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How to Calculate the Total Cost of Cloud Storage Published: 18 October 2013

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How to Calculate the Total Cost of Cloud Storage Published: 18 October 2013 This research note is restricted to the personal use of [email protected] G00255331 How to Calculate the Total Cost of Cloud Storage Published: 18 October 2013 Analyst(s): Gene Ruth, Pushan Rinnen, Arun Chandrasekaran Cloud storage economics depend on more factors than just the cost per GB to be an attractive alternative to on-premises storage. Without a comprehensive business case, IT leaders will make mistakes and waste money. Key Challenges ■ Data growth continues to challenge IT operations. For example, a 35% growth rate per year requires a doubling of on-premises storage over a three-year period. ■ A large percentage of data handled by IT operators (e.g., archive, backup and file shares) is often inefficiently stored on high-performance storage, and thus wastes valuable capacity that could otherwise be freed up for other uses. ■ Coordinated data delivery and protection within branch offices can be expensive using conventional on-site storage, and is prone to data loss. Recommendations ■ Include hybrid cloud storage environments as an appealing alternative to storing unstructured data in low-demand/performance situations when dealing with high data growth. ■ Apply distributed cloud storage integrated environments using cloud storage gateways as an alternative and cost-effective method to support branch offices. ■ Include total implementation and administrative costs when comparing on-premises storage to hybrid cloud storage solutions to expose any hidden costs. Consideration for operations, staffing and skills should be included in any cost comparison. ■ Prepare for cloud failure by requesting contractual guarantees with financial penalties from cloud vendors for the availability of data, loss of data, and time to migrate or copy data from a bankrupt cloud storage provider to another or to your own in-house storage. This research note is restricted to the personal use of [email protected] This research note is restricted to the personal use of [email protected] Strategic Planning Assumption By 2018, 80% of enterprise data centers will place low-performance unstructured data into public cloud storage, leaving only business-competitive capabilities on-premises. Introduction This research provides advice on what to consider when calculating the cost of public cloud storage (infrastructure as a service [IaaS]), compared with traditional on-premises storage for an enterprise- scale IT infrastructure. Examples of cloud storage referenced here include Amazon Simple Storage Service (Amazon S3), Microsoft Windows Azure Blob and ATT Synaptic Compute as a Service cloud storage. Simply comparing the purchase cost (cost per GB) of an on-premises storage infrastructure to a cloud storage solution is insufficient to make a well-informed decision. IT organizations must dig deeper to uncover the real economic value when comparing the two options. Considerations should include the impact on operations, investment requirements, resource utilization, skill and head count requirements, and alignment with other IT initiatives. In addition, any use case analysis must distinguish business-competitive IT workloads from routine data manipulation in order to identify and prioritize cloud-eligible workloads and use cases. And importantly, although difficult to quantify, the risk of a cloud storage service provider failing must be considered, along with any Plan B options that might be necessary. Additionally, appropriate exit SLAs must be built into the cloud services contracts, should things go wrong. Analysis Analyze All Explicit and Hidden Costs During the Planning Phase Customers need to carefully factor in all costs when comparing on-premises storage with cloud storage, as there are a number of nonobvious costs on both sides. As a reference, for an enterprise- scale environment, Gartner calculates that the annual total cost of ownership (TCO) for 1TB of on- premises storage is $3,879 (see "IT Key Metrics Data 2013: Key Infrastructure Measures: Storage Analysis: Multiyear"). Although the $3,879 per TB metric is interesting, most cloud storage projects start on a smaller scale and require more explicit examination to validate a TCO comparison. For example, public cloud storage deployments often address only a fraction of an IT storage environment, and depend on additional on-premises hardware/software, such as cloud storage gateways and require client-side encryption key management. In addition, customers should consider the additional costs involved in procuring enterprise-class support from public cloud providers that can guarantee escalation response time. Customers desiring more robust disaster recovery in the cloud should include the costs of cross-regional replication (offered by the cloud provider) and, potentially, physical equipment exchanges for fast recovery activities. Often-overlooked costs in on-premises storage are the infrastructure costs associated with rack space, electricity and cooling costs — all of which can be a significant portion of operating Page 2 of 9 Gartner, Inc. | G00255331 This research note is restricted to the personal use of [email protected] This research note is restricted to the personal use of [email protected] expenditure (opex) costs in a data center. Customers should also consider backup and disaster recovery costs (as outlined in Figure 1), including, for example, backup application and replication license fees. The IT staffing costs and implementation and training costs also need to be considered against the backdrop of existing workforce skills in the IT organization. Refer to Figure 1 for items to consider when comparing implementation and operational costs. Figure 1. Key Considerations When Determining the Value of Moving to a Hybrid Cloud Storage Environment On-Premises Public Cloud Storage • Acquisition of storage hardware, • Cloud storage gateways Acquisition including software licensing • Connectivity infrastructure Costs • Management software • Replication software • Space/colocation • On-demand capacity • Electricity, cooling • Egress/ingress bandwidth • Transaction costs (get, put, etc.) Operational Costs • Annual maintenance and • Cloud provider support upcharge software • IT workforce • IT workforce • Service vendor management • Encryption key management • Equipment costs • Cross-region disaster recovery • Software licensing and/or backup to physical media • Maintenance • Cost of testing • Additional bandwidth Redundancy • WAN optimization controller Costs (optional) • Space/colocation • Electricity/cooling • Cost of testing • Implementation • Implementation • Training • Training Others • Recurring migration costs during • One-time migration every upgrade • Contract management • Depreciation Source: Gartner (October 2013) Build a Business Case That Considers Nontangible Benefits Cloud storage (IaaS) promises some unique benefits, such as business agility, better capacity utilization and scalable capacity at lower incremental costs that are tough to replicate in an on- Gartner, Inc. | G00255331 Page 3 of 9 This research note is restricted to the personal use of [email protected] This research note is restricted to the personal use of [email protected] premises model. Data storage in the cloud often enables enterprises to quickly launch applications (e.g., file sync and share and endpoint backup) by leveraging on-demand compute and software (SaaS) that are often delivered by the same public cloud provider. Organizations are also able to distribute and monetize content more easily through use cases, such as global content distribution, or analytics that can be more effectively rolled out in a public cloud. Arguably, use of public cloud storage reduces vendor lock-in by lowering the switching costs between vendors. Most on-premises deployments have substantial technical (through usage of proprietary software features), operational (through prepaid maintenance) and migration costs that tend to favor a continued relationship with the incumbent storage vendor. In contrast, hybrid cloud storage (a combination of on-premises and cloud storage) is less dependent on proprietary implementations and provides flexibility in mixing capital and opex. Some lock-in does occur when using gateways, but the scope and scale are much less than the on-premises alternative. This allows procurement teams to leverage discretionary opex budgets for new products and services that are less constrained by incumbent vendors and their proprietary implementations. Given recent price reductions (e.g., Amazon lowered storage costs by 25% in November 2012), the public cloud providers have been more aggressive than on-premises vendors in lowering storage prices and passing on the cost-benefits to customers. With growing competition, public cloud storage is certainly turning into a buyer's market, whereas, in comparison, the competitive dynamics in the on-premises storage space have changed little. Although the outlook continues to be positive for cloud storage, compared with the existing conventional hardware storage market, it has a long way to go to establish credibility for usage with enterprise-class, high-availability workloads. Emphasize Workforce Productivity Gains Undeniably, workforce productivity gains through public cloud storage can be immense. Operational tasks, such as handling on-premises tape backups, can be eliminated, and configuring and provisioning storage systems will be automated in the public cloud. The convergence of storage automation tools, server virtualization, converged infrastructure
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