Azure and price comparison with On-premise

By | July 12, 2013

Have several customers come to me in the last couple of months asking me “How can Azure be more affordable then an on-premise solution?” “I mean a virtual machine in Azure costs more then I can run in our datacenter”. So I have always said back to the customer “have you thought about the SAN? The Power Usage ? Internet Connection? Hardware failure? Licensing ? Rental of datacenter etc and so on ?

I also see alot of forums posts regarding the same thing, so therefore I thought I would write a post how to do a price comparison with an on-premise solution and running IaaS on Azure.

Now in my research I had to set some prerequistes.
* A new company that needs to setup a datacenter start with renting some rack space at a colocation center.
* The pricing has been based upon some norwegian company prices.
* This new company needs to setup a new IaaS based solution based upon Hyper-V and failover clustering
* This new company is basing their hardware on Dell hardware (both virtualization hosts and networking and storage) With the regular support of 3 years. So in the extreme cases they would need to replace their hardware every 3 years.
* The company will also need a good internet access to this private cloud for the end-users running applications against it.
* The operating system mostly used will be Windows Server 2012 (Therefore im going to base it on Windows 2012 Datacenter Server)
* One person will have to be in-charge of the hardware part-time or this can be out-sourced to the colocation company.
* The datacenter needs to have good physical security measures inplace.

So let us start with Azure. The pricing here is based upon the calculator and since this is a company that knows how many vm we need we will setup a pre-paid 12 month plan.
Lets start with something small. Our company has to host some applications on a web servere running on 20 different servers these will be running on a medium VM in Azure (a medium VM consists of 2 shared cores and 3,5 GB of RAM. (Total of 40 shared cores and 70 GB of RAM)

You can read more about the different options here –> http://msdn.microsoft.com/en-us/library/windowsazure/dn197896.aspx  (This makes up to $2,678.40 a month) And inside that number there are a couple of factors that are included.
This makes up to $32140 a year for 20 Virtual machines running non stop in Azure.

UPDATE: 01/04/2014 Since Microsoft has reduced the cost on VM since last time this article was updated the price has now been lowered for from 32140$ to 20184$ a year for 20 VMs running non-stop. 

* All the hardware is managed by Microsoft (This means UPS, Power, networking, storage, )
* Phyiscal Security is controlled by Microsoft
* Internet Access is included
* The Windows Server 2012 license and CALs are included as part of the pay-per-hour fee.
* Highly-available (The data is being replicated three times inside the same datacenter and Azure hold controll of VM’s being available)

So how much would this cost on-premise for a company ?

* Renting rack space for instance in my case I found a colocation company that has the ability to offer colocation https://www.mywebhost.no/produkter/colocation/
So lets say I wanted to reck an entire rack (that would cost me around 1137$ a month this gives me UPS, physical security, own internet access to the rack but not including power. (so for the rack renting space would be $1137.

Hardware (I would atleast need 2 physical servers setup with a failover cluster and . The cluster would be setup with an iSCSI based SAN solution. Now for some Dell Servers R720 (With both 40 GB of ram and 2x Intel Xeon with 8 cores each costs about $6000 each (which then includes 3 year support) so for two servers that’s 12000$ for one year. As for the SAN I cannot get any prices from Dell since I need to be a dell partner to get that I can only estimate around  $4000 there as well, since iSCSI runs over regular ethernet I need a managed switch where I can configure VLANs so I found a managed gigabit switch from Dell which costs around 1500$ so in total for the hardware (not including cables etc) is around $8000 + $4000 + $1500 = $17500 for one year. (NOTE: that this cost can be divided by 3 since the support lasts for 3 years and there will be no more invenstments in hardware in that timeframe)

And for the power I have found that the regular kw/hour is around 0,05$ here in Norway (In June) so for the Dell R710 under heavy load uses about 258 Watts/hour and the switch uses 30 watt under load. 546W and if this infrastrucure runs 24/7 this equals to 13KWh a day (so for one year) which is a total of 365 days in a year) with 13 KWh we get around $237 for the Power Usage. (When it is under full load of course) source: http://essa.us.dell.com/DellStarOnline/DCCP.aspx

