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A Closer Look at Comparing the Economic Impact of a Flexible Capacity Service


In my earlier blogs, I’ve discussed various cloud strategies that can affect economics and help toward managing Total Cost of Ownership in a hybrid cloud environment. In the 10th part of this cloud economic series, I touched on the challenges and benefits that HPE Flexible Capacity--an infrastructure service that offers on-demand capacity combining the agility and economics of the public cloud and the security and performance of on-premises IT--addresses.  When considering between private cloud vs. public cloud deployment options, this service can have a real impact on TCO.

But how much of an impact?

Recently, 451 Research provided a 3rd party analysis of the HPE Flexible Capacity service. A key question the analysts asked examining challenges, such as accurate planning, overprovisioning, responsiveness, and managing risks and costs: “Are enterprises managing on-premises infrastructure so well that it has economic advantages over public cloud, or are things so complicated that private cloud is a premium service?” The 451 Research report found, “HPE’s Flexible Capacity helps resolve these challenges by providing on-premises infrastructure on a flexible and scalable basis. A TCO analysis of a typical enterprise scenario found it to be on par with public cloud and 29% less expensive than a self-managed private cloud.”

To say that costs on premises are roughly on par to costs in the public cloud runs counter to the assumptions that I think most people have. 451 Research backs up this claim with by providing a rigorous analysis.

Here is 451 Research’s description of its approach in their own words: 451 Research was commissioned to compare the TCO of a typical end-user self-managed private cloud and a public cloud against an HPE private cloud built on its Flexible Capacity program, using Cloud Price Index (CPI) and the aforementioned survey as sources. To ensure independence, none of those being surveyed were aware this project was commissioned by HPE, and HPE was not permitted to select a sample for analysis from the whole dataset.

When thinking about this comparison, it’s important to remember that public cloud providers with multitenant data centers can manage the capacity of the data center and use (often homegrown) technology to dynamically allocate resources.  In addition, some public cloud providers use a “hyperscale”, scale-out architecture with bare-bones commodity servers and a high degree of automation. Here, both technology infrastructure and labor costs can be kept to a bare minimum. So what can you do to try to compare to those economics?

The importance of utilization in this economic comparison

As noted in my earlier blogs, two key drivers of cost in an on-premises environment are utilization and manpower efficiency. HPE’s Flexible Capacity is specifically designed to provide the same operational efficiencies, and thus achieve similar cost benefits. Flexible Capacity drives up infrastructure utilization by right-sizing the environment, meaning that the initial capacity needed is close to what is needed right away (plus an extra buffer), not the typical estimate at what is needed for the next 3-4 months (average procurement cycle, according to 451 Research). By “right-sizing” capacity, the cost is cut by the amount of over-provisioning. In the case of the 451 Research analysis, this alone accounted for savings of 59% for compute and 48% for storage. These savings are then locked into the process as customers continue to pay just for what they use (above the minimum commitment) as they grow, translating to significant cost savings over the entire life cycle.

The role of manpower efficiency in this comparison

As 451 Research points out, the benefits go even deeper. The services component of Flexible Capacity helps customers better operate their hybrid IT and get the most out of the IT that they use. Similar to the efficiencies of cloud data centers, the combination of well-managed technology and efficient operations drives cost savings.

As the 451 Research report says, “In a previous survey study conducted by an independent 3rd party, HPE’s Datacenter Care (which is included in Flexible Capacity) was found to provide an average 28% improvement on labor efficiency. We have used this figure as a conservative estimate of labor-efficiency improvements as a result of using Flexible Capacity (conservative because Flexible Capacity includes more management than was included in the sole Datacenter Care product).” They go on to show how the resulting HPE Flexible Capacity costs are, in fact, virtually identical to those of a public cloud with the same capacity.

The net takeaway that I want to leave you with is that HPE’s Flexible Capacity services can help you get the benefits of a private cloud at TCO levels that are much lower than those associated with other approaches to private cloud provisioning and possibly comparable to public cloud alternatives, depending on your unique scenario. This gives you the freedom to make the right cloud deployment decision based on what is best for the business from an operational perspective (performance, user experience, security, compliance, operational control, etc.).

If you have questions, reach out to me on Twitter @lalitsingh17


About the Author


I am the Chief Operating Officer and Vice President of the Hewlett Packard Enterprise cloud business unit, driving all aspects of operations and performance. I am a leader in HPE’s Cloud Economics campaign. I have also held various leadership roles in General Electric and Electronic Data Systems, and have a Master’s degree in Business Administration, Analytical Finance and Strategic Marketing from the Indian School of Business, Hyderabad in India. I am also Six Sigma Black Belt certified. Follow me on Twitter @lalitsingh17

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