3 Reasons Why An OpenStack Private Cloud May Cost You Less Than Amazon Web Services (AWS)

By Gina Longoria, Patrick Moorhead - October 24, 2016
IT organizations are moving to the public cloud in droves to take advantage of cost savings and efficiency improvements over traditional on premise datacenters. The public cloud offers the promise of on-demand self-service for developers and business owners, pooling of resources to improve utilization and the ability to scale applications very quickly. Companies like Amazon.com, Google and Microsoft have developed robust public cloud solutions, strong developer communities and broad vendor ecosystem support for their offerings. These companies and other public cloud vendors are reaping the rewards of the mass exodus out of the datacenter and into the cloud. openstack-vs-aws-1200x601 (OpenStack and Amazon Web Services logos, property of of their respective companies, compiled by Moor Insights & Strategy) The public cloud got a head start on the private cloud, but adoption of private cloud is also on the rise. Some companies are finding that a private cloud solution may make more sense for their workloads than public cloud. For example earlier this year, Dropbox said they were moving the majority of the company’s storage off of the Amazon public cloud back to their own private cloud. Dropbox said the private cloud approach allows them to increase performance by removing the lag of accessing public cloud-based resources. Dropbox also expects to save money with private cloud by having the control to optimize both hardware and software. One example of a private cloud solution gaining significant traction is OpenStack, which has become a de facto standard for open-source based private clouds. With the OpenStack Summit taking place in Barcelona this week, it is interesting time to reflect at how robust OpenStack has become since the project’s inception over 6 years ago. OpenStack is now backed by some of the world’s leading technology infrastructure providers like Cisco Systems, Dell EMC, Hewlett Packard Enterprise, IBM, Intel and Lenovo, and it is used by leading brands including AT&T, Best Buy, BMW Group, Walt Disney, Verizon Communications and Wal-Mart Stores. According to the latest OpenStack User Survey released last week, the share of OpenStack deployments in production is 20% greater than a year ago, with 71% of clouds in production or full operational use. In addition, the latest survey showed that 72% of those surveyed said their number one business driver for deploying OpenStack was to save money over alternative infrastructure choices. Many companies have already proven out the return on investment that OpenStack can provide. For example, TD Bank claims that they experienced a 25% to 40% costs savings on their platforms and virtual machines over their previous solution by deploying OpenStack. As private cloud solutions like OpenStack become more widely adopted, now is the time for IT to take a hard look at why a private cloud approach may make more sense for some workloads than a wholesale move to a public cloud like Amazon Web Services (AWS). Here are three reasons to consider:
  1. Cost Models: Public cloud based pricing models are generally optimized for development workloads that have a lifespan of months, not years. The public cloud may also be well-suited for workloads that have choppy demand where IT may need the flexibility to scale up and down resources, while those workloads with linear demand may be better served with private cloud. In addition, many organizations find that the network bandwidth costs for public clouds can add up quickly for high-traffic workloads. The specific breakeven point between public cloud and private cloud will vary depending on each environment. However, as IT organizations crunch the numbers for their bandwidth-intensive production workloads, private cloud often comes out on top.
  2. Flexibility: Long-term flexibility may be limited with the public cloud focused strategy. Over the next several years, many companies will look to adopt multi-cloud strategies that include a mix of private cloud and multiple public cloud options to ensure they have the “right cloud” for each of their workloads. It is important to consider how easy it may be in the future to move applications from one cloud to another and how locked in you may be to a specific public cloud. A strategy that is centered around a specific public cloud vendor’s tool stack may limit interoperability with other clouds and limit IT’s ability to move away from certain public cloud offerings as workload demands change. In addition, many IT organizations looking to move out of the public cloud are finding that it can be very costly to move applications and data from one cloud environment to another.
  3. “As-a-Service” Private Clouds: There are ways to get the efficiency benefits of public cloud without having to make the leap. The public cloud does provide a hands-off approach for managing IT resources which lets IT focus on more value-added activities to drive the business. Public cloud also provides operating expense based financing models which can be beneficial for those companies not looking to pay a large up front capital expense for equipment. With this in mind, vendors like Rackspace Hosting and Mirantis have come to market with solutions that provide private cloud capabilities “as- a-service”. By deploying private cloud as-a-service, IT can deploy their workloads on their premises or at a co-location facility which gives all of the benefits of a private cloud (data sovereignty, security, control) with a public cloud-like consumption model. Service offerings can also include capacity planning, cost monitoring, solution optimization and resource management for the entire product lifecycle. For the right workloads, private cloud as-a-service may cost less than the public cloud. Rackspace also offers an “OpenStack Everywhere” approach which gives IT choices on where they want to deploy OpenStack, whether it be their own on premise datacenter, a third-party datacenter, a colocation facility or a Rackspace datacenter.
IT organizations may want to think twice before making a move to the public cloud as the return on investment for certain workloads may be greater with a private cloud solution like OpenStack. But getting up and running in production on OpenStack isn’t always straightforward. It is only recently that OpenStack has reached a tipping point to be well-equipped for deployment by a broad base of IT organizations. Most IT organizations will want to engage with industry partners who have OpenStack expertise to do it right. Both existing and up-and-coming vendors help fill in the perceived gaps of the upstream code with products that help improve the OpenStack deployment process and the ongoing operational experience. Integrators and service providers are also delivering OpenStack consulting and support expertise to help enterprise users deploy and manage their OpenStack environments. I’m looking forward to hearing more success stories this week at OpenStack Summit. As more deployments move into production, I hope to see more OpenStack users discussing the return on investment benefits they are experiencing with OpenStack private clouds.
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Patrick Moorhead
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.