Cloud IT economicsWhat you don’t know about TCO can hurt you

Cloud is evolving, becoming the key platform for innovation and business value. Yet, as enterprises look to the cloud to accelerate growth, many still struggle to understand the true cost of ownership.

Enterprises turn to the cloud to…

What do they hope to gain?

Achieve deployment flexibility. . .. . . to gain interoperability across hybrid environments

...to leverage emerging ecosystems and communities

Improve quality and speed time-to-market. . .. . . to roll out innovative business models  quickly

. . . to deliver compelling customer experiences

Leverage existing investments. . .. . . to integrate cloud with current IT infrastructure and applications

. . . to deliver an integrated user experience

Quickly gain deeper insight from data. . ....to drive real-time decision making using data from internal and external sources

. . . to increase productivity, collaboration and quality of customer relationships

Achieve greater understanding and learning. . .. . . to identify new business value from “dark” data

. . . to improve customer targeting and personalization

Innovation to maximize opportunity and business flexibility

Speed to get to value faster

Insight to get the best business outcomes

Security to minimize risk

Flexibility to best deliver on business objectives

Access to technology without major capital investment

Transformation to deploy new business models

Choice to get the best price-performance

Cost to optimize IT spending

Visibility and control to manage the cloud more efficiently

To seize the advantage that cloud promises, forward-thinking

business leaders are looking for solutions that enable strategic

capabilities at the lowest cost. And providers are responding,

with aggressive pricing that makes their cloud offerings look very

affordable. But are they?

To get an accurate understanding of cloud costs and their

business impact, it’s necessary to look at real-world costs

and performance.

This guide can help you in your comparison and evaluation

of competitive cloud offerings. Using what’s here, you can look

beyond initial pricing to focus on real-world performance, price-

performance and the many considerations that drive total cost

of ownership.

3Cloud IT economics What you don’t know about TCO can hurt you

In the real world, cost of ownership is not that simple

“ Some businesses that chose a cloud service provider based on low published rates are experiencing higher costs than anticipated. Others are fielding complaints about unacceptable application performance. Still others are realizing they have no idea whether they are paying too much or too little for what they are getting.”

– Frost & Sullivan, The Truth About Cloud Price-Performance1

The total cost is not always evident

Determining the true cost of cloud is more complex than it might seem. By

focusing on initial pricing, enterprises may miss important performance factors

and service add-ons that increase overall cost. An attractive base price is far

less appealing when additional investment is needed to accelerate business

results. The real cost of a cloud that speeds innovation, enables compelling

customer experiences and supports business flexibility is the more meaning-

ful measure.

There’s an important difference between total cost of acquisition (TCA) and

total cost of ownership (TCO). The first is what the enterprise actually pays for

cloud services. TCO is harder to pin down because it also includes intangible

costs like complexity that drives up IT staffing costs, or poor performance that

impacts customer experiences.

Answering the total cost question takes a deep understanding of how the cloud

affects the enterprise, and exactly what’s being purchased. That’s why there’s

more to making a smart cloud decision than choosing the lowest entry price.

When looking at cloud you might ask yourself:

What capabilities will accelerate speed, innovation and

business results?

_ What are the real requirements for applications, workloads,

and service levels?

_ Can the cloud integrate well with conventional IT, today and

in the future?

_ Can the provider meet your requirements for security

and compliance?

What level of performance is needed to drive compelling

customer experiences?

_ Can the provider’s cloud deliver the speed and throughput

that individual workloads require?

_ Are choices available that deliver higher levels of

performance and service?

What are the real economics of the solution?

_ How much will it cost to achieve the needed performance–

initially, and in the future?

_ If upgrades are needed, what will they cost?

_ How much does it cost to migrate workloads and data?

_ Are there hidden costs?

What are some of the factors that drive total costs?

Technology

_ Processor and RAM costs

_ Storage and memory costs

_ Connectivity and bandwidth costs

_ Upgrades and scalability to meet high

workload demands

Data centers

_ Number and geographic location

_ Transfer charges between data centers

Software and operating environment

_ Operating system costs and

associated overhead

_ Software licensing

Technical support

_ Cost of internal resources to support

the environment

_ Provider technical support

Management

_ Visibility, control and transparency

_ Complexity

Development

_ Workload deployment efficiency

_ Platform complexity

Integration and workload portability

_ Ability to integrate current and

future applications

_ Interoperability among systems

5

It’s time to think differently about cost

“ Selecting a cloud service requires an in-depth understanding of workload performance characteristics and needs, and the ability to match those needs to the actual offerings of multiple cloud vendors.”

