Cloud Computing: Is it a Cost Saver?

Thesis for Managing Information Organization – GCIS 546

Master of Science in Computer and Information Science

Gannon University, Erie, PA

Batul Poonawala

Email: poonawal001@gannon.edu

December 11, 2009

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Thesis Statement................................................................................................................3Abstract..............................................................................................................................3Introduction........................................................................................................................3Definition............................................................................................................................4Cost Analysis......................................................................................................................5

Cloud Computing for startup companies.........................................................................6Cloud Computing for scientific applications (Montage).................................................6Cloud Computing for Decentralized Online Social Networks (OSN).............................7Cloud computing for a lab environment..........................................................................8Cloud Computing for Enterprise...................................................................................10

Key Issues of Cloud Computing.....................................................................................11Data Governance...........................................................................................................11Manageability................................................................................................................12Monitoring.....................................................................................................................12Reliability and Availability............................................................................................12

Conclusion........................................................................................................................13References.........................................................................................................................14

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Thesis Statement

My opinion is that cloud computing is no cost saver and it will ultimately lock users

into expensive systems that compromise security.

Abstract

On demand provisioning of scalable and reliable computing services which charges

users based on the actual usage of services has been an objective of distributed

computing since a long time. Cloud computing is an emerging technology which

assures to fulfill this objective: provide on-demand computing services for

applications and data, and a structure where consumers access these services on a pay-

per-use basis. However, adoption of cloud computing in the enterprise world requires

proving the business value of cloud computing to organizations. Since companies are

in general always finding ways to gain competitive advantage and lower operational

cost, the financial advantage of any computing services plays a major role in

promoting the usage of the service. The main purpose of this paper is to explain the

concept of cloud computing and compare the cost and benefits of this new paradigm

with the conventional IT solutions and existing computing technologies.

Introduction

As society advances, some services become basic necessities so that consumers need

to have access to it whenever needed. In today’s day to day life, services such as gas,

water, electricity are a necessity. These services are provided by certain service

providers and consumers pay service providers based on the usage of these services.

The 21st century vision of computing is to provide a computing service, like the

present day utilities, which is readily available on demand (Buyya, 2009). These

computing services need to be highly reliable, scalable, and self-sufficient. With

technological advances in multi-core processors and networking, a large set of

computing services have been proposed. These new paradigms include Cluster

computing, Grid computing, P2P computing, Volunteer computing and most recently,

Cloud computing (Buyya, 2009). Cloud computing assures a robust infrastructure and

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reliable services through next-generation data centers built on compute and storage

virtualization technologies. Consumers can access data from the “Cloud” anywhere in

the world, at any time.

Definition

In a CTO roundtable discussion at ACM, a panel of experts including CTO and CIO

of various organizations were asked the very basic question about the new paradigm of

cloud computing: “What is Cloud Computing?”. Each of their descriptions revealed a

new realm of dimensions for cloud computing (Mell, 2009).

Werner Vogels, CTO of Amazon.com – “It’s not just data. I also believe that clouds

are a platform for general computation and/or services.”

LEW TUCKER, CTO of cloud computing at Sun Microsystems – “Cloud computing

is not so much a definition of a single term as a trend in service delivery taking place

today. It’s the movement of application services onto the Internet and the increased

use of the Internet to access a wide variety of services traditionally originating from

within a company’s data center.”

GREG BADROS, Senior engineering director at Google – “There are two parts to it.

The first is about just getting the computation cycles outside of your walled garden

and being able to avoid building data centers on your premises. But there’s a second

aspect that is equally important. It is about the data being in the cloud and about the

people living their lives up there in a way that facilitates both easy information

exchange and easy data analysis.”

Apart from business executives, many computing researchers and practitioners have

attempted to define cloud in various ways. Computer scientists at National Institute of

Standards and Technology (NIST) have developed a draft definition of Cloud

computing in collaboration with industry and government. The definition states:

“Cloud computing is a model for enabling convenient, on-demand network access to a

shared pool of configurable computing resources (e.g., networks, servers, storage,

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applications, and services) that can be rapidly provisioned and released with minimal

management effort or service provider interaction (Creeger, 2009)”.

Cloud computing ensures to offer an on-demand computing service where consumers

can rent infrastructure to deploy applications, store data and access the applications

and data on a pay-per-use basis [2]. Cloud operators such as Amazon, Google and

Microsoft, to name a few, offer such resources to users as they need them, when they

need them and for as long as they need them. Amazon Web Services (AWS) offers

computational and storage resources, which expand and contract in accordance with

the needs. Google presents the App Engine, which provides a server for hosting web

applications in the cloud. IBM too has declared plans for its cloud infrastructure,

called “Blue Cloud (Hayes, 2008)”.

