
design, capacity and
operational concerns
for e-Commerce Platforms
Marcos Garcia
Senior IT Architect

2. What is Cloud?

3. Cloud is not Dropbox or iCloud. Those are Cloud Storage services.
Cloud Computing is defined as [1]
1. On-demand self-service - customers can get compute/storage/networking resources
with just an email ID and a payment option (credit card)
2. Broad network access - resources can be accessed anywhere, anytime
3. Resource pooling - access to vast amounts of shared resources
4. Rapid elasticity - scale up or down, immediately
5. Measured service - pay as you go
[1] http://csrc.nist.gov/publications/nistpubs/800-145/SP800-145.pdf
Cloud 101

4. Cloud 101: Storage and Network Resources
Cloud Storage services Cloud Network services
Including streaming

5. Cloud 101: Compute Resources
Pre-2006 [2]
- Web Hosting
- Virtual Private Servers
- Virtualized Servers
- Dedicated Server Hosting
- Collocation services
Post-2006 - same as before, plus:
- Infrastructure as a Service
- Platform as a Service
- (Software as a Service)
- Contanerized IaaS
- Lambda - code execution
service [3]
[2] https://en.wikipedia.org/wiki/Amazon_Web_Services#History
[3] https://aws.amazon.com/blogs/aws/run-code-cloud/

6. A web application is described using layers:
● The website Code and Images are executed by a
Web Server
● Code is written in a language (PHP, Java, Python or
Ruby) that requires Libraries to run.
● It needs a Database to save customer data
● All runs on top of an Operating System (Windows
Server, Linux, Solaris)
● The OS uses Drivers to abstract the Compute,
Network and Storage resource details
Cloud 101: Structure of a web application
Web Server
Website Code
Website Images
Database
Operating System
CPU
RAM
Network
Card
Storage
Drivers
Libraries

7. Web Hosting
It is simply a Web Server where we can upload our
website Code and Images, and use a shared Database.
Typical cost: 3-5$/month
Examples:
● 1and1.com
● godaddy.com
● ehost.com
● peer1.com
Web Server
Website Code
Website Images
Shared Database
Operating System
CPU
RAM
Network Card Storage
Drivers
Web Server
Website Code
Website Images
Shared Libraries
Customer A Customer B
Web Hosting subsystem

8. Web Server
Website Code
Customer B
Website Images
Database
Operating System
CPU
RAM
Network Card Storage
Drivers
Virtual Private Server
It offers a dedicated Operating System that runs on a
shared server with many other customers on it,
isolated thanks to a special VPS software. It contains
pre-installed Web Servers and Databases. Each
customer manages everything above that, and the
provider manages the OS and the layers below.
Typical cost: 5-10$/month
Examples
● DigitalOcean
● Softlayer VPS
● OVH VPS
Web Server
Website Code
Website Images
Shared Libraries
Customer A
VPS subsystem
DatabaseLibraries Libraries

9. Web Server
Website Code
Customer B
Website Images
Database
Operating System
CPU with VT
RAM
Network Card Storage
Drivers
Virtualized Server
It offers an isolated and dedicated Operating System
that runs on a shared physical server with few
customers on it, isolated thanks to a hardware feature
called VT (Virtualization Technology). The Virtualized
Server (or VM) contains empty Operating Systems that
can be different from the host. Each customer manages
everything inside their guest OS instance, and the
provider manages the host OS and the layers below.
Typical cost: fixed price 30 to 300$/month (per guest *)
Examples:
● peer1 virtual cloud servers
● Rackspace Managed vCloud
● OVH vSphere as a Service
● VMWare vCloud Air
* Often, a minimum amount of guests are required (i.e. 10)
Customer A: Empty
Libraries
Operating System 2Operating System 1
Virtual DriversVirtual Drivers

10. Dedicated Server
It offers an isolated and dedicated physical server, that
is collocated next to another customer’s server, so the
only shared resource is the network traffic, that has to
be isolated using the provider’s network features.
Typical cost: 80 to 500$/month
Examples
● peer1 virtual cloud servers
● Rackspace Managed vCloud
● OVH vSphere as a Service
● VMWare vCloud Air
Web Server
Website Code
Website Images
Databa
se
Operating System
CPU
RAM
Net.
Card
Storag
e
Drivers
Libraries
Web Server
Website Code
Website Images
Databa
se
Operating System
CPU
RAM
Net.
Card
Storag
e
Drivers
Libraries
Web Server
Website Code
Website Images
Databa
se
Operating System
CPU
RAM
Net.
Card
Storag
e
Drivers
Libraries
Web Server
Website Code
Website Images
Databa
se
Operating System
CPU
RAM
Net.
Card
Storag
e
Drivers
Libraries
Provider Network Infrastructure
Customer A Customer B
Customer B Customer A

