Thursday 9 June 2011

4 Real-World Examples and Prices of "Cloud Computing" for 1 Start-up

Yes, I still sometimes put "cloud computing" in quotation marks. For the most part, I do still agree with Larry Ellison's earlier derision of the term. I've had an e-mail account for 18 years. This means that I have used cloud computing for this long and set up small instances of it hundreds or thousands of times by now. That said, I will embrace this marketing term and use it frequently, as this is what people want to hear. Some clients take great pleasure in now being able to brag that they are using cloud computing.

Aside from the term, it is growing more useful all the time in the real world. Hosting companies and resellers have created stable thorough and granular web-based control panels that allow clients or their IT consultants to set up, control, and manage their hosted subscription based applications (cloud computing). It is especially useful for companies starting up preferring pay-as-you-go or pay-as-you-grow monthly fees over purchasing relatively expensive hardware and software to provide the same thing.

We have a client in private equity. He started off as a one-man shop not wanting to invest much at all in infrastructure until he knew where his business was going. Cloud Computing Instance 1: we set him up with a domain name, a one-page web-site, and POP3 e-mail - £96 per year plus a couple of hours of consulting to set it up and document it. (I realise we could have gone cheaper, but we always use hosting companies that have quality help desks available by telephone 24 hours a day, answered by knowledgeable people who speak clear English.)

After a while, the client wanted a bit more from his e-mail system, mainly seamless BlackBerry synchronisation. Instance 2: we upgraded his e-mail to hosted Exchange (Microsoft's e-mail server product). Instance 3: we also set up hosted BlackBerry Enterprise Server (BES) at the same hosting company and integrated it with his e-mail. This now gave him an e-mail solution that he would experience in any medium-to-large firm. E-mail, contacts, and calender are now synchronised seamlessly between his corporate laptop, his home computer, his BlackBerry, his iPad, and web-mail. The annual cost then for cloud computing was £236 plus a £5 set-up fee and another three hours of consulting (mostly migrating mail and setting up client devices).

The client grew and we needed to build him a new office, initially for 5 users but built to handle 15. We're just finishing that off this week. We did build them some in-house computing. They now have one server that is the file server, print server, central backup point for data on laptops, anti-virus program distribution and management, provider of Windows networking services, authenticator for the Virtual Private Network (VPN), distributor of Microsoft updates, and central control for many Windows settings. You could technically call all of this a "private cloud" - applications hosted in-house, just like any network built ever since companies had servers or mainframe computers in an office.

However, we're still using cloud computing, and if that is the case I suppose you could say we are using "mixed cloud" or "hybrid cloud" computing, with our cloud and private cloud. We're still using the hosted Exchange and BES services, now with more users, extra added disk space, some resource mailboxes so they can book boardrooms on-line for meetings, some shared calendars, external contacts defined, and distribution groups. We control all this for the client with the hosting reseller's web-based control panel, with occasional help from their excellent customer support. We get the request from the client, decide best how to fulfil the request, log on and set it up, and the bill for hosted Exchange simply goes up a notch on the client's monthly credit card bill. (They also receive an invoice from us, but that would be the case for in-house e-mail as well.)

At the moment, their annual hosting fee for e-mail and BES for 5 users and all the extra resources mentioned above is about £1,320. Compare this to the cost of setting up an internal Exchange and BES server: £9,700 for hardware, software, and consulting fees to build it.

Added benefits for this solution is that their e-mail data is already hosted in a Tier 3 data centre with redundant Internet links, servers, and sites. It is also backed up. This is all "free" and invisible to the client, and even to us, the IT consultants. It's also automatically and securely accessible from the Internet, something else we would have had to build in-house, so an in-house equivalent would really cost much more than £9,700 if we were to compare apples to apples.

That said, we still needed to deal with backing up the rest of the client's data, their personal and shared files, as well as the in-house server itself. The laptops are backing up their data to the server, but we went with Cloud Computing Instance 4 to back up the server. The client currently has about 100 Gb of data to back up, which includes the server itself. The backups run every night, first to a local cheap external USB hard drive, and then securely over the Internet to the backup hosting provider. (A technical prerequisite for this is a synchronous Internet link, where the upload speed is the same as the download speed. An Asynchronous DSL link won't quite suffice.) One fear about on-line backups such as this is Internet connectivity. What if the Internet link goes down exactly when we need to restore some data? (More likely to happen than you would think in a disaster scenario) The backup software, which is provided "free" by the hosting company, first restores from the local USB disk, as that would be faster in any event. Only if that fails, does it restore back down from their data centre.

This costs £1,800 annually for the 100 Gb backup plus a £150 set-up fee and four hours of consulting to configure it all. If we decided to install in-house backup software and a tape drive, it would cost anywhere from £2,000 (I'm aware that there are ├╝ber cheaper options out there, but we don't consider them for a business environment.) to £10,000 if the client wanted a tape library. There would also be an annual fee to store the backup tapes off-site and the tapes themselves would need replacing every couple of years. An additional benefit of hosted backups is that there are no tapes changes or off-site schedules to deal with. We receive e-mail alerts of any problems, check the backup logs weekly, and do a test restore annually, just as with any other backup system.

So this company hosts their most critical application, e-mail, and runs IT's most critical role, backups, in a cloud computing environment. It's invisible to the users and it makes our lives as consultants easier, which translates to less consulting fees to the client. This company of 5 users with 100 Gb of data currently pays £3,120 annually for this. Set-up and consulting fees to configure this were roughly £1,055, a fraction of the cost to build it all in-house.

Going forward, we will continue to use these services for a while. I intend to re-examine the costs for hosted backups at 500 Gb and for hosted e-mail and BES at 20 users. Hosting centre salespeople assure me that it will be a limitless savings curve no matter how high it goes, however I will report my own findings on that another day.


  1. Cloud computing and hosted services security strategy looks a best practice for accessing and using cloud services as well as avoiding risks, virtualization security and addressing common cloud security concerns.

  2. Hey, I appreciate to your writing.