* Software costs for licensing. (In this case since we have 20 virtual machines running in a cluster we could either use 10 standard licenses or two datacenter licenses. Now I have to use standard licenses from OPEN lisenses
https://mspartner.microsoft.com/en/us/Pages/Licensing/Downloads/open-license-no-level-estimated-retail-price-list.aspx
Now a datacenter 2 Proc license costs $4,810.00 w/o SA. So in case we would need 2 licenses (one for each host) so that totals of $9620 (Now when a new release comes out I would need to buy the new license or I can buy a license with SA then I would get the new release)

UPDATE: 01/04/14 Since Microsoft has raised the price for Windows Server 2012 R2 the Datacenter lisense goes up from $4810 to $6156 w/o SA User CALs are the same so they do not require an update. Totalt in licses for three years $15712

And this software that the buisness i running requires users to authenticate to AD (Which requires CALs) Im going with user CAls (they cost around $34 each) so for 100 users they come to $3400 as well.

So licenses in total = $13020

Now one part missing and that is that we need someone to manage this infrastructure (Both hardware, hypervisor level and the failover cluster) Since this is just a small installation im guessing we need a regular employee doing this 10% of his full time job. Im taking a regular year salary from the norwegian market.
http://www.studenttorget.no/index.php?artikkelid=2300
So for an IT consultant they get an average of $71178 a year so for 10% that equals to $7117 a year.

So in total over a total over 3 years (With an on-premise solution)
* Renting rack space, network connection externally, physical location, fire guard etc)
$1137 a month (13644 for one year) 40932 for three years.

* Power Usage
$237 a year ($711 for three years)

* Hardware
$17500 for three years

* Licenses
$13020 for three years

* Man hours
$7117 a year (21351 for three years)

Total: $96206 for three years for an on-premise solution.
For Azure Total for three years: $60552
Update: 01/04/14
This makes out a difference of 35654$

Another factor to think about here is that if you are academic or educational you get the license cost reduced for about 90% but still Azure would be a cheaper option.

Now some factors I did not consider.

* Azure replicates data three times inside the same datacenter to ensure High-availability, this is not included in the on-premise solution I used (Which would make the on-premise solution alot more expensive, either by having a cold-rack server with replicated VMs)

* Azure includes VPN solutions which I can setup either Site-to-site or Point-to-site this would require me to buy a hardware based VPN solution or use a windows server as an VPN server and require a public IP-address and require firewall configuration on the on-premise solution

* The pricing used for the SAN is not really accurate (Would really much like to get some input here! Smilefjes )

* Licensing OS (The calculations I based it upon are on OPEN and there are some discounts and rebate offerings im not aware of. For instance SPLA and EDU have a bigger discount programs and get therefore lower licensing costs. (EDU can subtract around 70% of the license cost)

* Azure gives a better IOPS pr / virtual machine then the on-premise solution based on the SAN we choose. (Therefore better end-user experience)

* Azure can also offer a load balancing capabilities

* On-premise solution requires additional man-power to start up (setting up and deploying servers, installing hypervisor and patching etc) start-up cost

* The ability to scale up on demand is easy just to click of a button on Azure. In case you no don’t need 20 virtual machines running you can just stop the machines and you will no longer be charged for them.

* In your on-premise datacenter you might still have enough capaticy to have more multiple machines then 20 (and you have already covered the cost of them) but in Azure you will need to pay for each extra machine.

* Both options would need someone to manage AD, IIS and backend solutions.

So even thou there is about 20.000$ difference in the case I just described, Azure will ultimately give you a easier and cheaper deployment. Azure also has advanced capabilities, like replication, HA, LB and VPN which always cost extra to implement on-prem.

But I would really like your feedback on this article, anything I’ve missed ?

 

UPDATE: I also did a comparison between Azure and Amazon EC2 instances as well to see if there was a major difference between the two. I did a comparison between Windows Virtual Machines.
Amazon EC2 instance m3.medium 1 virtual core 3 GHZ, 3,7 GB RAM SSD 1x 4 Where we are running 20 instances fulltime.