– Frost & Sullivan, The Truth About Cloud Price-Performance2

In cost of ownership, details make the difference

What might seem the least expensive cloud offering could cost more in the end

because it doesn’t deliver the performance or capabilities that the enterprise

actually needs “out of the box.” The key cost-related question is how well the

cloud performs in the context of real workloads and business requirements. It’s

not just price, but price- performance that matters – and comparisons should

take every cost driver into account.

The challenge with assessing the true cost of cloud is that providers don’t

structure, price, or measure performance consistently. The full picture involves

much more than selecting CPU, storage and networking. Similar specifications

from different providers can result in very different levels of performance and

cost, and it can be next to impossible to make direct comparisons on paper.

To make an accurate comparison it’s necessary to look at key performance

metrics, infrastructure configurations, contractual agreements and the impact

of workloads on cost.

Why similar offerings don’t cost the same

Environment – Not all clouds are equal,

even if they look alike up front. Multi-tenant,

single-tenant and dedicated server clouds

all perform differently.

Pricing – Not all providers offer pay-for-

what-you-need pricing, and upgrades

like current-generation processors and

permanent storage might cost extra.

Hidden costs –There may be unexpected

charges for intra-cloud network traffic, or

service and support.

Contract conditions –Volume or term com-

mitments can make it costly to move off of

the provider’s cloud.

6Cloud IT economics What you don’t know about TCO can hurt you

Looking at workloads realistically

“The ‘right’ cloud service isn’t always public cloud, or even virtualized cloud; the optimal solution may involve bare metal or dedicated servers, or even a private or hybrid environment.”

– Frost & Sullivan, The Truth About Cloud Price-Performance3

Leveling the playing field: cost in context

To make cost comparisons more meaningful, IBM has conducted extensive

analyses of cloud configurations from different providers based on the real-

world scenarios and business conditions enterprises are likely to encounter.

The findings, verified by leading analyst firm Frost & Sullivan, are a comparison

of price-performance in context rather than straight pricing.

What’s revealing about these tests is the effect of factors like choice of cloud

environment and workload requirements on cost. The results show that “apples

to apples” comparisons don’t necessarily yield an accurate view of cost, high-

lighting the need to assess the cost of ownership for each workload individually.

Compare the most meaningful measuresAnalyzing typical scenarios can be a useful starting point, but to get a solid grasp of TCO it’s important to understand the exact characteristics of your specific workload.

Web applications Compute-intensive, customer-facing applications that require rapid response, throughput and scalability.

What to look at• How many user requests are processed per second on average?• Do alternative environments deliver better price-performance?

Analytics Storage-intensive, traditional business analytics and innovative cognitive applications.

What to look at• How many input-output queries per hour can the cloud handle?• How costly is storage?

Network-intensive workloads Inter-application messaging and data localization that require data to be moved cloud-to-cloud, cloud to on-premises systems and from one data center to another.

What to look at• How much cost does a messaging-intensive workload add?• How cost-efficient is the cloud at moving data and workloads?

Hosted private cloud Moving workloads from on-premises to consolidated cloud environments with speed and efficiency.

What to compareHow much does it cost to migrate a virtual machine to the cloud?

7Cloud IT economics What you don’t know about TCO can hurt you

TCO in the real world: Compute-intensive cloud application workloads

Cloud-based applications like those for the Web,

mobile and the Internet of Things are compute-

intensive, demanding a cloud with flexibility and raw

performance to deliver the experiences custom-

ers expect. It’s about being able to quickly deliver

and manage applications that meet the needs of

the business as enterprises continuously develop

applications in a mixed environment.

Some application workloads require the rapid scal-

ability and provisioning of virtualized infrastructure,

while others will achieve better price-performance

in a non-virtualized bare metal environment where

the enterprise has greater control. This places a

premium on the ability to choose the environment

best suited to each, and easily shift among them.

The comparison: Environment makes a difference

IBM benchmarked cloud-based application

workloads against a pair of leading providers

in two ways. One set of tests was run in a fully

virtualized environment, using the most nearly

comparable configuration from each provider.

Another was run using the IBM SoftLayer® bare

metal (non- virtualized) cloud.

One competitor’s virtualized offering was very

close to IBM SoftLayer: a single-tenant virtualized

cloud using the same generation of processors.

