Cloud Computing: Is Dedicated Hosting still Cheaper?

This week one of our customers called and asked us to provide some advise on whether to host OfficeClip Contact Manager to a Virtual Private Server (VPS), Dedicated Server or Cloud. This led me to look at various options on cloud computing as it exists today.

Is the Cloud Computing cheaper than Dedicated Host?

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Currently there are two feasible cloud options for Windows environment (OfficeClip works on windows server so I evaluated this option). Amazon Elastic Cloud EC2 and Microsoft Azure (which is not yet available for production). Let’s consider these options compared to traditional hosting options. Note that I am only comparing clouds with hosted dedicated servers and not in premise dedicated servers:

Setting up the Server: Setting up the server on the cloud is no easy feat (compared to setting up a dedicated/VPS hosting where you just sign up and get the RDP without any other hassle). I took the path of setting up the EC2 cloud environment using the ElasticFox add-in for Firefox. Then I had to follow a lot of instructions to setup the instances and other stuff. This itself would turn off many small business (even technical savvy!). After I got it to run and managed to install the Sql Express etc. I could install and run our product. However, from the reliability point of view I was not very happy as one out of five time the server did not reboot and it hung. Maybe there are other third party products to do this but I consider this as a minus.

Pricing: Let’s compare apples to apples!

• Dedicated Server: You can get a dedicated server from a decent service provider with dual core CPU, 2 GB RAM and RAID compliant drive for around $150 – $175 per month. Where you get around 2000 GB bandwidth and some free static IP address. For most small business this is a pretty good configuration. In addition you could get email hosting by signing up with Google Appliance or install a email server (like Zimbra) yourself. Cost of Amazon EC2 for a similar configuration would be:
• Amazon EC2: This comes to between $250 to $300 per month, here is an approximate breakdown
  • Hourly: High CPU Instance – 1.7GB of memory with 2 virtual cores – $0.29 per hour – Total: $208 / month (assuming 24 x 7 operation).  OR
  • Reserved Instance : High CPU – $ 910 (one year term) + $0.12 per hour – Total: $162 / month (assuming 24 x 7 operation and you use it for 1 year)
  • Data Transfer:  Data Transfer Out – 0.17/GB and Transfer In – 0.10/GB. So if your server is customer facing you will need more bandwidth. Lets conservatively assume that you need only 500GB per month. That would cost approximately $81.50 (assuming 90% traffic out and 10% traffic in)
  • You may need an elastic IP address to make sure it does not create trouble with your DNS etc. That is $0.01 per hour, totals to $7.20 per month.
• Azure: Microsoft Azure pricing page does not show the exact configuration of the computing power of each computing units. So the pricing comparison cannot be done equally. It looks like they have priced it comparable to Amazon EC2

Customer Support: The clouds are managed centrally so individual customer service should be poor compared to the dedicated server hosts. However, it is anticipated to be more stable.

Extensibility: This is where the cloud computing will have an upper hand. For example, if you are running a store on a hosted dedicated server and you have to deal with double load during Black Friday and Christmas shopping times, your server, if not programmed to handle this load, will become slow. However, in a could environment, you can add the number of computing units for a short period to handle the load and not have to pay too much money for it. This may not be a big deal with the dedicated server if you have some extra CPU power or extra memory sitting unused (which may not be too expensive anyways).

Risks: A new report released by European Security Agency (ENISA) outlines the benefits and risks of the Cloud Computing (Cloud Computing Security Risk Assessment.pdf) shows many key risks with cloud computing compared to storing data in-house. This report is a good read and includes a checklist of what customers should consider when shopping for a cloud computing environment.

Cloud Computing will grow and the prices will come down if the vendors involve third party hosting companies to resell the services. I would like to know if you are thinking of moving your company server to the cloud.