Blog #2 of a 3 part series on The Economics of the Cloud, by Robert Darrow – Vice President of Operations at cloud provider, Peak (getcloud@ powered by peak .com) April 23, 2014

In part #1 of my blog The Economics of the Cloud Buyer Beware I discussed Cloud Economics Rule #1: AVOID CROWDED CLOUDS. Much like an airline overbooking its flights, many public cloud providers continue supplying seats to their cloud long after they should. They’re making a gamble that when demand peaks for some it will fall for others. Unfortunately, that formula doesn’t always pan out—not for airplane passengers and not for cloud users. Someone is bound to be inconvenienced. When it comes to mission-critical applications, that “inconvenience” can translate into lost revenues and damaged reputations

In this, my second blog post on Cloud Economics, I will discuss Rule #2: LOOK UNDER THE HOOD (OR, HOW TO COMPARE APPLES AND ORANGES):

Cloud providers typically extract value from cloud services by exploiting server idleness/inefficiency by placing them on virtual machines and oversubscribing the underlying hardware. Workloads suffer at peak demand if this isn’t planned properly. Apps slow down, mail servers get sluggish, and website performance suffers. Inconsistencies in performance like these can make it pretty difficult to deliver on your SLAs.

Virtual machines are merely synthetic representations of the underlying infrastructure, and specifications differ between providers. You can’t compare cloud providers unless you have a clear understanding of their specs, performance, and utilization. For example, how leveraged is their compute? And, is infrastructure dedicated to each user?

Commodity cloud providers’ stats might sound good, but you have to look a little deeper to make sure the infrastructure is there to support their claims. When poor cloud performance affects customer satisfaction and workforce productivity, then there’s a high cost to pay for that low-cost cloud infrastructure. For this reason, private clouds often represent a far better value than public clouds for service providers and end customers alike.