Cost Analysis

Getting a complete inventory of costs of operational IT is very difficult as costs are

hidden almost everywhere. Furthermore, IT is often responsible for mission-critical

tasks that have nothing to do with using clouds as opposed to traditional IT service

offerings. The paper evaluates cloud computing costs for various business and

research scenarios by comparing the cost of computing on the cloud versus traditional

IT computing infrastructures.

In this paper we shall consider the cost structure for Amazon Web Service. For our

purposes we shall consider only 2 services provided by Amazon, namely, Amazon

Elastic Cloud Compute (EC2) and Simple Storage Service (S3). EC2 provides a

virtual computing environment where users can run their Linux-based applications.

Consumers are charged for the time every instance of application is run in the virtual

environment. S3 offers a data center where users are charged for each data transfer.

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Cloud Computing for startup companies

Cloud computing services can be employed by startup companies as a cost effective,

scalable infrastructure. The primary business objective of startup companies is cost

efficiency with the crucial problem of highly unexpected demands. The major costs

for a start-up company are buying new servers, several overhead costs like shared

utilities, security, backup power, etc. It is difficult to anticipate hardware demand and

unanticipated hardware failures have a terrible impact on productivity. Furthermore,

getting involved into server installation and other tasks is a big distraction in the plans

for company growth. New companies thus require a greatly flexible development and

deployment environment with high availability and scalability. One such case study is

of Zoopla, a real estate / property website (Zoopla Case Study: Amazon Web

Services). In building Zoopla, the team used Amazon EC2 and found a huge upside in

responsiveness and flexibility by having the option of renting infrastructure which

scales as per their needs.

Cloud Computing for scientific applications (Montage)

Cloud based outsourcing may be useful for scientific applications, as it saves the cost

of buying and maintaining costly computing infrastructure for short testing periods.

Deelman, with a few others have studied the cost of running a real-life astronomy

application, called “Montage” on Amazon cloud (Deelman, 2008). Montage provides

science-grade mosaics of the sky to astronomers for study. The input to the application

is an area of the sky whose mosaics are desired. A set of computations are performed

on this image, and after a few intermediate images, the final output mosaic is obtained.

Montage is a data-intensive application and the mosaics are of significant size

requiring large storage capacity. However, computational tasks have a short runtime.

For the cloud implementation of Montage, primarily all images from an input archive

are stored on the cloud (Amazon S3). When a user requests for a mosaic through the

Montage portal, the application generates a workflow to be executed either on local or

on cloud resources. Computing resources are acquired on the cloud and the workflow

is executed. At the end, the final output is transferred from the cloud to the portal.

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Simulations were used to find the cost of using cloud for Montage. One of the

questions addressed by the research was to calculate the cost of running sporadic

computations on the cloud. It was found that as the number of processors is increased,

the storage cost decreases but the computational cost increases, which in turn

augments the total cost. Additionally, although Montage is data intensive, the storage

costs were found to be negligible compared to the cost of transferring data. Thus, it

appears that it may be beneficial to pre-store data in the cloud to reduce data transfer

costs. However, storing large amount of Montage data on the cloud turns out to be

around $1,800 per month with an additional cost of $1,200 for initial uploading of data

on the cloud. It can turn out to be cost effective, if there are approximately 18,000

mosaic requests per month, which is a remote possibility. Thus, the research shows

that the cloud is very effective in handling erratic overloads of mosaic requests and

providing resources for all its computational requirements. Thus, in order to store data

on the cloud, a proper calculation has to be done to see if it is better to store data on

the cloud, or is it economical to only use the computational resources of the cloud. If

data is stored for a long time with very less access to that data, then it may turn out to

be more expensive.

Cloud Computing for Decentralized Online Social Networks (OSN)

OSNs like Facebook have gained enormous popularity and thus have large amount of

personal user data. Due to privacy concerns, recent work has proposed the idea of

decentralized OSNs. Researchers have explored cloud computing as one of the

architectural alternatives for decentralized OSNs (Shakimov, 2009). This approach to

cloud-based decentralization is termed as Vis-à-vis. In Vis-à-vis each user’s data is

stored in a personal virtual machine instance called a Virtual Individual Server (VIS).

Each VIS is structured into overlay networks and just like a person can belong to

various groups, one VIS can belong to multiple overlay networks. VISs are run in a

cloud like Amazon EC2 (Amazon Elastic Compute Cloud). Experimental results show

that Vis-à-vis is a viable alternative for OSN. However, the latency of common OSN

operations grows slowly with the size of the OSN group. Also, the memory required

by each VIS grows with the size and number of OSN groups to which the VIS user

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belongs. The main drawback of Vis-à-Vis is its cost. At the moment, Amazon EC2

charges ten cents per hour for a default virtual machine with 1.7 GB of memory, 1

virtual core, and 160 GB of persistent storage. Data-transfer fees vary depending on

the location of the machines with which the virtual machine is communicating. Even

without network-usage fees, running a virtual machine for one month costs close to

US$75 per month. Cloud computing thus provides high availability at the cost of

additional expenditure.

