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“The cloud” has evolved from humble beginnings ten years ago to a big tent word similar to “internet” and “web”. Most hosted services are now called “cloud” by the market, however amidst all this “cloud washing” the fundamental innovation of cloud computing is often overlooked - to be able to use what you need, when you need it. The ability to rightsize IT resources to changing requirements, combined with end-to-end automation of services via application programming interfaces (APIs), distinguishes cloud infrastructure services from traditional hosting services.

Infrastructure hosting services are designed for relatively static needs, and are typically cost optimized, with long-term commitments to a fixed amount of resources. Hosting resources are often underutilized because the traditional approach to uncertain requirements is to overprovision. That said, once load ramps up significantly hosting is difficult to scale horizontally and disruptive to scale vertically. Cloud services on the other hand are designed to allow customers to easily change their resource usage, by the hour or even by the minute, and pay only for what they need. Typically, the consumption of such cloud infrastructure resources is also automated via an API. As a result, cloud services can scale infinitely if the application is well designed. Cloud services cost more per unit of resource consumed than hosting services, but overall costs can be lowered since you only pay for what you need, and the opportunity cost of scaling is dramatically lessened.

For many businesses, the low cost and simplicity of hosting is ideal - there is no need for agility and scalability, and they are simply looking for reliable, value oriented service. Dedicated servers, virtual private servers (VPS) and managed hosting are excellent options for reasonably small traditional IT workloads. Many such services have been rebranded as cloud hosting but they retain their product roots around renting and bundling resource entitlements at a low price, that may or may not be consumed. Several hosting companies bet that a significant percentage of the resources rented will not be consumed, and this is what often drives their profitability. Customers of hosting companies like the low predictable costs but when their business and requirements heat up they can rapidly find themselves with nowhere to go, and the cost of being stuck on traditional hosting solutions can be incalculable, especially when the competition takes advantage of autoscaling.

Cloud infrastructure is better positioned to help businesses who are striving to innovate and transform to compete in a globalized digital economy -- customers who can only guesstimate their requirements, need to reserve the right to change their strategy, and thus value agility above predictability low cost. Many cloud oriented businesses such as flash mob sales with large peaks and valleys, can only exist because of cloud computing. Workloads can be inexpensively parallelized, so that data analysis or video rendering can be completed in 24 hours with 30 servers instead of a month with one server. The world economy is transforming into a highly competitive software ecosystem and every advantage counts. The ability to automate cloud based infrastructure dramatically reduces human costs and errors. Next generation applications for the global market require automated cloud infrastructure, and to be scalable the software architecture and the cloud infrastructure capabilities are inextricably linked. CloudOps helps many customers understand how to adapt their software development practices to best leverage cloud infrastructure, allowing them to both deliver more profitable software based services while lowering the risk involved in scaling up or down to meet changes in demand.

In the end, the expectation set by analysts and vendors that cloud computing is purely about lowering costs has been misleading the market to attempt direct financial comparisons to traditional IT solutions including hosting. Cloud infrastructure introduces both higher cost utility resources, and greater complexity of infrastructure adoption and operations, while unlocking capabilities and economic opportunities that are impossible to attain with traditional hosting.

So when shopping for your infrastructure requirements, keep in mind that comparing hosting and cloud infrastructure costs is not an apples to apples exercise!

Photo credit: http://dreamingincmyk.com/

 About the Author

IanRae.png Ian is the founder of CloudOps, a cloud engineering firm that combines private cloud building and managed services with public cloud deployment and operations to offer a hybrid cloud solution. Ian is also a partner at Year One Labs, a lean startup incubator and is the co-founder of the Centre cloud.ca, a space for tech and startup community events in Montreal. Prior to the emergence of clouds, Ian founded Syntenic, a web operations company, and was responsible for Engineering at Coradiant and IT at Canderel Management.