11. Infrastructure as a Service
‘Invented’ in 2006 by Amazon Web Services, named Elastic
Compute Cloud (EC2). It’s an improved Virtualized Server, split in 3
core resources, all managed with a dedicated API (Application
Programmable Interface) and multiple pricing metrics. Customers
registered using an email-address and a credit card have access to
unlimited resources, as long as they can pay for it.
● Compute instance (hours per month)
● Storage
○ Operating System image (free)
○ Block space (Gigabytes used/hour)
○ Object (# Files and GB transferred/ hour)
● Network
○ Private IP settings (free)
○ Public IP settings (# of IPs per month)
○ DNS as a Service (changes per month)
○ Load Balancer as a Service (Gbps transferred / month)
○ Firewall as a Service (Gbps transferred / month)
Web Server
Website Code
Website Images
Database
Operating System
CPU
RAM
Network
Card
Storage
virtual Drivers
Libraries
Compute
Instance API
Service
Network API
Service
Storage API
Service
Customer Instance (VM)
Metered
Usage
(used hours/Gb
per month)

12. Virtualization vs Cloud/IaaS
Virtualization is for Virtual Machines that will last many
months, and when they fail we need to repair them as
quickly as possible.
Typically, only one VM contains a particular component
of the Web Application (SPOF - single point of failure).
So when the VM fails, it causes a module of our website
to fail, maybe even causing a total downtime.
Virtualization offers the best of breed protection
mechanisms for VMs, to reduce the probability of an
infrastructure failure
It is priced as a fixed amount per month
Cloud/IaaS is for Virtual Machines that will last hours,
days or weeks, and whenever they fail we just launch
a new one.
The Web Application software was deployed using
dozens of small VMs that will cover for the faulty one
(no SPOFs). The application understands failure and
the service was not affected during downtime.
IaaS offers no protection to the VMs, but the API will
signal the failure immediately to our software, so it
can react accordingly.
Pricing is variable and subject to usage metrics
Read this: http://www.theregister.co.uk/2013/03/18/servers_pets_or_cattle_cern/

13. Public vs Private Cloud
Public cloud is what we’ve already seen: IaaS
offered by a huge service provider, with
millions of resources available. It also offers
extra services on top of IaaS that are very
appreciated by software developers.
The use of shared resources involve extra
auditing efforts (i.e. PCI-DSS) to the customer.
Although some say it has more advantages
than disadvantages, it can quickly become
more expensive than expected if it’s not used
where it’s appropiate.
Private cloud is an IaaS deployment on a
limited amount of resources, owned by a
private entity, so exclusively used inside the
company’s perimeter. It is often seen as the
most secure option due to that isolation.
It has no economy of scale, as commercial
servers are more expensive than those used
by public cloud providers (see OCP [4])
Furthermore, employees need new skills to
operate private clouds, which means there is
a learning curve that may cause the private
cloud to be less reliable than the public cloud.
[4] http://www.opencompute.org/

14. on demand, self-service
broad access
resource pooling
rapid elasticity
measured service
Infrastructure as a Service

15. Cloud revolution
By dynamically matching capacity to
demand, the infrastructure now allows a
lean growth model, key enabler of the
startup economy
http://www.dynco.co.uk/wp-content/uploads/2015/09/business-growth-1024x640.png

16. e-Commerce Hosting Requirements

17. e-Commerce Infrastructure
Web Server
Website Code
Website Images
Database
Operating System
CPU
RAM
Network
Card
Storage
Drivers
Libraries
Same as before: Web Application layers
But what kind of Infrastructure do we need?
Typical answers
● Web Hosting is OK for basic eCommerce
● Virtualized Servers is OK - better isolation than VPS
● Collocated / Dedicated Servers makes PCI-DSS
compliance harder
● IaaS is OK for complex eCommerce
● PaaS, SaaS, Containers, Lambda, often too complex
and very new: only for big companies.

