Economics of Cloud Computing (Jazoon'11)
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Netcetera consultants Ronnie Brunner and Jason Brazile show common economic arguments that are often used for making the case for cloud computing - in terms of providers as well as consumers
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Economics of Cloud Computing (Jazoon'11)
- 1. Economics of Cloud Computing Ronnie Brunner, Jason Brazile Netcetera 420
- 6. The Cloud Computing Service Models Platforms as a Service (PaaS) Infrastructure as a Service (IaaS) Software as a Service (SaaS) Cloud Enablers / Cross platform solutions
- 8. IaaS Provider Market Study Amazon/EC2 has a lot of competition Ben Lorica, Amazon's cloud platform still the largest, but others are closing the gap Guy Rosen, http://www.jackofallclouds.com/
- 14. Sample Cases: Calculating pricing At 25% utilization, cheaper to reserve The shorter the usage, the cheaper the cloud at 3% utilization even 100s CPUs are “cheap”
- 15. Cloud SLAs as good as average data centers Data Source: Andi Mann, Enterprise Management Associates unknown 99.9% (~10min/week) Microsoft Business Productivity Online Suite 99.85% (~15min/week) 99.9% (~10min/week) Google Apps Premier Edition unknown 99.95% (~5min/week) Amazon EC2 99.999% (~5min/year) n/a Top 15% Virtual Systems Management Enterprises 99.5% (~50min/week) n/a Data Center (avg. over 300) Achieved Uptime Promised uptime Who
- 17. Netflix in Cloud is U.S.’s largest traffic source Schonfeld, TechCrunch, Netflix now largest single source of internet traffic in N. America, 17 May 2011
- 18. Cloud consumer risks and their consequences Exposure to outage, higher switching cost Usage too specifically designed for a specific provider or lack of alternative service Lock-in dependency Situation worse and/or more expensive and no plan B Assumptions that all costs will go down (and all performance up) just from moving to the cloud Optimism bias More expensive over time, unclear what‘s still needed Nobody cleans up hard disks or gets rid of unused virtual machines Costs slowly increase Unmanaged service portfolio, not reaching strategic goals Introduction of a proprietary SaaS solution that (only) provides a quick fix Single actor can chose wrong direction quickly Image/brand damage NASA‘s moon landing tapes, hacker data vandalism, Provider default Data loss Financial liability, loss of trust Data protection violation, leak of industry partner’s secrets Data gets leaked Financial exposure and uncertainty Monthly bills unpredictable due to irregular demand. Lots of hard to track small transactions with many providers Costs can‘t be tracked well Service failure , data mess (where’s what?) Critical service is down because key person‘s individual credit card expires Individual “contracts” via credit card Result Examples Risk
- 19. Cloud provider risks and their consequences 1 Gray, Microsoft seeks to stem Azure exodus with huge appliance, Informed Virtualization Criticism, 2010 2 http://jpf.github.com/domain-profiler/ycombinator.html Limited niche market Too much per-customer customization prevents streamlined provisioning/operations Can’t maintain low marginal costs Lose regular customers and ability to keep tenancy high http://en.wikipedia.org/wiki/Rackspace#Downtime Can’t deliver on uptime Financial liability, loss of trust April 2011: Reddit, Foursquare, Quorum suffered from AWS EBS failure Visible customer gets burned Loss of momentum Microsoft Azure 1 2 Can’t grow customer base Change product (e.g. allow censorship) or abandon market Google in China Legislation threatens business model Image/brand damage, loss of trust Dec 2010: Microsoft BPS Cloud Service Data Breach Infrastructure gets hacked Race to the bottom - mainly about price 20+ providers of cloud compute nodes and storage services Commoditization of everything Result Examples Risk
- 25. Contact Ronnie Brunner [email_address] Netcetera http://netcetera.com Jason Brazile [email_address] Netcetera http://netcetera.com
Editor's Notes
- *) Pay-as-you-go can take various forms, important aspect is: you pay for what you consume But it can even be upfront (e.g. pre-paid phone)
- The 10 laws of cloudonomics (Joe Weinmann, 7. September 2008) Costs less even though it costs more: think pre-paid phone vs. monthly base fee + reduced cost for calls
