The Economics of Cloud, Part I - IDC HPC User Forum

After attending IDC’s HPC User Forum in Houston last month and participating in an HPC cloud panel, it's clear that many potential cloud users still seem confused about the economics of cloud and when it's beneficial. One of the complaints we heard many times was about Amazon’s pricing model being several factors (nearly three times) more expensive than outright hardware purchases. While true, users who complain about this fact may be, at least partially, missing the primary use case for external cloud computing.

Our cloud panel didn’t have enough time to delineate the conditions and workload where cloud computing offers economic advantages, so it seems appropriate to start that discussion here in the first of a series of the Economics of Cloud.

There several factors that should contribute to doing an HPC cloud computing pilot and most are necessary, but not required conditions. These include:

· Practical data sizes input and output or post processing methods that can be used to post process without data transfer

· Serial or course grained parallel workload

· Data security policies that can be satisfied by the cloud

· Application OS and performance requirements that lead to acceptable performance in the cloud

· Unsteady workload requirements (meaning the amount of resource a workload requires varies over time)

This last factor is the one that might be the most confusing. Using IaaS can be very cost effective if the results from a workload are highly valuable and short lived. Conversely, results of unknown value and lengthy execution durations or large data requirements can have enormous charges associated with them.

One simple way of visualizing this is to understand the peak workload (expressed as a fraction of the available local resource) and the average workload. The difference between these two values, if significant, is a good indicator for whether cloud computing could have positive ROI or not. If this effect is plotted in time and the average and peak lines are overlaid, the term "peak shaving" is clearly an apt description of what benefit cloud computing can offer.

Invariably, a steady workload is most efficiently processed in a local data enter resource when compared to pay-per-use rates. Indeed, most IaaS providers have calculated a factor between two and three times over into their pricing for hardware costs to account for the opportunity value of near instantaneous access to compute resources. Thus, paying this "tax" for a steady workload could have disastrous financial consequences if adopted as a strategy.

Anyone interested in permanent or long term cloud resource access should probably investigate longer term service contracts with a selected IaaS provider if local resources are not an option. Such an alternative agreement could easily change any potential negative financial estimates for the benefits of cloud.


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