18. e-Commerce Traffic Analysis
A complex Web Application, with 2 main functions
● Display our products
○ Show pictures and detailed information
○ Customer reviews
○ Intelligent tracking of customer preferences (based on browsing history)
○ Uses SEO techniques to attract visitors from other sites (e-Marketing)
● Allow customers to purchase our products
○ Shopping Cart function
○ Integration with Credit Card processing systems, PayPal, or any other B2B systems
○ Storage of customer sensitive information, subject to government or industry regulation
(SOX, PCI-DSS, PIPED Act, etc.)
○ It’s a common target for hacker attacks, phising and other threats.

19. Sidenote: PCI-DSS
Anual audits required to prove that a company
that stores Credit Card information
● Builds and maintains a secure network
● Protects cardholder data
● Maintains a vulnerability management
program
● Implements strong access control
measures
● Regularly monitors and test networks
● Maintains an information security policy

20. e-Commerce Demand Analysis
Daily Variation (night vs day) Yearly Variation (high-season)
Note the 2 kinds of traffic, aligned with the 2 functions from earlier:
● visitors only browse our product listing while they decide to buy or not
● buyers click on the ‘order’ button and introduce their credit card information to do the purchase.

21. A slow website (>3 sec per page)
loses money [5]
You need to provide enough resources
to your website.
[5] http://www.peer1.ca/knowledgebase/how-slow-website-impacts-your-visitors-and-sales

22. Case Study

23. A model for Web Site performance
Let’s suppose the following
● Compute Unit (CU): the amount of server’s resources (CPU, RAM, etc) required to display and
properly serve a website visitor during 10 minutes
○ A small server can handle 60 CUs per hour, 10 every 10-minutes.
● Visitor: a regular visitor that browses our website, clicks on images, reads the descriptions, etc.
○ Browsing our website catalog requires 1 CU.
● Buyer: the most important kind of visitors those browsing our Shopping Cart section, which
means they’re halfway their purchase process where they give us their personal details and
credit card information
○ Going through the purchase process requires 5 CUs.
● It takes more CU to serve a buyer than to serve a visitor (i.e. 5 times more), due to the storage
of personal data, credit card validation, checkout process, etc.

24. Are you smarter than a 5th grader?
Remember: 60 CUs per server/hour. 1 visitor = 1CU. 1 buyer = 5 CUs
● Number of visitors can 1 server serve per hour (on average) ?
Answer: 60
● Number of buyers can 1 server serve per hour (on average) ?
Answer: 12
● Maximum number of buyers can 1 server serve in 1 day?
Answer: 288

25. Daily Demand
Low vs High season
(example hourly values - best case)
Visitors/h Buyers/h
Night time min, low-season 60 6
Day time max, low-season 200 20
Night time min, high-season 100 10
Day time max, high-season 1000 100

26. Peak Demand
(best-case average vs worst-case)
Visitors
/h
Visitors
/10min
Buyers/
h
Buyers
/10min
Total CU
Equivalent / 10 min
Total CU per
hour
Worst-Case Total
Servers (ALL visits
in 10 min)
Best-Case Total
Servers (hourly
average)
Night time min, low-season 60 10 6 1 10+(1*5) = 15 60+(6*5) = 90 90/10= 9 (60+6*5)/60 = 1.5
Day time max, low-season 200 33 20 3.3 50 300 30 5.0
Night time min, high-season 100 16.7 10 1.7 25 150 15 2.5
Day time max, high-season 1000 167 100 16.7 250 1500 150 25
Remember: 60 CUs per server/hour. 1 visitor = 1CU. 1 buyer = 5 CUs
Equivalent to: 10 CUs per 10 minutes means 10/1=10 visitors every 10 minutes, or 10/5=2 buyers every 10 minutes.
6
1
10min 20min 30min 40min 50min 60min
Buyers’ demand - (similar for visitors)

27. 3-year Budget
With all variables in hand, can we prepare a budget for the infrastructure
needed for the next 3 years?
We’ll look at 2 scenarios: private cloud vs public cloud

28. Option 1: Private Cloud
How many servers to buy?

29. More information
We’ve supposed a basic server would be able to calculate 60 C.U’s /hour
We know, thanks to our providers, that the average server sold nowadays can
perform 480 C.U’s per hour, thanks to multi-core technology
The average price is 3000$ (CAPEX)
Collocation, electricity and other maintenance fees amount to $2000 for the
first three years (OPEX)
Our accountant will amortize the servers over 3 years, as OPEX expenses will
increase and it will be recommended to renew servers every 3 years.