However, the other provider offers only multi-tenant

cloud, and neither competitor offers the additional

performance and control of bare metal servers.

For compared workload and cloud environments, IBM SoftLayer is faster, lower cost, and has better price-performance

IBM SoftLayer virtualized vs. Provider A

23% faster performance with IBM

25% lower price with IBM (3 yr. total)

1.6x better price-performance with IBM

IBM SoftLayer, virtualized vs. Provider B

32% faster performance with IBM

1.2x better price-performance with IBM

IBM SoftLayer bare metal vs. Provider A

35% faster performance with IBM

47% lower price with IBM (3 yr. total)

2.5x better price-performance with IBM

IBM SoftLayer bare metal vs. Provider B

44% faster performance with IBM

20% lower price with IBM (3 yr. total)

1.8x better price-performance with IBM

Based on an IBM internal study of a basic web application workload. Customer applications, differences in the stack deployed, data center locations and options, and other systems variations or testing conditions may produce different results. Pricing based on published US list prices available for IBM and competitor data center location specified as of 3/21/2016 and calculated by projecting costs measured over a 3 year TCA period. Costs include compute, network, storage, software, data transfer, and support charges (and excludes labor). Available options and pricing vary by data center location. Option for non-virtualized servers not available in competitor environment.

8Cloud IT economics What you don’t know about TCO can hurt you

The implications for TCO

The analysis results show the real benefit of the choices that only IBM SoftLayer

offers. The processing overhead of virtualization and proprietary platforms has

a marked impact on performance. That can make it more difficult to deliver the

compelling experiences that customers demand.

There were also additional charges that added to the total cost of ownership

for competing cloud providers. Higher-cost, production-capable VMs were

required to match IBM SoftLayer, and there were additional costs such

as software licensing, data transfer and technical support. All of these added

dramatically to the total cost – and none are reflected in the competitors’ basic

price quotes.

The IBM advantage for cloud application workloads

Business need What should the cloud provide? How IBM delivers Key benefits can include

Stable, consistent high performance with lower operating costs

Choice of environment, with pricing by usage or by the hour and no upcharges

No fixed, predefined configurations in IBM SoftLayer; options like IBM POWER® and IBM z SystemsTM

Match cloud capabilities with workload requirements for optimal price-performance

Continuous development and delivery

Flexible tools that allow the enterprise to choose its own course

Automated, orchestrated deployment with IBM UrbanCodeTM Deploy

Reduced time to market, increased productivity that lowers cost

Rapid deployment and scale Easy workload and data portability

Seamless integration of development across public, private and dedicated clouds with IBM Bluemix® Local

Business agility, responsiveness and optimized cost

Innovation Integration with legacy and external systems, data and services

Robust IBM Bluemix service catalog and open APIs, plus IBM Cloud Managed Services that bring new services to market up to 75% faster6

Business agility and improved customer experiences

Saving time and money

by deploying in the cloud

Amica reduces software deployment times

by 95-98 percent. IBM UrbanCode Deploy

helps automate software release processes.4

Learn more >

Coca-Cola Enterprises Inc.: Moving to the

cloud lowers IT costs and brings customer

engagement programs to market faster.5

Learn more >

9Cloud IT economics What you don’t know about TCO can hurt you

120,000

100,000

60,000

80,000

40,000

20,000

0

16K

IOP

S

Provider A, block storage, 40K committed IOPS

1.6TB (10 x 160GB x 4000 IOPS RAID0)

SoftLayer, bare metal internal SSD

1.6TB (8 x 400GB SSD RAID10)

16K_SeqRead

112,419

29,572

IBM SoftLayer

3.8x the storage performance

3.0x lower price

vs. Provider A for compared workload and environment.

Increasing the value of data: Storage-intensive analytics workloads

The revolution in analytics and cognitive business solutions is driving growth

in cloud adoption, as enterprises seek to leverage data beyond traditional busi-

ness intelligence. Data has become a key resource, enabling richer customer

experiences and powering new, innovative business models through new tech-

nologies like IBM Watson. Not only can analytics help to create better customer

experiences, they can optimize the use of the cloud itself by monitoring usage

patterns and enabling a flexible infrastructure that self-adjusts as needed.

Analytic and cognitive workloads require speed and low latency while support-

ing many concurrent users. This places the emphasis on storage performance

and low processing overhead, so that rated speeds can be achieved in the face

of tens or even hundreds of thousands of requests per second.

