ECONOMICS

OF THE

CLOUD

Slide 1

Michel N’GuettiaBusiness Group Leadmicheln@microsoft.com

TRANSFORMATIE VAN IT

1970s and 80s | Mainframe

1990s | Client / Server

2000s | Web

Today | Cloud

HOW MICROSOFT VIEWS THE CLOUD

Nieuwe Principe's

Schaalbaarheid

Betalen naar gebruik

Hoge beschikbaarhei

d

Multi-tenancy

Infrastructuur

Business model

Eigendom

HeterogeneenHomogeneen

OpEx CapEx

Lease/Rented Koop

Keuze

Management3e partij Zelf

Locatie On premisesOff premises

SUPPLY SIDE ECONOMICS OF SCALE

• Server hardware costs (~45%)

• Facility & operations (~25%)

• Hardware labor costs (~15%)

• Power costs (~15%)

Larger datacenters have almost 50% lower TCO per server

ANNUAL TCO/SERVER DECLINES W/SCALE

MAIN DATA CENTER COST BUCKETS

1k Server DC 100k Server DC

$0

$1,000

$2,000

$3,000

$4,000

$5,000

Server Hardware FacilityHardware Operations Power

TC

O/S

erv

er

47% Savings

DE MICROSOFT CLOUD

Monolithic design and construction effort Typical large datacenter = 11 football fields

High Investments $$$ Typical construction costs = $10M to $15M per Megawatt

Long lead time 18 to 24 months from design to online

DE MICROSOFT CLOUD

ChicagoQuincyDublin

Amsterdam

Hong Kong

Singapore

Japan

"Datacenters have become as vital to the

functioning of society as power stations."

The Economist 

San Antonio

Multiple global CDN locations

Microsoft has more than 10 and less than 100 DCs worldwide

BoydtonDes Moines

Quincy, Washington 27MW 100% Hydro power

San Antonio, Texas 27MW Recycled water for cooling

Chicago, Illinois Up to 60MW Water side economization, Containers

Dublin, Ireland Up to 50MW Outside air cooling, PODs

SUSTAINABLE ECONOMICS

PUE Ojective: 1.125

Satisfied Customers

Less e-Waste

Less Empty Space

Less Wasted Power

People

Planet

ProfitLess Idle Equipment

Less Carbon

Less Raw Materials

• Improved Efficiency Energy savings and Sustainable Environment

• Reduced TCO for supply of cloud services

• Relentless focus on PUE reduction

• Lower cost passed on to customers

• Competitive Advantage

SHIFT TO ULTRA-MODULARITY

• Pre-manufacture the entire datacenter

• Low initial capital investment

• ITPAC Modular Server Building Block

• Airside Economization PAC with adiabatic cooling• Extremely efficient PUE of 1.05 - 1.2

• 400 to 2500 servers at a time

DEMAND SIDE ECONOMIES OF SCALEAverage server utilization rates are 5-10%

0%

25%

50%

75%

100%

Time

CP

U U

tili

za

tio

n

UNCERTAIN GROWTHUncertainty about future demand requires overprovisioning of resources. Pooling uncertainty dramatically reduces this inefficiency

1 2 3 4 5 6 7 8 9 10 11 120

2,500

5,000

7,500

ExpectedUpside Buffer

Months from Planning Date

Overprovisioning

Serv

er

Dem

an

d

Instance

Client

Admins

Resources

Instance

Client

Admins

Resources

Instance

Client

Admins

Resources

SINGLE-TENANT APPLICATION

• Each client has a dedicated instance

• Instances separately administrated

• Dedicated resources

• Costs grow with scale

MULTI-TENANCY BENEFITSMulti-tenant applications share resources between users and organizations

• One instance for all clients

• One group of administrators

• Fixed resources are shared

• Costs go towards zero with scale

Client

Instance

Admins

Resources

Client

Instance

Admins

Resources

Client

Instance

Admins

Resources

MULTI-TENANT APPLICATION

MULTI-TENANCY BENEFITSMulti-tenant applications share resources between users and organizations

Marketplace

Reporting & BI

Billing & Payments

Data Market Marketplace

Flexible APIs

Information Marketplace

Infrastructure

ComputeStorageManagement

Data Management

Relational dataManagement

Connectivity

Connectivity Access control

Developer ExperienceUse existing skills and tools

Multi-tenant Cloud OS

CLOUD OPERATING SYSTEM

PUBLIC VS. PRIVATE CLOUDS

100 1,000 10,000 100,000$0

$2,000

$4,000

$6,000

$8,000

Cloud Size (# of Servers)

TC

O/S

erv

er

Public Cloud Cost at Scale

Public

Cloud

Private

Cloud

40x cost benefit for SMBs

10x cost benefitfor Enterprises

CLOUD SCALE BENEFIT

(On-Premise)

Infrastructure

(as a Service)

Platform

(as a Service)

SERVICE MODELS

Storage

Servers

Networking

O/S

Middleware

Virtualization

Data

Applications

Runtime

Storage

Servers

Networking

O/S

Middleware

Virtualization

Data

Applications

Runtime

You m

anage M

an

ag

ed b

y v

en

dor

Man

ag

ed b

y v

en

dor

You m

anage

You m

anage

Storage

Servers

Networking

O/S

Middleware

Virtualization

Applications

Runtime

Data

Software

(as a Service)

Man

ag

ed b

y v

en

dor

Storage

Servers

Networking

O/S

Middleware

Virtualization

Applications

Runtime

Data

Service Categories

Lower Cost & Higher Agility

Higher Control & Higher Cost

BUSINESS APPS COLLABORATIONCOMMUNICATIONS IDENTITYDESKTOP MGMT PLATFORMDATABASEPRODUCTIVITY

ON-PREMISES & HOSTERS

CLOUD SERVICES FOR BUSINESSES

PLATFORMBUSINESS USERSBUSINESS APPS

THE VALUE OF CLOUD COMPUTING

Source: http://www.mckinseyquarterly.com/Business_Technology/BT_Strategy/How_IT_is_managing_new_demands_McKinsey_Global_Survey_results_2702?gp=1

THE HORSELESS CARRIAGE SYNDROME

"If I had asked my customers what they wanted, they would have said a faster horse." - Henry Ford

“There will never be more than 1 million units because of the limited availability of good drivers”

- Daimler Company

Forecasters

Engineers

Customers

“The horse is here to stay but the automobile is only a novelty, a fad.”

- Bank analyst

Analysts

…designed whip holders into the automobiles for the first 6-7 years, even though there was no horse…

(there were 8 million by 1918, over 600 million today)

THE HORSELESS CARRIAGE SYNDROME

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