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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

SLIDE 1

Procurement and Business Aspects of the Cloud

Belnet – Mario Vandaele Brussels – 19th September 2013

SLIDE 2

2 Procurement and business aspects of the cloud

Cloud Storage – Cost Breakdown

19.09.2013

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

SLIDE 3

3 Procurement and business aspects of the cloud

Cloud Storage – Cost Breakdown

19.09.2013

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

SLIDE 4

4 Procurement and business aspects of the cloud

Cloud Storage – Cost Breakdown

19.09.2013

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

SLIDE 5

5 Procurement and business aspects of the cloud

Cloud Storage – Cost Breakdown

19.09.2013

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”

SLIDE 6

6 Procurement and business aspects of the cloud

Cloud Storage – Cost Breakdown

19.09.2013

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

SLIDE 7

7 Procurement and business aspects of the cloud

Cloud Storage – Cost Breakdown

19.09.2013

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

SLIDE 8

8 Procurement and business aspects of the cloud

Cloud Storage – Cost Breakdown

19.09.2013

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

SLIDE 9

9 Procurement and business aspects of the cloud

Cloud Storage – Cost Breakdown

19.09.2013

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

SLIDE 10

10 Procurement and business aspects of the cloud

Cloud Storage – Cost Breakdown

19.09.2013

Leason Learned

– If you want to be a cloud provider…

… GO BIG!!! GO BIG!!!

SLIDE 11

11 Procurement and business aspects of the cloud

Commercial Cloud Providers

19.09.2013

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

SLIDE 12

12 Procurement and business aspects of the cloud

Commercial Cloud Providers

19.09.2013

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

SLIDE 13

13 Procurement and business aspects of the cloud

Commercial Cloud Providers

19.09.2013

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

SLIDE 14

14 Procurement and business aspects of the cloud

Commercial Cloud Providers

19.09.2013

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!!!

SLIDE 15

15 Procurement and business aspects of the cloud

NRENs & the Cloud

19.09.2013

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

SLIDE 16

16 Procurement and business aspects of the cloud

NRENs & the Cloud

19.09.2013

Conservative budget spending mentality

– It isn’t easy to convince the budget people that you want to spent a lot

f 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…

SLIDE 17

17 Procurement and business aspects of the cloud

NRENs & the Cloud

19.09.2013

Old-fashioned laws that deal with CFT

– Many of the laws were made when the first industrial revolution was

ngoing…

– 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, …

SLIDE 18

18 Procurement and business aspects of the cloud

NRENs & the Cloud

19.09.2013

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

SLIDE 19

19 Procurement and business aspects of the cloud

NRENs & the Cloud

19.09.2013

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…

SLIDE 20

20 Procurement and business aspects of the cloud

NRENs & the Cloud

19.09.2013

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

SLIDE 21

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:

Cloud Storage – Cost Breakdown

What we got

– A Cloud Storage service, including:

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

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”

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

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

Cloud Storage – Cost Breakdown

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

Cloud Storage – Cost Breakdown

Leason Learned

– If you want to be a cloud provider…

… GO BIG!!! GO BIG!!!

Commercial Cloud Providers

There are 3 types of commercial cloud providers:

– 1) Public cloud accidental spin-off due to overcapacity: e.g. Amazon

Commercial Cloud Providers

There are 3 types of commercial cloud providers:

– 2) IT operations required a big private cloud: e.g. RackSpace

Commercial Cloud Providers

There are 3 types of commercial cloud providers:

– 3) Public cloud is the core business: e.g. GoGrid

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!!!

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

NRENs & the Cloud

Conservative budget spending mentality

– It isn’t easy to convince the budget people that you want to spent a lot

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…

NRENs & the Cloud

Old-fashioned laws that deal with CFT

– Many of the laws were made when the first industrial revolution was

– Mostly they dealt with public infrastructure works:

– For the cloud we need vertical & horizontal scalability, flexibility, modularity, …

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

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…

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

Q&A