30. Rigth-scaling issues
When purchasing a Fixed Capacity,
we risk undersizing our
infrastructure, which means we’re
not able to serve our customers
during the peak hours, losing
potential revenue and maybe
damaging our website’s reputation
(too slow, unresponsive, faulty...)
Furthermore, we may also be
oversizing our infrastructure, which
means we’ve spent too much, risking
our financial health
We’ll see later how public cloud offers Elasticity as long as our software we can closely adjust itself to
add/remove capacity according to the real-time demand

31. Deciding the size of our Private Cloud
Remember: a $3000 server with 8 CPU cores is 8x more powerful than our basic server calculated before
Visitors
/10min
Buyers
/10min
Worst-Case Total
Servers (6x peak)
8-CPU
servers
Best-Case Total Servers
(no peaks)
8-CPU servers
Night time min, low-season 10 1.0 9
1.13
1.5
0.19
Day time max, low-season 33 3.3 30 3.75 5.0 0.63
Night time min, high-season 16.7 1.7 15 1.88 2.5 0.31
Day time max, high-season 167 16.7 150 18.75 25 3.13
How many servers do we buy?
Between 3.13 and 18.75, we need to compromise. We’re going to size only for instant peaks of 2x the average
hourly rate, so we pick 6 servers. Using a $3000 server (CAPEX) that costs $2000 over 3y to maintain (OPEX),
we need $30.000 during the 3y period (we are supposing the same demand every year).

32. Option 2: Public Cloud
Can we forecast the cost?

33. More information
On average, a basic server able to do 60 C.U.s per hour costs around 20$ per
month. But it is billed per hour, so assume $0.028 per hour (we’re including
storage and network costs)
We’re assuming our software can
leverage the Elasticity and Autoscaling
features of the public cloud, so the
number of servers running will be
almost exactly those required to
properly serve the visitors/buyers any
given time.

34. * The sum of hours is 8640/24h = 360 days in a year (approximation)
Forecasting the size of our Public Cloud
In this case, we need to calculate the number of hours per year our basic servers will be powered on
Night time length, 12 h
Day time length 12 h
Low-season 9 months
High-season 3 months
Total CU: 3,045,600. If a basic server can do 60 CU/h, and costs 0.024 $/h, how much will it cost over 3 years?
(using 360 days/year) Hours/y Visitors /h Buyers /h CU/h
equivalent
Total CU/y
Night time min, low-season 3240 * 60 6 90
291600
Day time max, low-season 3240 200 20 300 972000
Night time min, high-season 1080 100 10 150 162000
Day time max, high-season 1080 1000 100 1500 1620000
We need 50,760 server hours per year x 0.024 $/h is $1,410 per year, $4,230 per 3 years

35. Extra Option: CDN
Add a Content Delivery Network

36. What is a CDN?
CDN is a key service that is contracted to help companies scale their web services and deal with
traffic peaks, specially with image-heavy content that permits a better browsing experience to the
user when they download from a CDN instead of a central server. It can only offload all ‘read-only’ or
non-transactional requests. Examples include Akamai, Amazon Cloudfront, etc.
It is priced with a fixed portion and a variable price depending on the traffic volume
Example for our case (2 million visitors/year)
$200/month
$0.5 per 1000 visitors/year
$2,400 per year (fixed fee)
$1,015 per year (variable fee)
3y fees: $10,245

37. Offloading visitors to the CDN
It can effectively remove all the load related to Visitors, leaving only the Buyers
to be treated in our servers (either Private or Public)
(Visitors now in CDN) Visito
rs
Buyers
/h
CU/h Total CU/y
Night time min, low-season - 6 30
97200
Day time max, low-season - 20 100
324000
Night time min, high-season - 10 50
54000
Day time max, high-season - 100 500
540000
Total 3 year cost $1,410
($2,820 savings)
Worst-Case Total
Servers
8-CPU
servers
Best-Case Total Servers 8-CPU servers
3
0.38
0.5
0.06
10 1.25 1.7 0.21
5 0.64 0.8 0.10
50 6.25 8.3 1.04
Total cost, 3y
2 servers (can handle 2x peaks)
$10,000
($20,000 savings)
We’ve effectively offloaded ⅔ of our traffic to the CDN
So we’re saving 66% in infrastructure costs, but we still need to cover the $10,245 for the CDN fees

38. looks like public cloudis the winner
there is quite a difference in the 3-year costs for Elastic Public Cloud ($4,230)
versus the 3-year server costs for Private Cloud at max.capacity ($30,000, or
$20,245 with CDN)
Even with a CDN, public cloud offers the lowest costs
But it’s not that simple...