Cloud computing for a lab environment

A blog (Cost of cloud computing, expensive, 2009) on the internet was focused on

determining the cost of moving a lab environment to a cloud environment to find it’s

cost effectiveness. The author demonstrated the cost of hosting the lab environment in

Amazon’s EC2 and S3 (Amazon Simple Storage Service) and comparing it with the

cost of having it in house.

Amazon EC2 Costs for 300 lab instances are as shown below. There are 744 hours in a

typical month (24*31).

Instance Type NumCost/Instance

HourCompute Cost/Month

Windows 100 $0.125 $9,300

Windows + SQL Server 50 $1.100 $40,920

Linux 150 $0.100 $11,160

Windows (SQL/xlarge) 2 $2.400 $3,571.20

Total Cost Per

Month$64,951.20

Storage Storage Cost/Month

5.6T (usable) $0.10 Gb/month $573.44

I/O 30B$0.10 per 1MM

I/Os$300.00

Network Network Cost/Month

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I/O 20 Gb $0.10 Gb/month $2.00

Total EC2

Cost/Month$64,826.64

Total EC2

Cost/Year$789,919.68

On the other hand the actual lab costs were:

Gear Number Cost Per Month

Dell 1950 28

Dell 2950 2

HP DL585 2

10TB iSCSI 1 $10,000

Dell/HP/Equallogic

Support$300

HVAC/Power $1,000

Floor Space 500 sq/ft $24 sq/ft/year $1,000

VMware ESX 9 $1,250

Annual Support

(VMware)$1,250

Internet $1,200

Network

Infrastructure$556

Total

Infrastructure

Cost/Month

$16,556

Software Cost

SQL Server 2008 $2,083

Oracle 10g/11g $2,083

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Labor Cost/Month $4,166

Total In-House

Cost/Month$24,888.89

Total In-House

Annual Cost$298,666.67

The author further states that even by summing the head count for network and

compute infrastructure, the difference between in house and EC2 is ($789,919.68 –

$298,666.67) = $491,253.01. This is a reasonable difference for a system that is

always on.

Cloud Computing for Enterprise

For a service to be accepted by the enterprise, it must move from early adopter phase

to early majority. The proof that a technology has reached this stage comes from a big

number of enterprises using the service for business-critical purposes. Forrester and

his research team could not find enough enterprises using Cloud Computing to prove

that it has matured to the point of IT consideration and crossed from early adopter to

early majority yet (Staten, 2008). Of most companies deploying cloud computing, the

enterprises are using Cloud computing only for research and experimentation. This

shows that although enterprise is trying to dip their toes into the cloud, they have not

been completely satisfied of its capabilities and hence not ready to move critical

applications to the cloud.

Since not many enterprises have tried cloud computing as of now, it is difficult to

prove cost effectiveness of cloud computing due to unavailability of enterprise

statistics. By the research carried out in this paper, and the cost calculations of various

organizations listed above, I believe that cloud computing might not be cost effective

for large organizations. To support my belief, I use the Montage example and the fact

that Amazon S3 charges users for every GB of data stored in their storage, and upload

and download of data each time. Since organizations have huge quantities of data,

cloud computing will turn out to be costlier if this data is not accessed frequently.

Additionally, enterprises have well managed data centers, which are operating at good

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economic scales. Thus, enterprises do not have significant cost advantages related to

initial capital investments. Another issue is the software complexity and cost to

migrate data from an enterprise application to the cloud. While migration is a one-time

task, it requires significant effort and needs to be considered as an important factor in

deciding to move to the cloud.

McKinsey and Company carried out a research of replacing a large enterprise

computing operation with rented space on an external cloud. His analysis shows that

cloud computing would be more expensive than the in-house datacenters.

Key Issues of Cloud Computing

Apart from cost, there are many factors that need to be considered while adopting

cloud computing at the enterprise level. At a workshop held at the Center for

Information Technology Policy at Princeton University, a major subject of discussion

was the questions about cloud computing privacy, security, and reliability (Zoopla

Case Study: Amazon Web Services).

Data Governance

Enterprises have tons of sensitive data which needs access for monitoring and

protection. As stated in an article (Zhen, 2008) “Data is the life blood of many

enterprises, the loss of control will not be acceptable.” In addition to privacy,

enterprises have to meet certain compatibility issues when dealing with important

data. By moving data to the cloud, enterprises will lose the ability to govern their own

data. Handing over sensitive information to third-party services, raises questions about

access and ownership like: What would happen to your data if you fail to pay the bill?

If you decide to move to another cloud provider, can you take your data with you?

Does the service provider have the right to access any part of your data? (Hayes,

2008).