The comparison: Analytics relies on storage throughput

In the analytics realm, provisioning for high input-output performance is the

dominant cost driver. IBM tested a mix of complex and intermediate business

intelligence reporting workloads against two industry leading cloud providers,

using configurations optimized for reporting throughput.

The IBM SoftLayer test was run in a bare-metal environment for best

price- performance. Since neither competitor offers bare metal, the closest con-

figuration was used with upgrades as needed to deliver maximum throughput.Test results obtained using an industry standard file system benchmarking tool. Competitor cloud configuration provisioned for I/O bandwidth of 40,000 IOPS. Results obtained under controlled conditions testing resources of a publicly available cloud infrastructure. Customer applications, differences in the stack deployed, differences in data center locations and options, and other systems variations or testing conditions may produce different results.

For compared workload and cloud environments, IBM SoftLayer bare metal delivers higher throughput with less cost

IBM SoftLayer bare metal vs. Provider A

1.9x more throughput per processor with IBM

3.0x lower price with IBM (3 yr. total)

3.2x better price-performance with IBM

US list prices available for IBM and competitor data center location specified as of 3/21/2016 and calculated by projecting costs measured over a 3 year TCA period, and include compute, network, storage, and support charges (excludes labor, DB2 software license costs (identical in both environments), and cloud provider data transfer charges.) Available options and pricing vary by data center location. Option for non-virtualized servers not available in competitor environment.

IBM internal study of an analytics workload consisting of reports scanning all or portions of a 1TB denormalized star-schema database. Competitor Cloud configuration provisioned for I/O bandwidth of 40,000 IOPS. Results obtained under controlled conditions using publicly available cloud infrastructure. Customer applications, differences in the stack deployed, differences in data center locations and options, and other variations may produce different results. Pricing based on published

10Cloud IT economics What you don’t know about TCO can hurt you

The implications for TCO

With some cloud providers, provisioning for high IOPS performance can

make costs skyrocket. Because of virtualization overhead and throttling by the

provider, standard storage offerings may exhibit high latency and be unable to

deliver their rated speed. The alternative is to opt for upgraded storage at a far

higher cost.

Even basic storage costs are not always readily apparent. A provider’s virtual

machines may include local storage – a seeming cost advantage. However,

that storage is temporary. Those “ephemeral” disks are erased each time the

virtual machine is shut down, restarted, moved or resized. With some providers,

permanent block storage must be purchased separately, and is available only

in fixed disk sizes – leading the enterprise to potentially buy more than it needs.

The IBM advantage for analytics workloads

Business need What should the cloud provide? How IBM delivers Key benefits can include

Enhanced customer experiences and business model innovation

Access to open APIs that build predictive analytics, business intelligence and cognition into the cloud

Extensive service catalog including IBM WatsonTM technology and IBM Bluemix-integrated services

Differentiated offerings that increase competitiveness and business agility

Actionable business and customer insights

Ready access to data and analytics

Robust analytic solutions for marketing, finance, risk management and sales performance, fully integrated with the cloud

Accelerated business results and optimized operations

Reduced costs for storage-intensive workloads

Consistent, high-performance, cost-effective storage

Massively scalable IBM CleverSafe® object-oriented storage and IBM SoftLayer bare metal deployments that optimize infrastructure resources

High throughput and data portability with lower storage costs

Bringing cognition

to the cloud

To see how Whirlpool Corporation is

applying IBM Watson Services, including

cognitive analytics.7 Learn more >

Alpha Modus, in conjunction with

IBM Bluemix, is succeeding in making

sense of – and shaking up – the entire

investment management industry.8

Learn more >

11Cloud IT economics What you don’t know about TCO can hurt you

Moving data: Network-intensive workloads

By definition, cloud strategies depend heavily on network performance. Data

is in constant motion, whether as part of application messaging traffic, work-

load migration, or data transfer from one data center location to another. Fast,

reliable network connections unlock value by enabling different systems and

applications to operate seamlessly, and enterprise data to be extended to the

cloud. The priority with these network-centric workloads should be to keep the

cost of moving data as low as possible.

As cloud strategies evolve, the need for high network throughput is increasing.

Cloud-based applications rely on network speed to perform well. Shortened

development cycles require workloads to be shifted rapidly, and often. There

is also the need to localize data, as security concerns and data sovereignty

laws – regulations mandating where data and workloads are physically housed–

become more stringent.