39. Is server cost the only attribute of TCO?

40. Other CAPEX factors
Private Cloud Public Cloud
Procurement (HW)
Expensive Zero-cost
Software development
Moderate, more expensive than
traditional virtualization due to lack
of platform’s High-Availability
Expensive: it’s harder to write an Elastic
software than a traditional one
Auditing
Cheap when network is well
designed
Otherwise, expensive
Moderate
Systems design &
architecture
Moderate (not so different to
Traditional Virtualization)
Expensive
CDN setup Cheap Cheap although network fees may
increase if different provider

41. Other OPEX factors
Private Cloud Public Cloud
Salaries
Moderate (skills are almost the
same as traditional virtualization)
Expensive (high-demand)
HW Operating costs
Moderate: power, cooling,
replacement parts, etc
Zero-cost
SW maintenance
Cheap, we can apply security by
isolation, as our servers are inside a
secure perimeter.
Moderate, APIs may change over time and
we’ll be forced to update (lock-in factor)
HW Maintenance
Moderate, but cheaper than
virtualization, no need for
emergency repairs
Zero-cost
Tech Support
Cheap, less than traditional
virtualization
Expensive, extra SaaS services may be
needed (capacity optimization, security
and performance monitors, etc)

42. Other aspects to be considered
Financing
● Borrowing or raising money often includes a budget estimation, which makes the purchase of servers
more attactive than the outsourcing of public cloud.
● Physical servers can also be leased instead of purchased at very interesting rates.
Accounting
● Some may prefer to have assets (like actual) instad of having outsourced their IT servers
● Tax deductions may be available when buying servers (private cloud)
● Some servers can be amortized up to 5 years, reducing the CAPEX burden
Uncertainty and resilience
● There is no doubt that public loud offers a zero-engagement model that allows companies to cut back on
their fixed costs and allocate them as variable costs
● This makes the company more resilient to market fluctuation.

43. Hybrid Cloud

44. Hybrid is the most complex solution
It is often used as a way to combine the best of both worlds.For instance, we
store all sensitive information in our premises (private cloud) but we keep the
website parts that are not-sensitive in the public cloud.
This way, the PCI-DSS and other audits are smaller in size and in complexity
We can use the private cloud to do Dev/Test/QA and save on costs that
otherwise would have increased the Public Cloud expense
Other IT compliance and regulations my force the use of private cloud and
forbid CDN techniques, leaving us with only public cloud as the the scale-out
option for the times of the year when capacity demanded our private cloud
resources

45. When use Hybrid?
As a rule of thumb, keep the important
things (mission critical) close to your
business, and let others deal with less
important workloads
http://blogs.vmware.com/vcloud/files/2012/11/bluelockwebinar2.png

46. In conclusion
Public cloud is the best option for some (i.e. variable and bursty demand), for others it’s
Private cloud (i.e. more constant demand).
You need to analyize your particular case and consider all quantitative aspects (CAPEX,
OPEX, time to market) as well as qualitative (page load, flexibility, risk management,
security and vendor lock-in). Think before you make any final decision, such as buying
servers or re-architecting your software to run on public clouds
Remember: not every workload is suited to be run on a cloud, either public or private. If
it works, wherever it was hosted (virtualization, baremetal), don’t change it. There’s
often no need to jump on new technology unless you need that extra competitive
differentiation that a new architecture can bring.

47. use a calculator
Examples:
http://www.thecloudcalculator.com/calculators/build-vs-buy.html
https://cloud.google.com/pricing/tco/
https://awstcocalculator.com/

48. Doubts?
Thank you!

49. Thanks!
Contact me:
Marcos Garcia
mgarciam@redhat.com
@_marcos_gm_
https://ca.linkedin.com/in/garciamartimarcos