Public Cloud vs Private Cloud – Cost Tipping Points

Tipping Point Guide between Public and Private Clouds to assist in cost and resource planning.

A significant challenge for IT professionals is to determine the right placement of their dollars against Cloud Services provided by either Public Clouds or Private Clouds. To assist in understanding the the options and the driving forces for decisions, we have created a Key Services Map and this Cost and Scale Guide.

As this analysis is quite complicated, please bear with the creation of this Public Cloud vs Private Cloud Cost Tipping Point over time. To convince you this is important – a quick “right to the numbers” then back to the process.


Total Cost of VM with Block Storage and Bandwidth – Public vs Managed Private

Deployment Size, BandwidthPublic CloudPrivate CloudManaged Private Cloud*Monthly Diff with Managed PrivateYearly Diff
Small – 100VMs, 10TB$3,889$1,810$2,350$1,539$18,468
Medium – 500VMs, 50TB$15,756$7,100$9,020$6,736$80,832
Large – 1000VMs, 150TB$31,641$13,740$17,196$14,445$173,338
XL – 2000VMs, 300TB$57,658$26,616$33,182$24,475$293,701
*Managed Private Cloud can vary if the Cloud has significant modification from “standard” private clouds.

I hope this convinces you to continue!


Please Note: Each Brand is a registered trademark of the company or entity listed. Information presented here was collected in September 2021. If you see any discrepancies or material you feel is inaccurate, please let us know.

Company or Product Names = Key

  • Amazon Web Services = AWS
  • Microsoft Public Cloud = Azure
  • Google Cloud Platform = GCP
  • OpenStack with Core Projects = OpenStack
  • Flex Metal Private Cloud Core = Flex Metal
  • VMWare vSphere plus Hardware = VMWare
  • Nutanix Base plus Hardware Vendor = Nutanix

Terms

Public Cloud = Large infrastructure providers that sell you usage based resources one small unit at a time.

Virtual Private Cloud = A software construct that is used to create private networks so resources, like VMs, can communicate easily with each other.

Hosted Private Cloud = A small footprint Cloud leased to you by a 3rd party in their data center.

Private Cloud = A larger footprint Cloud where you may own or lease the hardware directly and place it in your data center or chosen colocation provider. Often referred to as an On-Premise Private Cloud but colocation is probably more common.

Cost and Scale Transitions for AWS, Azure, GCP, Flex Metal, OpenStack, VMWare, and Nutanix

To help compare across Public and Private Clouds by Service and by Cost, there are a few critical items that will swing your ROI evaluation of the options. First and foremost:

Does your company already have private infrastructure and staff in place?

This mean that if you already have staff and data center space, you almost certainly have sunk costs, things that you already pay for, that you are not fully using. Space, power, core network capacity, IP space, and connectivity all fit within this. System administrators or DevOps staff are also common team members that will handle Cloud Administration.

If YES, if you have those, adding Cloud to your existing data center is often much lower cost than previously imagined and thus your tipping point to Cloud on premise – aka Private Cloud – is lower.

If NO, you do not have those, then your tipping point is going to be higher to move to your own data center based Cloud. When doing that, you are also likely to use managed services from the Private Cloud vendor until you reach a scale that lets you bring management in house.

For a NO, most likely is that you will first go to “hosted private cloud” before going to your own data center based Cloud. The tipping point to go to Hosted Private Cloud is between Public Cloud and On Premise Cloud. If you are well past the tipping point to hosted private cloud, then you will probably go to colocation in a DC. But you will save huge amounts, so there is that.

Know your Public Cloud to Private Cloud Tipping Point

Absolutely critical in your evaluation is understanding the tipping points for certain types of resources.