Connecting data and applications

to transform the business

For compared workload and cloud environments, IBM SoftLayer costs less, yields faster messaging

IBM SoftLayer bare metal vs. Provider B

Up to 7x faster performance with IBM

Up to 11x better price-performance with IBM (3 yr. total)

IBM SoftLayer bare metal vs. Provider A

36% faster performance with IBM

2.4x better price-performance with IBM (3 yr. total)

Based on an IBM internal study of a message passing workload. Results obtained under controlled conditions using a publicly available cloud infrastructure. Customer applications, differences in the stack deployed, differences in data center locations and options, and other variations may produce different results. Pricing based on published US list prices available for SoftLayer Washington DC and competitors’ US East data center locations as of 3/21/2016 and calculated by projecting costs measured over a 3 year TCA period that includes compute, network, storage, and support charges (and excludes client labor costs and cloud provider data transfer charges.) Available options and pricing vary by data center location. Option for non-virtualized servers not available in competitor environment.

IBM Cloud and consulting services help

Shop Direct react to shifting customer

demands in a mobile connected, cloud

enabled world.9 Learn more >

Apptimate migrated its solution to

the SoftLayer platform, capitalizing on the

global network of data centers to facilitate

growth and adhere to national data security

laws.10 Learn more >

12Cloud IT economics What you don’t know about TCO can hurt you

80,000

60,000

40,000

20,000

0M

essa

ges

per

seco

nd

Provider B Haswell vCPU

Provider BSandy Bridge vCPU

9,514

12,632

25

20

15

10

5

0

Dol

lars

per

mes

sage

per

sec

ond

Provider B Haswell vCPU

$20.87

Performance for the workload and environments comparedHigher is better

Provider A Ivy Bridge vCPU

12kB non-persistent messaging tests

51,995

Cost for the workload and environments comparedLower is better

Provider A Ivy Bridge: 32 vCPU, 10 Gbps Provider B Sandy Bridge: 16 vCPU Provider B Haswell: 16 vCPUIBM SoftLayer Ivy Bridge: Bare metal, 12 cores, 10 Gbps

SoftLayer Ivy Bridge bare metal

Provider B Sandy Bridge vCPU

Provider A Ivy Bridge vCPU

$1.85

$19.39

$4.44

SoftLayer Ivy Bridge bare metal

70,925

The comparison: Virtualization has a significant impact

IBM analyzed messaging performance against two leading cloud providers by

generating message threads with a “sender” application, passing them through

a messaging server, and consuming them with a “receiver” application. Traffic

was increased until the message rate couldn’t go any higher.

The processing overhead caused by virtualization and proprietary software

stacks played an important role, with IBM SoftLayer bare metal delivering far

higher performance at a small fraction of the cost relative to the competitors’

virtualized clouds. The choice of processor in the competitor’s clouds also

had an impact, with upgraded hardware delivering better performance but

at a much higher cost per message.

Based on an IBM internal study of a message passing workload. Results obtained under controlled conditions using a publicly available cloud infrastructure. Customer applications, differences in the stack deployed, differences in data center locations and options, and other variations may produce different results. Pricing based on published US list prices available for SoftLayer Washington DC and competitors’ US East data center locations as of 3/21/2016 and calculated by projecting costs measured over a 3 year TCA period that includes compute, network, storage, and support charges (and excludes client labor costs and cloud provider data transfer charges.) Available options and pricing vary by data center location. Option for non-virtualized servers not available in competitor environment.

13Cloud IT economics What you don’t know about TCO can hurt you

The implications for TCO

For applications that generate heavy network traffic, messaging server

throughput can be the single most significant limiting factor on performance.

As network traffic backs up, application servers may sit idle and costs rise

because the enterprise must invest in additional capacity to compensate.

Network capacity is not the only cost driver associated with moving data. Most

cloud providers encourage their clients to keep data and workloads in the pro-

vider’s cloud through policies that make it easy and inexpensive to move data

to the cloud, but costly to shift it once it’s there.

