14 Jan 2022

Colocation Better Than Cloud IaaS In The Post-Covid Economy

Colocation Better Than Cloud

With the 7% inflation in 2021 in the U.S. (5% in European Union's Eurozone) smaller and medium companies face increasing business expenses and loss of business, as most of their clients have definitely not become richer. The rapid digitalization of the economy and the wide adoption of using IT services and Cloud infrastructure on the pay-as-you-go model puts millions of SMBs at risk. They face increase pressure from corporate structures, an uncertain future, and increasing costs for technology services.

Cloud providers will offer you 1-year Free Trials and will use fancy terms to lure you to move to the Cloud in 2022 if you haven't already done so. Experts will point to flexibility, scalability and will give you a lot of financial arguments to persuade you that Cloud infrastructure-as-a-service (IaaS), is what you need. Some would say that Cloud infrastructure is a pay-as-you-go service and that you can cancel whenever you want. Well, this is simply a big fat lie. Why?

1. In the digital economy, both individuals and business entities need computing capacity, either for storage or for application hosting. It is not an option to have it.

2. Scalability is important for many businesses and many IT projects. However, operations can be planned. So those businesses and projects who are looking for stability and longevity will always need IT infrastructure.

3. Contractual flexibility is a good thing to have, but it is also expensive on the Cloud. The more resources we need to more we pay to the cloud providers.

4.. Clouds, especially the major ones - AWS, Azure Google, etc - are charging you for everything. Companies who use cloud services with major Clouds, instead of colocating their own equipment end up paying two or even 3 times higher monthly services bills for data transfer.

5. The major Cloud IaaS providers charge you for technical support of the IT infrastructure, something that in fact should be included in the Cloud service. Most small or mid-sized Cloud hosting service providers offer free technical support of the Cloud IaaS their offer. The Business level support starts at $100/month. There is no good reason to pay to AWS or Microsoft $100/month for infrastructure technical support, a service that you'd get for free with other providers, isn't it?

6. There is a vendor lock-in on the cloud, especially when it comes to data storage and data migration. Companies end up using terabytes of data on the major clouds and paying thousands or even ten thousand dollars for Cloud IaaS. Most of them simply cannot afford to move off the cloud despite being overcharged for computing resources. The reason is that migration of IT operations, live technology setups, and applications used for delivering both public and private services to hundreds, thousands, or more customers require a significant effort, manpower and costs a lot of money. So, more than 60 percent of the clients of the major Clouds like AWS or Azure a locked to their IaaS providers for an indefinite period.

How can we avoid Cloud vendor lock-in and save a thousand dollars every year?

It is simple, Just choose a data center service provider, buy your own servers and use a Colocation services or Dedicated Hosting. Your business or project would need to use a certain amount of computing resources anyway. So, it makes sense to spend wisely and not to give your money to Jeff Bezos, Bill Gates or other billionaires who are: a) smart enough, so they do not need it; b) they do not care about it and you are not important for them; c) their Cloud IaaS providers might no be able to give you better Cloud infrastructure, that you'd build internally.

Do the math. The average cost of a 1U server, with 10 TB data transfer per month on 1 Gigabit Internet connection, IPv4 and IPv5 resources, 100 watts of power, and 24/7 infrastructure support varies between $50 and $120 per month depending on the location.

A brand new rack server - 1U chassis with 4 disks bays 3.5 Hot-swap, Redundant Power Supply, 10 CPU cores based on 16-core Intel Xeon Silver 4216, 2.1 GHz, 64 GB RAM, 2 TB usable SSD storage based on Intel data center edition S4510 SSDs, hardware RAID with RAID 1 data protection (with 1 hot-spare 2TB SSD) and 6TB enterprise HDD for backup, would cost you around $3,500 - with 3-year warranty will cost you between $90/month and $100/month on 36 monthly installments. With the monthly recurring cost of the server colocation, your company will end up paying between $140/month and $200/month and can build its own Dedicated Cloud infrastructure with enough resources, bandwidth, and technical support. The 3-year costs of the Colocation service vary between $5,040 and $7,200. Even when your server depreciates it will still be usable for a few more years.

It is very important that with the Colocation service:

  • you will not need to pay for overage bandwidth or overage data transfer;
  • b) you will not need to pay $100 plus per month for IaaS technical support, as major Clouds require.

How much would cost you "EC2 Dedicated Hosts" Cloud IaaS with the same resources on Amazon AWS compared to Colocation?

Your cost on hardware for 16 CPU cores, 2 TB SSD storage (16,000 IOPS), $2,359 upfront with a monthly fee of $294.54/month, per AWS pricing calculator (dated January 14, 2022). You need to add to these infrastructure costs:

  • $100 or a higher fee per month for IaaS technical support;
  • An additional bill for data transfer you will receive from AWS every month;

So, with the technical support included, without data transfer and bandwidth costs you are looking at $16,561.72. $12,961,72 of them will be paid for Cloud infrastructure and $3,600 for technical support at $100/month. $2,359 of those are upfront costs (setup fee), while the rest - $14,202,72 will be paid in 36 installments - $394.52 per month. And this is just the beginning. You will be charged each month for data transfer and other services on AWS, so your 3-year Cloud infrastructure costs would easily go above $20,000.

After the 36th month, your monthly recurring cost on AWS will increase as you will have a larger IT infrastructure that uses more CPU, more RAM, and more data transfer. You would expect at least a 40% increase in the monthly service fee. This means that your recurring cost for Cloud infrastructure would go above $550 per month, without the data transfer costs.

It is exactly the opposite when you use the Colocation service, your company would use to create your own Dedicated Cloud. After the 36th month, the monthly price of a Dedicated Cloud with the computing resources specified above will drop to $50/mo - $120/mo, depending on the colocation service provider and data center location.