The Tipping Points used in the charts below are organized around when Public Cloud becomes more expensive than alternative Clouds. Public Cloud, due to its Minimum starting point of “1 small unit” is brilliant to get started, but becomes significantly expensive at a certain scale. The famous VC company Andressen-Horowitz published the The Cost of Cloud, a Trillion Dollar Paradox that talks about the loss of huge value for a set of companies caused by the high cost of Public Cloud.

That concept, boiled far down, has to do with when the cost you pay for the ease of use of the Public Cloud is overridden by the margin those companies are taking per VM, Storage, or other Resource. Their margins are very large and so your expense becomes very large once past a tipping point.

For example, using a single AWS, Azure, or GCP VM is quite economical since expense of all the other things that go on around hardware is simply baked into the cost. But as your deployment grows, the high cost of the individual VM on AWS, Azure, or GCP versus a Private Cloud VM leaves enough dollars on the table to pay for all the parts around that VM.

To illustrate this lets compare using an AWS VM compared to an unmanaged Private Cloud VM, building in discounts from AWS that you may or may not get. But here is how this happens.

Public Cloud VM Costs vs Private Cloud VM Costs Tipping Point

Public Cloud VM

AWS VM Standard, Standard Performance Storage – t3.medium – Xeon based 2vCPU/4GB plus 30GB “Standard” SSD Elastic Block Storage with 2 Snapshot = $39.36/mo, no commitment. With year commit, $30.89/mo. There are confirmed discounts we know customers have received (but not guaranteed) at scale, so we will use a 20%, 10% and 5% drop. Public Cloud is managed under the VM.

Private Cloud VM

Flex Metal Hosted, VM Premium, NMVe Network Storage – r4.medium – Xeon based 2vCPU/4GB plus 25GB NVMe SSD Network Block Storage with Snapshots = $7.80/mo, no commitment. With year commit, $7.20/mo. There are confirmed discounts, etc., so we will use 10% and 5% drop. This private cloud pricing is self managed under the VM. Management must be either handled by you or contracted from the Cloud provider.

VM Cost Tipping Point by Number of VMs, Public Cloud vs Self Managed Private Cloud

UnitsPublic VMDisc.Public TotalPrivate VMDisc.Private TotalMonthly DiffYearly DiffTipping Point
50$39.36$1,968.00$13.50$675.00$1,293.00$15,516.00
100$30.8921.5%$3,089.00$13.500.0%$1,350.00$1,739.00$20,868.00
500$24.7120.0%$12,356.00$9.6028.9%$4,800.00$7,556.00$90,672.00Maybe Here
1000$22.2410.0%$22,240.80$8.6410.0%$8,640.00$13,600.80$163,209.60Likely Here
2000$21.135.0%$42,257.52$8.215.0%$16,416.00$25,841.52$310,098.24Ouch
Key Item: VM only, this does not count costs of Bandwidth, which are considerable and will create their own Tipping Point away from Public Clouds.

In the above, a few thousand dollars will not cover self management costs. Running a cloud, even a small one, takes an admin 10-20 hours a month plus some support from off hours staff. Well architected larger clouds get into the 60-120 hours a month at 1000 VMs, then scale up per node that is added. It is important to note that 24/7 coverage requires generally 3+ admins but well architected clouds don’t require emergency alerts when common hardware fails. Redundancy is built in to not only protect the data and workloads, but to protect the admin’s time as well.


Public Cloud Bandwidth Costs vs Private Cloud Bandwidth Costs Tipping Point

Another very large expense in the public cloud is bandwidth. Outbound traffic is call Egress. It is calculated by GB, usually shown as TB though, of data transferred out of your Service. If you have a VM, you are paying for the VM only, not the transfer of data. Egress is paid for separately.

Public Cloud Bandwidth

Azure Egress – This is charged at different rates as follows. This is from North America or Europe out to the internet. It is per GB per month.

  • First 5GB – Free (ignoring this)
  • Next 10TB – $0.08/GB
  • Next 40TB – $0.065/GB
  • Next 100TB – $0.06/GB
  • Next 350TB – $0.04/GB

Private Cloud Bandwidth

Bandwidth in Flex, like data center connections, are billed at the 95th Percentile. We will estimate 70% of traffic occurs in a peak time to calculate per GB costs.

