5 Ways to Check if Private Cloud TCO Makes Sense to Your Company

Are you one of those people who goes straight to the last page of a proposal and looks for the bottom line figure? Imagine a private cloud proposal with a single number at the end. It looks great but how was that number generated? To work this out, you probably work backwards and analyze what it is you'll be getting (for that money), asking yourself: "What is the real total cost of ownership (TCO) of the solution?" Plus, "What are the alternatives?" So, the next stage is probably to consider the options: what if we do nothing? Is there a cheaper, better offering?

It's inevitable that out of the many factors to consider for a private cloud, one of the key factors that "the grownups" (read: the executives with the budget) will be interested in is the affordability, the value for money: that number.

This blog explores the principles behind building such a model before recommending five questions to ask of any private cloud TCO model:

1.What's a private cloud?

2.Building your private cloud TCO model

3.Five questions to ask of your private cloud TCO model

1. What's a Private Cloud?

Before you consider a private cloud solution and the costs, you need agree on what a private cloud is. Or, more specifically, you need to agree what it's not before you agree what it is.

This is important, because when you use a TCO for comparison, agreeing on what does and does not constitute a private cloud helps to ensure you have a proper TCO and are comparing apples-to-apples.

Let's start with what a private cloud is not: it's not a VMware cluster running in your datacenter with vCenter as the front end. It's a common confusion in the industry, falsely inflating many private cloud uptake reports, and it's wrong because a VMware cluster doesn't have the five essential cloud characteristics (as defined by NIST):

Essential Cloud Characteristic

Why a VMware Cluster isn't Private Cloud

On-demand self-service

You don't let non-IT users access vCenter

Broad network access

You can't access vCenter from corpnet

Resource pooling

Non-IT users can't set their own resource usage

Rapid elasticity

Your VMware cluster can't scale up and down

Metering service

You don't expose statistics or use them to control usage

Now we know how a private cloud should behave, hopefully we can agree on the (NIST) definition of private cloud:

"The cloud infrastructure is provisioned for exclusive use by a single organization comprising multiple consumers (e.g., business units). It may be owned, managed, and operated by the organization, a third party, or some combination of them, and it may exist on or off premises."

2. Building your private cloud TCO model

The on-premises vs. hosted private cloud TCO models are slightly different, but the approach is roughly similar. Which thankfully helps with apples-to-apples comparisons of running your own private cloud versus outsourcing it and offsetting some internal costs, such as staff and software costs, to the service provider.

As input to your private cloud TCO model, you'll need to have a sizing estimate based on the following information:

1.Estimated number of VMs, vCPUs, vRAM and storage

2.Number of virtual networks.

3.Number of operators (required for management software licenses)

4.Rate card from your hardware suppliers and your refresh cycle

5.Your facilities costs for space, power, cooling, and racks.

Using an online tool such as The Complete Cloud Build vs Buy Calculator, you can then use your estimates to get a "ball-park" figure for both on-premise and hosted private clouds.

3. Five questions to ask of your private cloud TCO model

"Does a private cloud make sense to your pocket?" is the overarching question. "Compared to what?" is another question that quickly needs to follow the first.

Once you have your TCO model you can start to build a position on what makes the most sense for you, by asking:

1.Your pocket - is it CapEx or OpEx friendly? For instance, some organizations in the public sector get budget just once a year and prefer CapEx models; others prefer to align spend to consumption over time and prefer OpEx. Which are you, and how does this affect your TCO? Are you looking for three-year deals, with forecasts of consumption, or are you looking to dip your toe in the water and pay as you grow?

2.Can you use existing IT kit? The first question any decent business executive will ask is, "Does this include using our existing excess capacity and sweating our current assets?" "Are we making most use of the money we've already spent?" So, look to see if you can reduce the cost inputs to your TCO this way.

3.What does it cost to "do nothing"? Challenge the premise that you need a private cloud at all. Understand what value will it create and the problems will it help solve. Alternatively, what's the opportunity cost of doing nothing. What impact does this have on the business, such as hindering agility, time to market, and suppressing revenue growth?

4.What is our business and IT strategy? Some businesses are seeking to reduce the building facilities they own and to maximize the use of what they have left. So, is this an opportunity to go to hosted private cloud? Make sure the TCO includes these numbers in terms of the value unlocked by this strategic alignment.

5.Remember that hidden costs are a killer. Getting the real numbers out of an enterprise to put into a TCO model can be difficult. Budget data is often confidential and sensitive information and might exist in silos. This raises the first issue of an on-premise private cloud TCO - it's often incomplete. So, check and double check your costs to ensure that you avoid making a suboptimal cloud decision due to incomplete data.

The key to a successful private cloud TCO effort is to center it around your own reality, not that of a hosting provider or vendor. Use this approach to build, and question, your own model - and on your terms. You will then be able to better understand if private cloud is the best option and which of the on-premise or hosted models work best for your organization.

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