Azure Medium Virtual Machines which as 2 x 1,6 GHZ, 3,5 GB of RAM Where we are running 20 instances fulltime

The calculation looks like this. For Windows virtual machines.
Azure: 20256$ (Both includes 100GB bandwidth)
Amazon: 25836$ (Both includes 100GB bandwidth)

The calculation for Linux virtual machines.
Azure:  13488$
Amazon: 15012$ 

NOTE: that in Azure I choose a 12 month pre-paid plan and therefore got a good rebate. This was not an option that I found in the Amazon Price calculator.

 

 

7 thoughts on “Azure and price comparison with On-premise

  1. vNetWise

    Hey there. Like the post, but do have some feedback to provide:

    “regular kw/hour is around 0,05$ here in Norway (In June) so for the Dell R710 under heavy load uses about 258 Watts/hour and the switch uses 30 watt under load. 546W and if this infrastrucure runs 24/7 this equals to 13KWh (so for one year) which is a total of 8765 hours (in a year) with 13 KWh we get around $5680 for the Power ”

    This has a bunch of math issues. If your equipment is pulling 546W – let’s say 600W to round up, then that is 0.6kWh or over 24 hours, it is 14.4kWh (very close to your 13, becuase I’ve rounded up). But you don’t multiply that by 8765 hours because it is the day rate – you multiply that by 365. Or you can do it a few other ways. 14.4kWh @ $0.05/kWh = $0.72/day * 365 = $262.80. You’re about 21x too high on your power cost calculation – or $16K over 3 years.

    Are you certain that the CAL’s are included with Azure? It is clear that the Server licence is, but it makes no mention of CAL’s…..

    Regarding hardware:
    “Now for some Dell Servers R720 (With both 40 GB of ram and 2x Intel Xeon with 8 cores each costs about $6000 each (which then includes 3 year support) so for two servers that’s 12000$ for one year. As for the SAN I cannot get any prices from Dell since I need to be a dell partner to get that I can only estimate around $4000 there as well, since iSCSI runs over regular ethernet I need a managed switch where I can configure VLANs so I found a managed gigabit switch from Dell which costs around 1500$ so in total for the hardware (not including cables etc) is around $8000 + $4000 + $1500 = $13500 for one year.”

    “* Hardware
    $17500 for three years”

    The numbers are not lining up. If it is 2x $6000 servers for $12,000, and $4000 for SAN (drastically low), and $1500 for switches, then the cost should be $17,500 which is the lower number, not the upper number. But it would not be $13,500 for one year, i twould be $5833/year.

    “Azure gives a better IOPS pr / virtual machine then the on-premise solution based on the SAN we choose. (Therefore better end-user experience)”
    http://msdn.microsoft.com/en-us/library/windowsazure/dn197896.aspx

    Possibly. Note that for a Medium VM you can have a maximum of 4 disks and a maximum of 500 IOPS per disk. Now that’s not clear if you can expect to see 2000 IOPs per VM across 20 VM’s for 40,000 IOPS sustained. That would be a good answer to get from Microsoft.

    When you’re calculating rack-space rental, the assumption is that either way the data is “off-site” in someway. Either way you require data connectivity from your offices to the off-site location – its a wash this way, but if the rack was on site, you don’t need 100mbit or better (perhaps) between two sites, as it’s local gigabit or better. So this can be where on-site can be drastically better.

    I do agree that the consulting costs to manage the cluster are fair. But note that either way, you require someone to manage AD, users, data, backups, Windows Updates, software installations, etc – eg: general system administration. That should, however, be the same either way.

    So if we take out the $15000 power difference, the difference between Azure and self-hosted is < $5000 over 3 years.