  • <~1TB – $2.02/Mbit or ~$0.05/GB
  • ~1TB to ~100TB – $1.84/Mbit or ~$0.046/GB
  • ~100TB to ~400TB – $1.38/Mbit or ~$0.034/GB
  • >~400TB – $1.15/Mbit or ~$0.029/GB

Bandwidth Cost Tipping Point by TB of Transfer – Public Cloud vs Private Cloud

TBPublic CloudPrivate CloudMonth DiffYearly DiffTipping Point
10$800$460$340$4,080
50$3,400$2,300$1,100$13,200
150$9,400$5,100$4,300$51,600Maybe Here
300$15,400$10,200$5,200$62,400Likely Here
600$27,400$17,400$10,000$120,000Ouch
Of Note: Companies can often make choices about when certain transfers take place. For example, backups can be done at night, outside of the typical busy period and are below the 95th Percentile and thus are “free”.

Combined Bandwidth and VM Costs for Public Cloud vs Private Cloud vs Managed Private Cloud

To simplify the explanation, we are assuming, for Private Clouds, two scenarios:

Scenario 1Scenario 2
You started on Public Cloud and do not have physical infrastructure.You have a fairly typical private infrastructure footprint within a data center. Fairly typical means you have two or more high volume internet connections (think Level3/Lumen, Zayo, GTT, Cogent, etc.) with proper redundant networking hardware, several free cabinets or the equivalent, and 5+kW of unallocated power.

With that being said, you may find yourself between this, so reviewing both situations may help you.

Scenario 1 – No Physical Infrastructure

In this scenario we will look at the Public Cloud versus the Managed Hosted Private Cloud options. As mentioned above, the reason for this comparison is because the scale tipping point between Public Cloud and Hosted Private Cloud is significantly less then going from Public Cloud to On-Premise Private Cloud. OpenStack is not listed under this section due to the typical process of getting OpenStack. See Scenario 2. Flex Metal is highly automated OpenStack and can act as a stepping stone to self managed on premise OpenStack.

Deployment Size, BandwidthPublic CloudPrivate CloudManaged Private Cloud*Monthly Diff with Managed PrivateYearly Diff
Small – 100VMs, 10TB$3,889$1,810$2,350$1,539$18,468
Medium – 500VMs, 50TB$15,756$7,100$9,020$6,736$80,832
Large – 1000VMs, 150TB$31,641$13,740$17,196$14,445$173,338
XL – 2000VMs, 300TB$57,658$26,616$33,182$24,475$293,701
*Managed Private Cloud can vary if the Cloud has significant modification from “standard” private clouds.

Scenario 2 – Established Physical Infrastructure

In this scenario we will look at the Public Cloud versus the “On Premise” Private Cloud options. With significant investment in your data center already completed you have what is called a “sunk cost”. Almost certainly you have capacity in your data center now and adding additional hardware is typically quite appealing. If for some miraculous reason you have a 98% full data center with a fully used set of internet connections, well, kudos to you! With your savvy approach you will already know Private Cloud is a better deal.

Working on this part next, will update then.

OpenStack Service Detail and Notes

OpenStack is the 3rd most developed Open Source project behind Linux and Chromium. It provides Cloud Services and Hardware Automation. It is typically referred to as a “Private Cloud” when its Core Projects are the only Projects installed in an OpenStack. You may be interested in “What is OpenStack?“.

The Core Projects provide the following:


Todd Robinson
Todd Robinson President at InMotion Hosting, BoldGrid, and – a big OpenStack fan!

I would really appreciate any thoughts and guidance you might want to share. Please connect with me on LinkedIn or leave a comment below with requests or questions — even corrections if I managed to mess up something!

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