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Comparing the Cost of Hybrid Cloud- Cloud Economics Series


lalitedit.PNGGuest Post by Lalit Singh, COO & VP, HPE Cloud

At HPE we are regularly asked by our existing cloud customers, and by customers just starting out on their cloud journey, about how we can help them understand the true costs of the various cloud options available to them. In response, I thought it would be helpful to start this cloud economics blog series, which will focus on new strategies to help organizations better define and articulate total cost of ownership (TCO) for public, private, and managed cloud options. This information may be needed to justify a project to management as part of the approval process, or simply to document internally that all appropriate options were properly analyzed as part of project due- diligence. Whatever your motivation, I hope that you will find this series interesting and useful.

In order to decide whether to host an application on a public, private, or managed cloud (or some combination of the three), customers need to consider a number of factors—of which quantifiable monetary cost is only one. In some cases this may be an overriding factor, but in others it may be a secondary or even a tertiary factor. Every enterprise will have their unique right mix of IT resources specific to their business requirements. Security, compliance, cost, performance, speed and other factors will need to be weighed when making an application deployment decision. When cost becomes a key consideration in deciding whether to use public, private, or managed cloud, the methodologies used to calculate and compare costs need to be both consistent and sufficiently robust to capture all of the costs that go into creating TCO. 

calculator.jpgEach enterprise will make its own decisions based on their unique requirements and whether to deploy applications on traditional IT, public, private, or managed cloud. For each case the costs need to be captured and analyzed properly. With traditional IT, the elements that go into developing a standard TCO are not new and are generally well understood. However, the different cloud alternatives introduce new challenges when analyzing costs, particularly when trying to derive cost comparisons between the different cloud options. In most organizations there is constant pressure to contain and reduce costs. Hence, there is a built-in bias to select the cloud option that appears to have the lowest cost. But for most businesses things are usually not quite that simple and other factors need to be considered in addition to monetary value. In the end, costs need to be weighed alongside other decision criteria in selecting the appropriate cloud option—or more likely, a combination of options.


While the concept of cost is one that everyone understands, as a practical matter it is generally a non-trivial matter to come up with a true TCO for any IT deployment option.  In the cloud, the price landscape is fraught with additional complications. Public cloud service providers are able to change prices with limited advanced notice. Different public cloud providers do not always quote prices in comparable units. Even virtual machine (VM) sizes often vary from provider to provider, and may come with different amounts of ancillary resources, such as disk storage or different transaction costs associated with moving data. There are a multitude of different variables to consider, some hidden and some not. But in the end a complete cost rationale for each application deployment decision, relative to the various alternatives, needs to be developed to support the selection of a deployment option.

When cost is an important decision criteria, a surprising statistic from 451 Research’s Voice of the Enterprise service found 33 percent of IT end-users were not confident that their cloud costs were under control, or even properly understood. The study further found that 25 percent of these IT end-users were not doing any cost evaluation whatsoever.  Where are you related to this perspective? Are you just getting started in understanding cloud economics or far down the path of trying to compare the cost of different cloud options?

Measuring TCO is a complex task. This blog series will attempt to provide you with insights, guidance, and some best practices to help you tackle this problem. From quick TCO comparisons, to more in-depth analyses unique to the needs of the business and the workloads they run, I will attempt to explore different approaches for creating apples-to-apples cost comparisons of public cloud, managed cloud, and private cloud. Additionally, I hope to help you understand how your enterprise can leverage HPE’s deep expertise and rich cloud portfolio to lower your TCO, while enabling you to meet other critical business objectives. In the end, the goal is to create increased value for your business, and to support better business outcomes for your enterprise using what we call your right mix of cloud and traditional IT that is consistent with where your business is on its cloud journey.

Stay tuned as our next blog will look at the role of unexpected costs in creating a cost comparisons in a multi-cloud world. If you have other topics you want covered, please let us know.

Read the next blog in the Cloud Economics 101 series: Cloud Economics 101: Contingent costs and calculating true TCO


Other Recommended Resources:

If you’re just getting started on exploring the issue of cloud TCO, I encourage you to read Forrester’s insightful research paper, “The Top 10 Facts Every I&O Pro Should Know About Cloud Economics.”

For more information and resources on how to create a quick comparative multi-cloud TCO, explore the 451 Research paper.

About the Author


I manage the HPE Helion social media brand accounts promoting the enterprise cloud solutions at HPE for hybrid, public, and private clouds.I have put my toes in the ocean of cloud evangelism for the enterprise IT industry. But my expertise is in Social Media and Digital Marketing.