Financial Comparison: Public vs. Private Cloud Computing Solutions

Posted by Mark Teter, Chief Technology Officer
May 22, 2013

It’s been over two years since we posted our blog analyzing the financials of public versus private cloud computing solution models. While the dollar figures may have changed since then, the outcome still holds true—building a private cloud, while more expensive initially, can save nearly 50 percent over the course of three years versus a public cloud.

First… the assumptions. Many factors can go into a financial cloud computing model, so this is merely a starting point for discussion. Here’s what we did:

  • Assumed all instances of public or private cloud server usage are active 24/7
  • Calculated the public cloud (Option 1) using 10 extra-large CPU classes, 60 large CPU classes, and 30 small CPU classes
  • Used a scenario of 100 virtual server instances, for initial analysis purposes
  • Included a silver-level support in the costing scenario for the private cloud
  • Included all needed server, storage, switching and software infrastructure in the private cloud scenario
  • Examined all scenarios over a three year period with an assumed 15% growth rate in server instances (public cloud scenario) and virtual server deployment (private cloud scenario)
  • Allocated maintenance & support costs in the year they occur
  • Determined the company’s technical staff had the skills to install and configure this infrastructure themselves, and so did not include professional services to install the private cloud infrastructure

We also included costs for rack, power, space, etc. at a co-located data center facility in the private cloud scenario, using a quote for a 24 month commitment at a local datacenter co-location facility. Additionally, we procured a quote for a Phoenix co-lo that had higher initial one-time costs with a lower monthly charge. However, we determined that the benefits of having local access to the equipment out-weighed the lower monthly charges. The difference between the two proposals over a three year period was approximately $2,000.

Our model compared three cloud computing solutions scenarios… 1) a public cloud from Amazon EC2; 2) the purchase and building of a private cloud computing infrastructure; and 3) a leased private cloud computing infrastructure:


A recent Oracle-sponsored Unisphere survey (PDF Executive Summary) drew similar results and conclusions:

While most executives favor private clouds over public clouds because of security, private clouds are also seen as more cost-effective over the long run. In addition, cost savings through consolidation is the main business benefit from private cloud deployments; higher scalability is the leading technical benefit.

Of course there are multiple options when deploying a cloud computing infrastructure in your organization, including a hybrid cloud. Be sure to weigh your options and compare private and public cloud solutions carefully; depending on how you’re using the cloud, each has its own potential benefits and drawbacks.

About Mark Teter Before he retired from ASG in 2013, Mark Teter was Chief Technology Officer (CTO) and the author of 'Paradigm Shift: Seven Keys of Highly successful Linux and Open Source Adoptions.' As CTO, Mark regularly advised IT organizations, vendors, and government agencies, and he frequently conducted seminars and training programs.

Filed Under: Cloud Computing

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