Manageability

As discussed earlier in the paper, cloud computing is still in it’s infancy stages. Just

like any other technology, cloud currently provides just raw infrastructure and

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platform. It still has to mature to provide additional manageability capabilities. As an

example, when Amazon EC2 claims that it is scalable, it merely means that it has the

potential to be scalable. It does not automatically scale applications when load on the

servers increases. It is the responsibility of the developers to handle this scalability.

Monitoring

CPU and memory usage are not the only contributors to monitoring of a service. The

real measurement is the amount of time taken for a transaction to complete (latency).

As stated in High Availability’s article on latency:

“Amazon found every 100ms of latency cost them 1% in sales. Google found an

extra .5 seconds in search page generation time dropped traffic by 20%. A broker

could lose $4 million in revenues per millisecond if their electronic trading platform is

5 milliseconds behind the competition.”

Reliability and Availability

JohnsonDiversey, maker of commercial cleaning products adopted Google Apps

Engine for an e-mail upgrade. The CIO of the company mentioned that 99.9% uptime

guarantee of Google results in 43 minutes down-time a month (Weier, 2009).

Although it was acceptable to JohnsonDiversey, it cannot be tolerable for crucial

business services.

Furthermore, there are almost no Service Level Agreements (SLAs) provided by the

cloud providers today (Zhen, 2008). Even Jeff Barr from Amazon said that SLAs are

provided only for their S3 service. For any enterprise to have faith in a new service,

contracts need to clearly define SLAs.

Conclusion

Cloud Computing definitely offers a new business model for computing and storage.

The long dreamed vision of computing as a utility is finally emerging. The main users

of cloud computing today are small companies and startups which do not have legacy

management issues. The elasticity of the cloud matches the need of small businesses

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to expand at a much faster rate. The process of growing which took years earlier, can

now be done within months.

As appealing as the concept of cloud computing sounds, it is still very new and hard

for traditional IT to trust. Majority of enterprises use cloud today for innovation and

experimentation. Some efforts of deploying web-based collaboration services and low

priority business applications on the cloud have been identified. However, enterprises

already have economic data centers running at scale, and transitioning all data to the

cloud may prove to be more expensive than traditional IT infrastructure. Additionally,

cloud computing needs to solve questions regarding privacy, security, reliability and

availability to be largely accepted by enterprises. Cloud computing must meet

enterprise standards and provide the capability to be monitored and controlled by IT.

References

1. P Mell, T Grance. (2009). The NIST Definition of Cloud Computing. Retrieved

Oct 27, 2009, from NIST:

http://csrc.nist.gov/groups/SNS/cloud-computing/cloud-def-v15.doc

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2. M Creeger. (June 2009). CTO Roundtable: Cloud Computing. ACM, New York,

NY, USA. http://delivery.acm.org/10.1145/1560000/1551646/p1-

ctoroundtable.pdf?

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FTOKEN=30390835

3. R Buyya, CS Yeo, and S Venugopal. (2009). Market-Oriented Cloud Computing:

Vision, Hype, and Reality for Delivering IT Services as Computing Utilities.

Future Generation Computer Systems

4. B Hayes. (2008). Cloud Computing. Communications of the ACM

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http://aws.amazon.com/ec2/

6. Retrieved from Amazon Simple Storage Service (S3): http://aws.amazon.com/s3/

7. E Deelman, G Singh, M Livny, B Berriman, and J Good. (2008). The Cost of

Doing Science on the Cloud: The Montage Example. IEEE Press, Piscataway, NJ,

USA http://delivery.acm.org/10.1145/1420000/1413421/a50-deelman.pdf?

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5&CFTOKEN=36754616

8. A Shakimov, A Varshavsky, LP Cox and R Cacerus (2009). Privacy, Cost, and

Availability Tradeoffs in Decentralized OSNs. ACM, New York, NY, USA.

http://delivery.acm.org/10.1145/1600000/1592669/p13-shakimov.pdf?

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1&CFTOKEN=90216934

9. Retrieved Nov 29, 2009, from Zoopla Case Study: Amazon Web Services:

http://aws.amazon.com/solutions/case-studies/zoopla/

10. Retrieved Jan 2009 from Cost of cloud computing, expensive!:

http://www.uptimesoftware.com/uptimeblog/cloud-virtualization/cost-of-cloud-

computing-expensive/

11. MH Weier, JN Hoover (2009). Alternative IT. Information Week, ABI/INFORM

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12. J Staten (2008). Is Cloud Computing Ready for the Enterprise?, Infrastructure and

Operations Professionals, Forrester.

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13. J Zhen (2008). Five Key Challenges of Enterprise Cloud Computing. Cloud

Computing Journal. Retrieved Dec 11, 2009 from, http://cloudcomputing.sys-

con.com/node/659288

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