What is the total cost of ownership, TCO, of the cloud? When we think of the cloud, we think of using applications in the cloud such as Salesforce, Box.net, and others. We may even consider using security as a service tool such as Zscaler and others. In some cases we also think of placing our own workloads in the cloud using Amazon and other tools. The real question that comes to mind is the TCO of the cloud? Not now, but long term.

TCO of SaaS Clouds

This is by far the easiest to quantify. Usually, the SaaS cloud is a tool we do not have or no longer have in our existing environments. If we do not have the tool, then the cost is the cost for access to the tool but also includes any additional tools we need to protect our data within the cloud.  If we do have something similar, the SaaS solution is most likely priced as an upgrade from the existing tool and has more features and requires less on-premise maintenance and support.

Ongoing TCO: Cost (perhaps as an upgrade) of the Software + Cost to Protect Data + Support + Maintenance

TCO of PaaS Clouds

PaaS clouds offer a slightly different TCO model as they fit somewhere between IaaS and SaaS. They provide a SaaS middleware layer while also offering virtual machines in which to run an application.  Some PaaS are really IaaS in disguise using pre-installed virtual machines into which you publish an application developed locally. These have the same software stack used to develop the application. We will also need to add into this any costs associated with protecting the data within the PaaS solution.

Ongoing TCO: Cost (of the VMs as they run based on memory, compute, etc.) + Cost of the Platform + Cost to Protect the Data + Support + Maintenance.

If the PaaS is only for development and not running in production the TCO model could change quite a bit.

TCO of IaaS Clouds

There are three or so cases for IaaS that depend on where you are when you start the journey to the cloud, as well as where you wish to end up. The TCO of an IaaS cloud depends on your current investments and how they will be managed as well as the cloud.

Just starting out, a startup with no compute infrastructure

If you are just starting out, you have a perfect chance to use the cloud for as many business processes as you need. In fact there are some companies that do not have a physical presence for business processes. They instead choose to spend dollars on the cloud and on a physical presence purely for engineering. Others, forgo all on-premise systems and use the cloud completely.  Which means you may have to add additional cloud services to protect your data and determine what is really happening perhaps using a cloud based SIEM such as Splunk.

Ongoing TCO: Cost of SaaS + Compute, storage, network costs for development + Costs to protect data + Support and Maintenance

We have all heard the stories of receiving $50,000 bills from Amazon, so the companies that choose to go this route need to keep a firm hand on monthly costs and for that they need charge back accounting, daily if not hourly costs of using the cloud services.

Existing environments, an infrastructure tasked as a virtual environment

Those companies who have an existing infrastructure and investment in equipment, people, tools, etc have  a harder time going to the cloud as they see it as a replacement for their existing environment. The TCO of the cloud generally is wrapped up in the TCO of their existing environment. No one wants to just dump an existing investment that is producing results. Nor should they, however migrating to the cloud could be for specific needs as the business grows. Instead of buying more hardware, IT could instead by cloud services and use migration tools such as HotLink, Ravello Systems, and VMware vCloud Hybrid Solution to move workloads between local and cloud resources as needed.

Ongoing TCO: Compute, storage, network costs for the cloud + Costs to protect data + support and maintenance + Costs ongoing of local environment hardware/software maintenance

Eventually, once you start down the cloud path, as hardware fails, it may be less expensive to just push those workloads out to a cloud. Even so, keep a close eye on costs ensuring there is a way to trend costs within the cloud on an hourly basis, this way you can control the costs associated with the cloud.

Very large environments with a hefty investment in hardware, people, and software

Many large environments opt to create their own private clouds, and the costs associated with them are similar to what they already have within their data center. The ongoing costs can be charged back to the departments using the global IT cloud. Could there be bursts out to other clouds, perhaps, but that is usually not the norm. However, if you run a cloud, you most likely have an investment in hardware, people, software already and most likely have data classification issues as well which prevent the use of clouds not controlled by the IT group.

Ongoing TCO of the cloud: Hardware + Software + Maintenance + Support + People

Closing Thoughts

The TCO of the cloud depends too much today on controlling your costs. If for example your average monthly bill in a cloud is $50,000, perhaps it is time to rein in those costs and share the costs with an on-premise presence or at least think about using a less expensive cloud. As we move to the cloud, as we use clouds, controlling the costs is in your hands.  The more you use the more it costs. And this is the limiting factor of clouds today. It can cost A LOT to use a cloud.

There are many reasons to consider the cloud: moving data centers, availability, less on-site costs, but at the moment we are transferring our costs to the cloud. At the moment it just looks like a lateral move or a growth move, but the base on-premise will stay until we can protect our data in the cloud effectively.

When we go to a cloud fully, our onsite IT staff transitions to becoming cloud administrators to monitor operations folks, as well as those who monitor the costs on an hourly basis. The people costs do not diminish, we may just diminish the costs associated with on-premise hardware but increase off-premise costs.  For a small business this could be a win, for a business with an existing infrastructure it could be a wash, and for the very large organizations, they become the cloud.

The ultimate questions, however, are why do you want to use the cloud, and what do you plan to put into it?

What is associated with your TCO for the Cloud?

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Edward Haletky (384 Posts)

Edward L. Haletky, aka Texiwill, is the author of VMware vSphere(TM) and Virtual Infrastructure Security: Securing the Virtual Environment as well as VMware ESX and ESXi in the Enterprise: Planning Deployment of Virtualization Servers, 2nd Edition. Edward owns AstroArch Consulting, Inc., providing virtualization, security, network consulting and development and The Virtualization Practice where he is also an Analyst. Edward is the Moderator and Host of the Virtualization Security Podcast as well as a guru and moderator for the VMware Communities Forums, providing answers to security and configuration questions. Edward is working on new books on Virtualization.

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1 comment for “TCO of the Cloud

  1. November 10, 2013 at 6:34 PM

    If you are interested in lowering TCO by increasing tenant density, consider multi-tenant shared container PaaS. I have authored a white paper describing the concepts and cost savings.

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