Is Building Your Own Cloud Ever Cheaper Than Going Public?

Written by Joe Kozlowicz on Tuesday, November 15th 2016 — Categories: Cloud Hosting, Data Center Design, Security

perform a cloud total cost of ownershipPrivate vs. public cloud is a battle many thought was over years ago, and some recent think pieces seem to confirm that notion, claiming no one can match the economies of scale delivered by hyperscale cloud providers.

But private cloud, or on-premise virtualization, can still be a less expensive option — if you have the staff and capabilities to support it. A recent study from 451 Research describes when the tipping point is in the favor of private cloud and when public cloud has a lower total cost of ownership (TCO), based on utilization of hardware and efficiency of your staff.


How big are you willing to build?

The most important considerations at hand are the ability of your company to manage infrastructure and hardware resources and the stability of your IT environment. If you have the staff proficiency to manage a large scale virtualized environment and your applications, data storage needs, network configuration, and other pieces of infrastructure will remain relatively stable over the next few years, then building your own cloud might be cost effective.

On the flip side, if your IT staff is already stretched thin or is part of the two-thirds of IT departments that lack proficiency in internal or external cloud management, then a public cloud provider is likely the more economical choice. The same goes for inconstant workloads and smaller deployments.


What if you want the security of private cloud?

Choosing public over private cloud isn’t always as simple as a cost analysis, however. Security remains a top cloud concern, while some organizations require more granular control over their infrastructure for specific applications, compliance, or integration with legacy hardware and software.

Public cloud doesn’t have to be insecure. It also enables you to take advantage of the latest and greatest software and hardware available, as public cloud vendors adopt and replace their platform components on a much more frequent basis than even the most upgrade-prone internal IT department.

Some cloud providers (including Green House Data) also work with organizations to deploy custom private or hybrid cloud solutions that can tie back into existing infrastructure while enabling the support expertise and scalability of public cloud. This may not always be the cheaper option, but it does enable the security, customization, and compliance benefits of private cloud.

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How do you compare the financial impact of private vs. public?

You’ll need to perform a Total Cost of Ownership. How many virtual machines are you using? If you went to a public provider, would you decommission most of your physical IT infrastructure? Carefully plan how many VMs you need currently and might need within the next two or three years (three years is the average time for a hardware refresh). Weigh the cost of your engineering staff salaries, any new hardware you might need, and software licensing against the price of a public cloud subscription for the same amount of time. Of course you’ll still need some staff to manage your public cloud apps, but the workload would be greatly reduced.

You also need to consider the utilization rates of your hardware, the cost for supporting equipment like cooling and generators, as well as the energy cost to run the data center.

The 451 Research report states that a rule of thumb to keep in mind is your ability to manage approximately 400 virtual machines per engineer. If you feel comfortable doing that with your current staff levels, then a private cloud can be a less expensive option. 451 also claims that if your hardware is only utilized at a 50% of its total capacity, then each engineer should be managing 1,000 VMs to reach a favorable cost of ownership compared to public cloud.


Ultimately, efficiency of your staff and utilization of your hardware are the key factors. Without high rates of both, a private cloud deployment is likely to be more expensive and frustrating for your IT department.