The Cost of a Cloud

Microsoft 2009 research paper, The Cost of a Cloud: Research Problems in Data Center Networks with now-AWS architect James Hamilton as a co-author, presented a table breaking costs down cloud data center costs:

http://research.microsoft.com/en-us/um/people/dmaltz/papers/dc-costs-ccr-editorial.pdf



"It is natural to ask why existing solutions for the enterprise data center do not work for cloud service data centers.

First and foremost, the leading cost in the enterprise is operational staff. In the cloud data center, such costs are so small (under 5% due to automation), that we safely omit them from Table 1. In a well-run enterprise, a typical ratio of IT staff members to servers is 1:100. Automation is partial [25], and human error is the cause of a large fraction of performance impacting problems [21]. In cloud service data centers, automation is a mandatory requirement of scale, and it is accordingly a foundational principle of design [20]. In a well run data center, a typical ratio of staff members to servers is 1:1000. Automated, recovery-oriented computing techniques cope success- fully with the vast majority of problems that arise [20, 12].

There are additional differences between the enterprise and the cloud service data center environments including:
Large economies of scale. The size of cloud scale data centers (some now approaching 1,000,000 severs) presents an opportunity to leverage economies of scale not present in the enterprise data centers, though the up front costs are high.

Scale Out. Enterprises often optimize for physical space and number of devices, consolidating workload onto a small number of high-price “scale-up” hardware devices and servers. Cloud service data centers “scale-out” — distributing workload over large numbers of low cost servers and hardware.

That said, enterprises are also moving toward the cloud. Thus, we expect innovation in cloud service data centers to benefit the enterprise, through outsourcing of computing and storage to cloud service providers [1, 8, 3], and/or adapting and scaling down technologies and business models from cloud service providers."