Understanding the Economics of OpenStack

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As anyone involved with managing an OpenStack deployment quickly learns, cost savings and elimination of time-consuming tasks are among the biggest benefits that the cloud platform provides. However, leaders at many OpenStack-focused organizations, including Canonical, believe that the business technology arena is under such tremendous pressure to keep up as Software-as-a-Service, containers, and cloud platforms proliferate, that the true economics of OpenStack are misunderstood. Simply put, a lot of people involved with OpenStack don’t fully understand what they can get out of the platform and the ecosystem of tools surrounding it.

Mark Baker, OpenStack Product Manager at Canonical, provides useful background on all of this  in a recent essay:

“Over the past decade, IT Directors turned to public cloud providers like AWS (Amazon Web Services), Microsoft Azure, and GPC (Google Public Cloud) as a way to offset much of the CAPEX (capital expenses) of deploying hardware and software by moving it to the cloud.  They wanted to consume applications as services and offset most of the costs to OPEX (Operating Expenses).  Initially, public cloud delivered on the CAPEX to OPEX promise. Moor Insights & Strategy analysts [point to] upwards of 45 percent in capital reductions in some cases, but organizations needing to deploy solutions at scale found themselves locked into a single cloud provider, fluctuating pricing models, and a rigid scale-up model that inhibits the organization’s ability to get the most out of their legacy hardware and software investments. Forward thinking IT directors realized they must disaggregate (put into units) their current data center environments to support scale-out. Consequently, OpenStack was introduced as a public cloud alternative for enterprises wishing to manage their IT operations as a cost-effective private or hybrid cloud environment.”

As Baker notes, it can be very challenging with OpenStack to determine where the exact year-over-year operating costs and benefits of managing the platform reach parity, not just with public cloud alternatives, but with their software licensing and critical infrastructure investments. “In a typical multi-year OpenStack deployment, labor makes up 25% of the overall costs, hardware maintenance and software license fees combined are around 20%, while hardware depreciation, networking, storage, and engineering combine to make-up the remainder,” Baker notes.

Indeed, the economic tradeoffs between public cloud solutions  and platforms like OpenStack are complicated enough that many enterprises are running both types of solutions. As Forrester Research reports in a detailed brief on OpenStack economics, 82 percent of OpenStack deployments exist in parallel to other cloud platforms.

So what are some best practices for organizations that want to better understand the economics of an OpenStack deployment? Here are key thoughts from Forrester and Canonical on managing OpenStack efficiently and understanding its benefits:

Canonical: The only way to fully benefit from OpenStack is by adopting a new model for deploying and managing IT Operations… Building a private cloud infrastructure on OpenStack, is an example of the big software challenge. Significant complexity exists in the design, configuration, and deployment of all production ready OpenStack private cloud projects. While the upfront costs are negligible, the true costs are in the ongoing operations; upgrading and patching of the deployment can be expensive.

Forrester: Identify a self-contained project or area of the business. Begin with a pilot project, and use this to build familiarity with OpenStack and any partners with whom you might be working. OpenStack users have stated that working with OpenStack requires significant training in the first six months, especially if you don’t have seasoned OpenStack veterans. Ensure that the pilot — and OpenStack — have a senior champion within the business, such as the chief technology officer. How are other aspects of organizational IT currently managed, and does the rationale behind those historic deployment decisions also apply here? Figure out the right level of vendor support, given your team and your organization’s strategies.

Canonical also offers a free ebook, that breaks down the economics of OpenStack in easily understood ways.

“It is important to keep in mind that OpenStack is not a destination, but rather a part of the scale-out journey to becoming cloud native,” said Canonical’s Baker. “CIOs know they must have cloud as part of their overall strategy. From a long-term perspective OpenStack will remain the key driver and enabler for hybrid cloud adoption. However, IT organizations will continue to struggle with service and applications integration while working to keep their operational costs from rising too much.”

In addition to the ebook from Canonical on OpenStack economics, The OpenStack Foundation has a free online webinar on the topic.

Learn more about trends in open source cloud computing and see the full list of the top open source cloud computing projects. Download The Linux Foundation’s Guide to the Open Cloud report today!