- IaaS This is probably the most well-known cloud service model reported by the media. However, cloud compute-on-demand is also an easier to understand next step after in-house virtualization and co-location. When the resource need is known in advance but generally very irregular over time, IaaS is a viable approach to cost savings. However in many application the resources needed over time are not known especially if it depends on external demand (such as a web site that gets very popular because of a specific event). However, after initial “low-hanging fruit” of just moving a virtualized service into the “Cloud” next steps get tougher: Scaling a service needs manual effort or additional tools and measures There is likely a need to re-design (maybe even from scratch) to successfully move to an inherently more distributed platform. Only on PaaS (migrating to which may also need heavy application architecture change) do you get (in some cases at least) automatic reduction of scaling details PaaS Platforms simplify architecture of applications by providing a more abstract model of its service, providing simpler deployment and hiding the complexity of scalability behind their interface to the application developer. In the best case (i.e. when there is a good fit to the service’s model) a user does not have to worry about scalability or availability simply by adhering to the platforms APIs. Lock-in The biggest drawback to consider however is “lock-in”: For IaaS, there are already many abstraction (cross-platform) APIs around that help mitigate the risk of locking the user to a specific provider. For platforms, this will be more difficult, although there are also already first open source implementations of existing platforms (e.g. AppScale, which is an open source implementation of the Google AppEngine) SaaS A SaaS provider is basically a ASP, as it was called a couple of years ago. While the Cloud lets providers leverage existing infrastructure and the traditional ASP based his offering mostly on his own infrastructure, the difference for the actual user is insignificant. With SaaS too, the main characterization is: self-service, pay-as-you-go and on-demand. Moving from local installations to SaaS allows new capabilities that are not possible locally: e.g. simultaneous editing of documents. Variety Whenever a software can potentially be accessed with a browser, it is a candidate for SaaS. This implies that the number of offerings and services will explode even more in the near future. The difficult question when exploring possibilities is that the market is changing even faster than the IaaS and PaaS market. --- BTW: Deployment Models: Private cloud. The cloud infrastructure is operated solely for an organization. It may be managed by the organization or a third party and may exist on premise or off premise. Community cloud. The cloud infrastructure is shared by several organizations and supports a specific community that has shared concerns (e.g., mission, security requirements, policy, and compliance considerations). It may be managed by the organizations or a third party and may exist on premise or off premise. Public cloud. The cloud infrastructure is made available to the general public or a large industry group and is owned by an organization selling cloud services. Hybrid cloud . The cloud infrastructure is a composition of two or more clouds (private, community, or public) that remain unique entities but are bound together by standardized or proprietary technology that enables data and application portability (e.g., cloud bursting for load-balancing between clouds). -> Actually, there is no (technical) reason for anything else but public cloud…
- January 2011: Racksace is still 10 servers behind Amazon
- At these quantities, special purchasing arrangements are the norm (Google pays only a fraction of the market price for their servers, $500 for 16GB 2 CPU server, 2009) Unlimited backup for ~50$ per year?! Cool for customer, but how can it work for Backblaze? Not necessary to be able to read the actual figures: the size of the bars are enough…
- Assumption of 50% utilization is quite high!
- Typical risks The slides collects some critical risks that one might become more exposed to through the use of Cloud Computing. Being aware of what can go wrong and how bad it can be, is very important especially for first movers. It only takes one catastrophic early experience to cause potentially over-compensating measures which could limit the ability to profit from Cloud benefits for a long period of time before trust is again rebuilt or the technology becomes so mainstream that it overcomes the negative bias. Devising measures to mitigate the risks After having identified such risks, it is in everyone’s interest to define reasonable measures to prevent such cases from occurring. Easy to take measures include encryption of data or the introduction of checklists. Such measures are what many people think of as governance. Perhaps the easiest way to get buy-in is to elicit recommendations on such measures from the first movers. Such users are likely to recognize the danger of negative events and are more likely to actively participate in governance measures that they have helped to devise.
- Freemium sample: Xing costs .30 per user, 1 in 10 is premium -> 3/mt is break even
- Mention Chaos monkey and chaos gorilla