The document discusses the economics of open source clouds compared to public clouds. It notes that while experts say public clouds are better economically, only 1% of the world's storage is in public clouds currently. Open source allows for standardized IT capabilities like public clouds but provides more flexibility in customizing resources. By enabling cooperation between companies, open source can develop cloud software at large scale and speed to match major vendors and provide alternatives to proprietary public clouds.

1. The Economics of Open Source Clouds
Carlo Daffara
@cdaffara

2. “cloud computing is a model for enabling ubiquitous,
convenient, on-demand network access to a shared
pool of configurable computing resources (e.g.,
networks, servers, storage, applications and services)
that can be rapidly provisioned and released with
minimal management effort or service provider
interaction.” – NIST
Source: “The NIST Definition of Cloud Computing”, Special Publication 800-145.

3. cloud computing: a standardized IT capability (services,
software, or infrastructure) network-delivered in a metered,
fast, self-service way.

5. “Public cloud is better from any economic point of view”
(or so the experts say)

15. “The cloud has decimated sales of on-premises servers and
storage (Source: “The Public Cloud Services Market Will Grow
Rapidly To $236 Billion In 2020”, Forrester)

22. 5%

24. “Statistically speaking, everyone says cloud, cloud, cloud, but
only 1% of storage capacity in the world is in any public cloud”
Urs Holzle (interview with Business Insider) may 2015

25. Why?

28. CAPEX/OPEX and flexibility

30. “Public cloud allows for rapid provisioning, saving money by using only
the resources you need.”

31. “Public cloud allows for rapid provisioning, saving money by using only
the resources you need.”

32. “Software Scalability issues aside. I am not sure if Pokemon
Go would ever be possible if it not on the cloud. How could
you get instances up this fast. It had explosion of players in
very little time. There is no way you could have planned this
resources ahead of time. And it die down fairly quickly, which
means you would have lots of unused server if it were not for
cloud.”

35. source: “The cloud dividend: Economic impact of cloud computing”, Centre for Economics and Business Research, Dec 2010.

36. source: “The cloud dividend: Economic impact of cloud computing”, Centre for Economics and Business Research, Dec 2010

39. Moore’s law & scale

40. source: Urs Hölzle's keynote at Google Cloud Live, 2014

41. source: “How Fast are Semiconductor Prices Falling?” David M. Byrne, Federal Reserve Board, Stephen D. Oliner, AEI & UCLA, Daniel E. Sichel, Wellesley College and NBER, March 2015
It’s true that Moore’s law has provided a y/y improvement in price/performance rate of around
30%, but companies have a depreciation period to respect. This, and the immobilized capital
means that the maximum impact it may have is around 15% on hardware alone...

42. source: “Overall Data Center Costs.” James Hamilton, Amazon. http://perspectives.mvdirona.com/2010/09/overall-data-center-costs/

45. Source: Huan Liu, https://huanliu.wordpress.com/2014/02/26/amazon-ec2-grows-62-in-2-years/
Number of Amazon EC2 racks (est.)

47. Utilization and energy efficiency

48. source: “Cloud Computing, Server Utilization, & the Environment.” Jeff Barr, Amazon.

49. “Public cloud has far greater utilization rates”
Fact: Absolutely not. Reported rates for Google (that has a scale
comparable to AWS) are not far from those reported for private clouds.

50. Source: NRDC
How VMware Virtualization Right-sizes IT Infrastructure to Reduce Power
Consumption; VMware, 2008AWS

52. PUE: power usage effectiveness

54. PUE: practically useless estimate

61. So, who is right?

63. The fallacy: believing that every company is like a Silicon Valley startup.

64. … so Public clouds are bad?

67. Source: “Transportation Cost and Benefit Analysis II – Vehicle Costs” Victoria Transport Policy Institute, Dec 2015
Number of Amazon EC2 racks (est.)

70. Source: J. Arnold http://blackswanfarming.com/understanding-value/

71. cloud computing: a standardized IT capability (services,
software, or infrastructure) network-delivered in a metered,
self-service way

74. Source: J. Arnold http://blackswanfarming.com/urgency-profiles/

77. Amazon EC2 Service Level Agreement:
“AWS will use commercially reasonable efforts to make Amazon EC2 and
Amazon EBS each available with a Monthly Uptime Percentage (defined
below) of at least 99.95%..”
“Unavailable” and “Unavailability” mean:
For Amazon EC2, when all of your running instances have no external
connectivity, for Amazon EBS, when all of your attached volumes perform
zero read write IO, with pending IO in the queue.

78. So we simply have to rewrite all the software in use.

85. (1986)

86. (1986)

87. source: “2014 Worldwide Software Developer and ICT-skilled worker estimates.” IDC

88. So, we’re doomed?

94. (Cost of BT Spine contract: 620M£ in 10 years)

95. (Spine 2, OSS-based)

99. “While IBM initially contributed software that was valued
at 40M$, external contributors to the project created
software representing a value of roughly 1.7B$ over the
examined period.”
Source: “Enabling knowledge creation through outsiders: towards a push model of open innovation” Spaeth, Stuermer, von Krogh. Int. J. of Technology Management 52(3/4). (2010)

100. Source: “Strategic use of Free Software at Siemens.” Karsten Gerloff

101. ● Amazon AWS added 516 new features in 2014
● AWS changes code every 16 seconds
● Difficult for any vendor to match that rate
● Open Source does, through coopetition
● Microsoft has 30000 software engineers working on all its cloud
projects
● … which is approximately the number of overall contributors to an
OpenStack (& Linux) based open source public cloud

102. Open Source allows any company to afford the same
standardized platform approach of Public cloud providers

103. But which platform?

109. There is more than one way

111. source: “The Quantitative State of the Open Cloud” Gonzalez-Barahona / Izquierdo (Bitergia), 2015

117. ● Open Source provides a wide spectrum of tools - use the one more
appropriate. Don’t stop to the first one or the most visible
● “There can be only one” is a nice line for an Hollywood movie, not
for your IT systems
● What is niche today can become mainstream tomorrow
● Most users don’t need the complexity of the largest platform. Some
necessary features can be added later as VMs on top

118. Conclusions

119. Public Cloud computing is a tool, not Harry Potter’s wand.

120. To change the economics, you have to change how you use
your software (and probably your software too)

121. Open Source coopetition is the only mechanism that can create
software at the scale, speed and quality necessary today

122. There are several Open Source platforms. Including the most
appropriate for your needs. Don’t stop at the first one.

124. Economics is fun! (for me)

125. Thanks!
twitter: @cdaffara
carlo.daffara@cloudweavers.eu

126. Backup slides

139. Typical job posting for a private cloud builder

143. Medieval Portrait of an OpenStack sysadmin

144. Cloud as a commodity

147. If something is fungible (commodity), its pricing will move down thanks to
competition in perfect markets with no collusion:
Brand A Brand B

148. If something is fungible (commodity), its pricing will move down thanks to
competition in perfect markets with no collusion:
Brand A Brand B

149. If something is fungible (commodity), its pricing will move down thanks to
competition in perfect markets with no collusion:
Brand A Brand B

150. source: Cloud Computing Benchmark V2 Burstorm & Rice University, march 2016

152. Jevons’ paradox

158. Lower TCO