The IBM advantage for network-intensive workloads

Business need What should the cloud provide? How IBM delivers Key benefits can include

Application performance High sustained messaging throughput

IBM SoftLayer bare metal servers and high-speed networking, with pricing that allows the enterprise to buy only what’s needed

Improved customer experiences and productivity

Data localization High-speed, low-cost, secure data transfer, large number of data center locations

Zero transfer costs between IBM SoftLayer data centers, worldwide data center presence with IBM SoftLayer and IBM Cloud Managed ServicesTM

Customer satisfaction, enhanced compliance, reduced business risk

Data portability Network throughput, simplicity, freedom from barriers to migration

IBM Aspera®’s dedicated protocol that delivers transfer speeds up to hundreds of times faster than FTP or HTTP, regardless of file size

Faster speed to market, increased business agility, enhanced productivity

Creation of innovative services Ability to connect applications and data in a secure, scalable way

IBM Message Connect seamlessly links applications and services, while IBM Integration Bus connects processes across systems

Better customer experiences, business agility and speed to market

Providers may also charge extra to move data to a different data center,

especially one in another region. These transfer charges can become signifi-

cant if the enterprise needs to move large amounts of data to specific locations

in order to meet regulatory compliance or customer mandates.

14Cloud IT economics What you don’t know about TCO can hurt you

Gaining business agility: Moving workloads to the cloud

“When server resources are shared, there is increased opportunity for data to become contaminated or lost.”

– Frost & Sullivan, All Clouds Are Not Created Equal 11

Private clouds have an important place in today’s IT landscape because they

offer greater visibility, control and security. Some enterprises elect to keep

sensitive workloads such as development on-premises to ensure all three.

Today, however, providers like IBM offer hosted private clouds that combine

these advantages with the cost benefits of infrastructure-as-a-service. That

can enhance business agility, because the private cloud can be fully inte-

grated with existing IT infrastructure, on-premises and off-premises clouds in

a hybrid environment.

An increasing number of enterprises are deploying hybrid cloud environments,

enabling them to allocate workloads according to the characteristics of each.

Often, an enterprise will develop on-premises or in a private cloud, and then

migrate the workload to the public cloud for deployment. This makes workload

portability, complexity and the cost of migration key considerations.

The comparison: Simplicity and control tip the balance

IBM assessed the cost of ownership by consolidating 38 virtual machines

running Web applications, migrating them from an on-premises environ-

ment to the cloud. IBM SoftLayer costs were based on a hosted, bare-metal

private cloud. Neither of the two competitors offers a hosted private cloud

option, so pricing for those offerings was based on a fully virtualized public

cloud infrastructure.

For compared workload and cloud environments, IBM SoftLayer lowers migration costs

IBM SoftLayer bare metal vs. Provider B

40% lower cost with IBM (3 yr. total)

IBM SoftLayer bare metal vs. Provider A

44% lower cost with IBM (3 yr. total)

Based on an IBM internal study of a web application consolidation scenario. Results obtained under controlled conditions using publicly available cloud infrastructure. Customer applications, differences in the stack deployed, differences in data center locations and options, and other systems variations or testing conditions may produce different results. Pricing based on published US list prices available for IBM and competitor data center location specified as of 3/21/2016 and calculated by projecting costs measured over a fixed testing period to a 3 year TCA period. Costs include compute, storage, network, software, data transfer, and support charges (and excludes labor). Available options and pricing vary by data center location. Option for non-virtualized servers not available in competitor environment.

15Cloud IT economics What you don’t know about TCO can hurt you

The indirect costs of moving virtual machines

Consider other elements of cost beyond compute and storageBecause bare metal offers higher performance then vCPUs, less software must be licensed. Less software, less cost.

Comparable 8 processor single-tenant Linux systems 3 year total cost line item

IBM Softlayer, bare metal (two servers)

IBM SoftLayer, private VM (two single-tenant VMs)

Provider A, 3-year prepay (two single-tenant VMs)

Compute + storage $51,840 $34,746 $89,300

Technical support $0 $0 $8,995 (Business)

Data transfer (500GB per month per server)

$0 $1,620 $3,237

Software cost (including S&S) $49,686 $141,960 $141,960

Total 3 year cost with software $101,526 $178,326 $243,492

Total 3 year cost excluding software $51,840 $36,366 $101,532

3 year total cost projection includes comparable compute, storage, network, software, data transfer, and support charges; pricing based on SoftLayer monthly and competitor’s 3 year all upfront reserved instance published US list prices as of 3/21/2016. Options and pricing vary by data center location. Competitor single-tenant pricing includes dedicated per region fees. Options and pricing based on configurations in SoftLayer Washington DC and competitor’s US-East data center locations. Data transfer charges assume 500GB transfer to internet per month per server for two servers for 3 years.

