Procurement and Business Aspects of the Cloud Belnet Mario - PowerPoint PPT Presentation

Procurement and Business Aspects of the Cloud Belnet – Mario Vandaele Brussels – 19th September 2013

Cloud Storage – Cost Breakdown What we wanted – A Cloud Storage service, including: • A cloud orchestration layer providing self-service provisioning, etc • A 24/7 pro-active Monitoring & Control done by the vendor • As much storage as possible 19.09.2013 Procurement and business aspects of the cloud 2

Cloud Storage – Cost Breakdown What we got – A Cloud Storage service, including: • A cloud orchestration layer providing self-service provisioning, etc • A 24/7 pro-active Monitoring & Control done by the vendor • Not as much storage as we hoped: 200 TB RAW 19.09.2013 Procurement and business aspects of the cloud 3

Cloud Storage – Cost Breakdown The budget we had – 500.000 Euro (excl. VAT) to buy and have the service operated by the vendor for 4 years Some simple math: – 500.000 Euro / 200 TB RAW / 4 Years = 625 Euro / TB / Year – Data Center Cost (Rackspace/Electricity) = 125 Euro / TB / Year – Belnet FTE Cost = 500 Euro / TB / Year – “TCO” = 1250 Euro / TB / Year 19.09.2013 Procurement and business aspects of the cloud 4

Cloud Storage – Cost Breakdown Adjusting TCO for Net Capacity: – 200 TB RAW  100 TB Net – “TCO” = 1250 Euro / TB RAW / Year * 2 = 2500 Euro / TB Net / Year – Big shock for many people within Belnet – For sure to be a big shock for Customers if we confront them with prices based on this “TCO” 19.09.2013 Procurement and business aspects of the cloud 5

Cloud Storage – Cost Breakdown The repartition of the purchase cost – 500.000 Euro for 4 Years – 50% for the the Cloud Orchestration Layer (HW/SW/Support) – 30% for the Managed Services (24/7 M&C) (Fixed) – 20% for the Storage itself (HW/Support)  Huge CAPEX for Cloud Orchestration Layer for a rather amount of storage capacity 19.09.2013 Procurement and business aspects of the cloud 6

Cloud Storage – Cost Breakdown In the CFT we asked to provide a grow path: – In blocks of 50 TB RAW expansions – With corresponding prices – Up till 2 PB RAW – The results are in the following graph 19.09.2013 Procurement and business aspects of the cloud 7

Cloud Storage – Cost Breakdown 2500 k€ 2000 € 179.5000 € 179.5000 € 179.5000 € 179.5000 € 231.86886 € 179.5000 Managed Services € 231.86886 € 179.5000 1500 € 231.86886 € 38.64422 € 179.5000 Management : Support & Maintenance € 231.86886 € 179.5000 € 231.86886 Management : HW+SW Costs € 179.5000 € 231.86886 € 179.5000 Network : Support & Maintenance € 231.86886 € 179.5000 € 231.86886 € 179.5000 Network : HW+SW Costs € 231.86886 € 179.5000 1000 € 231.86886 € 179.5000 Storage : Support & Maintenance € 231.86886 € 179.5000 € 231.86886 Storage : HW+SW Costs € 179.5000 € 231.86886 € 179.5000 € 231.86886 € 179.5000 € 231.86886 € 179.5000 € 231.86886 500 € 1004.46134 € 231.86886 € 957.09272 € 909.72410 € 862.35548 € 231.86886 € 814.98686 € 767.61824 € 720.24962 € 231.86886 € 672.88100 € 625.51238 € 578.14376 € 530.77514 € 483.40652 € 436.03790 € 388.66928 € 341.30066 € 293.93204 € 246.56342 € 199.19480 € 151.82618 0 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 19.09.2013 Procurement and business aspects of the cloud 8

Cloud Storage – Cost Breakdown The repartition of the purchase cost for 2 PB – 1.800.000 Euro for 4 Years – 14% for the the Cloud Orchestration Layer (HW/SW/Support) – 8% for the Managed Services (24/7 M&C) (Fixed) – 78% for the Storage itself (HW/Support)  Cloud Orchestration Layer and Managed Services cost become justifiable compared to the storage cost 19.09.2013 Procurement and business aspects of the cloud 9

Cloud Storage – Cost Breakdown Leason Learned – If you want to be a cloud provider… … GO BIG!!! GO BIG!!! 19.09.2013 Procurement and business aspects of the cloud 10

Commercial Cloud Providers There are 3 types of commercial cloud providers: – 1) Public cloud accidental spin-off due to overcapacity: e.g. Amazon • Infrastructure based on peak demand • Overcapacity • A smart person within Amazon decided to sell overcapacity 19.09.2013 Procurement and business aspects of the cloud 11

Commercial Cloud Providers There are 3 types of commercial cloud providers: – 2) IT operations required a big private cloud: e.g. RackSpace • Started as web host company • Grew aggressively through acquisitions • Ended up with very costly complex legacy infrastructure • Implementing big private cloud which was immediately extended for public usage as well 19.09.2013 Procurement and business aspects of the cloud 12

Commercial Cloud Providers There are 3 types of commercial cloud providers: – 3) Public cloud is the core business: e.g. GoGrid • Founded by IT veterans who know what they are doing • Backed up by many $$$ of venture capital 19.09.2013 Procurement and business aspects of the cloud 13

Commercial Cloud Providers All 3 Types have in common that they have the economies of scale to be able to spread initial setup costs over a lot of volumes In other w In other words: GO BIG!!! s: GO BIG!!! 19.09.2013 Procurement and business aspects of the cloud 14

NRENs & the Cloud NRENs struggle with the following: – Conservative budget spending mentality – Old-fashioned laws that deal with CFT – Many people within the NREN aren’t ready for the cloud mindset 19.09.2013 Procurement and business aspects of the cloud 15

NRENs & the Cloud Conservative budget spending mentality – It isn’t easy to convince the budget people that you want to spent a lot of money for a lot of capacity if you can’t back it up with commitment from customers to buy this capacity – The problem is that if you ask small budget to start with, you will be stuck without the means to expand if your service turns out to be a success… 19.09.2013 Procurement and business aspects of the cloud 16

NRENs & the Cloud Old-fashioned laws that deal with CFT – Many of the laws were made when the first industrial revolution was ongoing… – Mostly they dealt with public infrastructure works: • Railroads, bridges, canals, harbour infrastructure, public buildings • Tangible, fixed, unchangeable, monolithic, … – For the cloud we need vertical & horizontal scalability, flexibility, modularity, … 19.09.2013 Procurement and business aspects of the cloud 17

NRENs & the Cloud Many people within the NREN aren’t ready for the cloud mindset – Technical people mostly grasp the spirit of the cloud business model – However, many of our colleagues within administrative/support roles don’t…yet… – This leads to frustrations on both sides when you try to implement a cloud project 19.09.2013 Procurement and business aspects of the cloud 18

NRENs & the Cloud Conclusions: We need to educate: – Our PO’s/accountants => They need to convince the wallet holders – Our legal advisors => They need to convince the law makers – We have to get these people on our side , so they can fight the fight for us…and we (the technical people) can take care of the technical challenges… 19.09.2013 Procurement and business aspects of the cloud 19

NRENs & the Cloud Conclusions: We need to collaborate: – Whenever it is possible, because many small needs, make a big need  leverage towards vendors – As a collective of NRENs must be able to “pay as we grow” to our vendors, while we let our customers “pay as they use” our cloud services 19.09.2013 Procurement and business aspects of the cloud 20

Q&A