Private Cloud vs. Public Cloud: Which Offers a Lower Total Cost of Ownership?

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Even though commercial private cloud offerings can offer a lower total cost of ownership in many cases because of the prevalence of qualified administrators, 451 Research says TCO is just one factor in selecting a particular cloud model.

According to 451 Research’s latest Cloud Price Index, in many cases, security and control of private clouds outweigh any financial considerations when managing mission-critical apps.

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While commercial private cloud offerings such as VMware and Microsoft currently offer a lower total cost of ownership when labor efficiency is below 400 VMs managed per engineer, when labor efficiency is greater than this, OpenStack is a better financial option. The report says that past this tipping point, all private cloud options are cheaper than both public cloud and managed private cloud options.

“Salaries and labor efficiency have a disproportionately large impact on pricing, so our analysis provides a true picture of total cost of ownership, beyond the technology costs,” Dr. Owen Rogers, Research Director of the Digital Economics Unit at 451 Research said in a statement. “But as with any IT purchasing decision, cloud buyers need to look beyond the pricing and evaluate all the risks, such as the impact of vendor lock-in over the long term. “

“While the CPI provides a basis for assessing options, we suggest buyers consider a hybrid or multi-cloud strategy so they can determine the best execution venue for each workload based on cost, management, technology and location requirements.”

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While private clouds may be cheaper past the so-called tipping point, analysts said that public clouds are the least wasteful option because of on-demand provisioning.

451 Research said that “organizations that fail to meet utilization and labor efficiency thresholds can quickly reach a point where they are wasting thousands of dollars each month compared with a public cloud solution.”

According to the Cloud Price Index released in March, public cloud users in the U.S. pay the lowest rates, followed by those in Europe, who pay a 7 to 19 percent premium for the same application.

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