Migrating to a global cloud to

expand the reach of the enterprise

To offer more agility and speed,

Kasbah System Software relies on high

value IBM SoftLayer cloud capabilities to

host its Genius University Management

System.12 Learn more >

_ Hypervisor conversion _ Complexity due to

separate manage-

ment interfaces _ Need to learn new tools

_ Reduced flexibility

and control _ Speed of provisioning _ Risk exposure in the

public cloud

16Cloud IT economics What you don’t know about TCO can hurt you

The implications for TCO

The way cloud providers price their cloud infrastructure has a major impact

on the cost to consolidate workloads. Charges are typically for fixed vir-

tual machine (VM) configurations rather than by utilization of the underlying

hardware, and the enterprise pays for capacity whether it is used or not.

IBM SoftLayer bare metal allows enterprises to achieve higher VM density

on a given physical server by “stacking” workloads, opening the door to

significant savings.

Indirect costs also come into play. Most cloud providers limit the choice of

computing architecture and hypervisor, and in some cases the management

platform. Each virtual machine that gets migrated from an on-premises data

center to the cloud may require conversion to a different hypervisor, and might

need different tools and skills for management. This adds complexity and with

it, cost.

The IBM advantage for consolidating workloads

Business need What should the cloud provide? How IBM delivers Key benefits can include

Security, visibility and control Physical, platform and network security, consistent management tools

Dedicated private cloud infrastructure with choice of hardware including IBM POWER, IBM z Systems, with visibility down to the machine serial number

Reduced risk, enhanced productivity, improved business agility, lower cost through higher VM density

Efficient workload migration Ability to extend existing tools, processes and skills to the cloud

Open standards-based IBM Bluemix platform, with IBM SoftLayer support for all hypervisors

Consistent management interfaces, lower conversion costs, less complexity, no provider lock-in

Availability and data protection Ability to back up critical data and recover workloads in a timeframe that meets business requirements

Disaster Recovery as a Service and Backup as a Service optimized for cloud workloads

Reduces risk of downtime and data loss

17Cloud IT economics What you don’t know about TCO can hurt you

To choose wisely, look at the big picture

“ When the enterprise finds a provider that has expertise across technology, infrastructure, professional and managed services, it can make a selection that is more likely to deliver maximum business value with optimal ROI.”

– Frost & Sullivan, Using Hybrid Cloud Strategy to Drive Business Value13

On the surface, cloud seems so simple and affordable. But as has been

demonstrated in this guide, there’s more to it than low-cost virtual infrastruc-

ture. The initial price is only the starting point. The total cost depends on

everything from hardware price-performance to cloud architecture, pricing

models, software licensing, technical support, contracts and “soft” cost drivers

like platform complexity and provider lock-in.

The IBM approach is markedly different because it takes these additional

factors into account. While other cloud providers are working to limit and com-

moditize cloud services in pursuit of low initial prices, IBM adds real-world value

through openness and choice. When total cost of ownership is viewed through

that lens, the IBM advantage becomes clear.

For today’s enterprises, that distinct approach matters because business priori-

ties are fluid. As cloud strategies driven by cost reduction give way to the use of

cloud for strategic advantage, enterprises are adopting integrated hybrid envi-

ronments that combine public and private clouds with existing IT. Productivity,

business agility, flexibility and ease of integration are as important as low cost.

These are what IBM helps to achieve, through a combination of expertise, tech-

nology and services unmatched by any other cloud provider.

Base your business case on the real economics of IT

Which cloud is best? The answer depends

on your workloads, IT requirements and

business strategy. There are questions of

which workloads to place in the cloud, and

which environment best suits them. It’s a

choice that balances IT economics against

business agility and workload optimization.

The IBM Eagle Team IT Economics Practice

can run a no-cost analysis using your own

data and business assumptions to help you

make the best decision.

Learn more >

IBM Global Technology Services can

help you architect an infrastructure tuned

for cloud workloads, to optimize your

cloud ROI.

Learn more >

18Cloud IT economics What you don’t know about TCO can hurt you

The IBM cloud aligns with what enterprises are looking for

Assessing cloud value is a balancing act, pitting what the solution enables the

enterprise to accomplish against the required investment. The IBM cloud can

help achieve desired business outcomes quickly, at low cost – the right combi-

nation of capabilities, performance and economics.