    The other thing no one ever takes in to account here is surplus resources. In Azure, if you need to spin up 20 more VM's, you need to pay for them. In the on site option, if your hosts have excess capacity, and you've paid for data center, you just spin up more. Granted, the 40GB R720 @ $6K won't have much space for that – but I'm buying R620's with 16x16GB and 8 free DIMM slots for $9K, with E5-2660's. In the case of my hosts, if I was comparing it, I could easily spin up another 5 copies of the environment, at no additional cost (other than likely disk, but let's assume I'm doing so based on SAN snapshots or have DeDupe or something enabled which makes my clones take no additional space).

    Anyway, that's my $0.02. It doesn't mean cloud is wrong. It just means there's some additional angles to check!

    Reply
    1. msandbu Post author

      Thanks for excellent feedback! 🙂

      I was doing some recalculations while I was writing the post so therefore some of the math got messed up, thanks for noticing it 🙂
      And I agree with you that there are multiple factors that needed to be examined before you take a leap into the cloud.

      And Server CALs are covered by Azure -> http://www.windowsazure.com/en-us/pricing/licensing-faq/
      No. Windows Server CALs are not required for accessing Windows Server running in the Windows Azure environment because the access rights are included in the per-minute charge for the Virtual Machines. Use of Windows Server on-premises (whether in a VHD or otherwise) requires obtaining a separate license and is subject to the normal licensing requirements for use of software on-premises.

      Regards,
      Marius

      Reply
      1. vNetWise

        I swear, I looked for the link about the CAL’s! That’s good to know that it is included. Worth noting though, if the client spins up even a single local Windows Server, it does come across as though they’d need to not only acquire the Server licence (expected) but the CAL’s (likely a surprise). It very much encourages vendor lock in and lack of mobility…..

        I think the best places for cloud, using your example, is some of the following:
        * You don’t know how long you’ll need this – you’re a startup, and you might not make it 8 months – why buy all the stuff?
        * You’re looking to start net-new, but your cash flow is tied up in people/location. While you *could* lease the equipment and pay monthly, that may affect credit availability, etc. Paying for a service – allows you to not use credit facilities.

        However, that is a double edged sword – on months where the start-up might be lean, if you can’t pay, do they shut you down? Because if you’d bought the hardware and had it on site, you can keep it running as long as you have power and internet.

        Cloud is always a fun topic to sit and debate on 🙂

        Reply
  2. Chris

    Hey there,

    Excellent post! If you supply me with IOPS, R/W ratio, required throughput and capacity I can get you pricing for an EqualLogic box.

    Regards,

    Chris

    Reply
    1. msandbu Post author

      Hi Chris,

      Thanks! 🙂
      ill go with the average to make it as close as the 20 VMs in Azure as possible. Great if you could find something that matches! 🙂
      3 TB capacity. 80%R/20%W ratio, 10000 IOPS. 5 GB troughput

      Reply
  3. David

    Hi Chris, doing this same analysis. I think this is a good example in comparing renting rackspace vs azure but this does select a scenario where Azure is likely more desirable. It should be clear to anyone reading this that there is not a simple “this is better than that” answer. A person’s own scenario will have factors that impact the decision. There are plenty of scenarios where the cost shifts more comparable or in favor of on-premise. Regardless, this requires some work and thought to determine what is truly best. Azure my be lower cost for your scenario but may not be practical and this is what has to be analyzed. For example: you do not get charged for incoming data to the azure systems but you do for outbound that leaves the MS datacenter. This is unpredictable and costly if your VM gets hacked or infected with a virus or if your business is being a spammer it can get costly.
    Azure is a very nice option if you do not have the staff to support hardware (you still need to know windows, support the services, manage your own backups) as it allows a reasonable datacenter management with less staff (you still have management though). If you are considering moving to Azure from on premise, there are different questions to ask yourself vs starting new. Its also different for enterprise environments of 20k people vs a small businesses,the type of business also impacts this (manufacturing vs service oriented). Asking which is better seems to be more like asking “what’s the best software to use”. First you have to know what you are going to use the software for.

    Reply
    1. msandbu Post author

      Hi David, Excellent feedback! ill update my post as well with some of your points. Since my post was not to favor Azure but to show a sample scenario and what people need to think about when considering moving to a cloud provider 🙂 but ill agree that my post seems a bit biassed 🙂

      Reply

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