Capabilities

Innovation – Leverage open communities and

cognitive computing to maximize opportunity

Speed –Take advantage of hybrid environments to

change only what’s needed and get to value faster

Insight – Combine enterprise data with new

sources of data to get the best outcomes

Security – Minimize exposure of sensitive data

Performance

Flexibility – Position workloads to best deliver

on business objectives

Powerful computing – Access leading-edge

technology without major capital investment

Transformation – Build a fast, scalable foundation

for new, cognitive business models

Economics

Choice – Choose the mix of technologies

and deployment models that deliver the

best price-performance

Cost – Optimize IT spending for maximum ROI

Visibility and control – Manage infrastructure

and IT services more efficiently

The future of cloud is hybrid. The future of business is cognitive. IBM is making it affordable.

Through ongoing investments in open technologies and infrastructure,

IBM is laying the foundation of a new kind of cloud that delivers better capa-

bilities and higher performance along with improved economics. Reducing

total cost of ownership is essential – but so is enabling competitive advan-

tage. The IBM cloud is designed to do both.

IBM is enabling business innovation and the cognitive enterprise because

these are what will differentiate tomorrow’s businesses. Along the way,

there’s an understanding of business reality, and that there’s a balance to be

struck between investment and outcome. That’s why IBM focuses on the

total picture: those costs and capabilities that matter most to the enterprise.

The IBM cloud: Greater business agility. Increased competitiveness. Less cost.

Choice with consistency Put the right workload in the right place, at the right time – because where and how you develop and deploy workloads determines price-performance.

Hybrid integration Unlock existing data and applications to build on what you have today, changing only what you need to –because less complexity means lower costs.

DevOps productivity Develop, experiment and iterate at speed – because business agility enhances cloud ROI.

Powerful, accessible data and analytics Extract deeper insight to understand your business and get closer to the customer– because smarter decisions lead to greater efficiency.

Cognitive solutions Build understanding and learning into decisions and interactions – because that’s what’s going to drive competitiveness in the age of digital business.

© Copyright IBM Corporation 2016

IBM Corporation New Orchard Road Armonk, NY 10504

Produced in the United States of America June 2016

IBM, the IBM logo, ibm.com, Bluemix, IBM Cloud Managed Services, IBM UrbanCode, IBM Watson, IBM z Systems and POWER are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml

Cleversafe is a registered trademark of Cleversafe, Inc., an IBM Company.

SoftLayer is a registered trademark of SoftLayer, Inc., an IBM Company.

This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates.

The performance data and client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions. It is the user’s responsibility to evaluate and verify the operation of any other products or programs with IBM products and programs.

THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT.

IBM products are warranted according to the terms and conditions of the agreements under which they are provided.

The client is responsible for ensuring compliance with laws and regulations applicable to it. IBM does not provide legal advice or represent or warrant that its services or products will ensure that the client is in compliance with any law or regulation. Statements regarding IBM’s future direction and intent are subject to change or withdrawal without notice, and represent goals and objectives only.

Please recycle KUJ12454-USEN-02

1 The Truth about Cloud Price-Performance: How Misperceptions about Service Costs Can Derail Your Cloud Strategy. Frost & Sullivan. August 2015. https://www-01.ibm.com/marketing/iwm/dre/signup?-source=ibm-cloud-weborganic&S_PKG=ov38505&dynform=20109

2 Ibid.

3 Ibid.

4 IBM case study. https://www-03.ibm.com/software/businesscasestudies?synkey=F504292V95613B10

5 IBM case study. http://www-03.ibm.com/software/businesscasestudies/za/en/corp?synkey=V936714O34270N26

6 Based on documented IBM client results.

7 IBM press release. http://www-03.ibm.com/press/us/en/pressre-lease/48762.wss

8 IBM case study. https://developer.ibm.com/bluemix/2015/11/03/alpha-modus-reinvents-investment-with-bluemix/

9 IBM press release. http://www-03.ibm.com/press/uk/en/pressre-lease/48890.wss

10 IBM case study. http://www-03.ibm.com/software/businesscasestudies/bn/en/corp?synkey=C599912P48348O12

11 All Clouds Are Not Created Equal: A Logical Approach to Cloud Adoption in Your Company. Frost & Sullivan Stratecast. February 2014. http://www.ibm.com/services/us/en/cloud-enterprise/att/pdf/frost-sullivan-wp.pdf

12 IBM press release. https://www-03.ibm.com/press/us/en/pressre-lease/42780.wss

13 Using Hybrid Cloud Strategy to Drive Business Value. Frost & Sullivan Executive Brief. Frost & Sullivan. 2015.