Comparing a cloud server versus an office server by business case prompted some robust debate.
The “cost of the highest spec Dell T110II server is ~$2K ($1799 online today), so your upfront cost is blatantly wrong,” commented Martin Gisch in a detailed rebuttal to Why you Should Stop Buying Servers.
Gisch makes some great points some of which I’ll address in another post. But I wanted to go through how the annual cost was calculated for the cloud server ($900.80 a year) and the office server ($1839 a year).
A Dell was chosen as the office server because Dell is a popular brand with small businesses and it has a great online store which lets you create detailed configurations.
The T110 is billed as “an ideal first server for small business, with the right combination of value, reliability, collaboration and data protection features to improve your business continuity and productivity”.
The base model T110 is actually advertised for an online price of $699 – a fraction of the $4,139 quoted in the comparison. So how does it end up at that price?
Dell advertises its servers before essential items have been added. At that price it doesn’t even come with an operating system. The list below shows the additions to the base level server in a real-life scenario.
What is a real-life scenario? Let’s run through the changes.
The big ticket items were an operating system (the base model comes without, add $1189) and upgraded hard drives (from one slow drive to two faster ones, add $1,000). The two hard drives also required a hard drive controller (add $303).
The operating system is essential and not worth debating. The comparison chose the same server software for both cloud server and office server; alternative Windows operating systems such as Windows 2008 R2 cost roughly the same.
One could argue adding the cost of two drives is unnecessary. A small business could save $1,000 and stick with the one hard drive but this would mean that the first time there was a problem with the drive the server would be unusable. Slower drives also means slower applications.
Nick Beaugeard from Amazon partner HubOne has seen dozens of quotes from server resellers when bidding for small businesses and says standard practice is to equip an office server with two drives.
“I’ve never seen an IT pro say ‘We’ll just get the single drive from Dell’, because we know that drives fail,” he says.
Comparing the stock hard drive on the Dell would also create an even bigger gap in the comparison – Amazon actually uses four mirrored drives for extra security. They are also higher quality drives which last longer and unlike the Dell can be replaced without shutting off the server (called hot swapping).
Optional expenses added to make the comparison a little fairer included upgrading to the fastest processor, which added $429.
Dell’s support service was upgraded from 1 year next-business day to three years of 7×24 2-hour on-site service, which added $444. Amazon includes 24×7 basic support in its price which is equivalent; both Amazon and Dell services only address hardware failures and not issues with operating systems or applications.
The total price for the Dell comes to $4,130 without installation. The installation charge from Dell for a PowerEdge Server and a Microsoft installation is $1386. (The original table mistakenly included the installation charge in the server price. It has been updated.)
Amazon’s set-up fee is $600. Neither setup fee includes adding applications. “That gets both of you to the same place where you can go put your applications on,” Beaugeard says.
“The thing that saves you (with a cloud server) is that I don’t have to send one of my guys to your office. You’ve got no call-out fee because we can do this remotely,” he adds.
The operational cost of the office server (purchase price plus installation) is double the price of the cloud server for a machine with lesser components and limited expandability ($2702.40 vs $5,516). And the three-year cost must be paid upfront.
The cost to a business is more than double that, though.
The cost of electricity required to run the office server was not included (Amazon’s price includes electricity). The amount consumed by a server varies by usage. Gisch suggests $500 a year would cover the cost of running the Dell, which adds another $1,500 over three years. The total cost of the Dell server is now $7,016 or 2.5 times the cost of the cloud server.
No monitor or keyboard were included. Security devices, such as the Sonicwall network security appliance which starts at $3,600, were also excluded. A new business would need to buy something similar.
Amazon provides network security for its cloud servers, though Amazon users are responsible for their own security and can take further measures to enhance it.
The exact changes to the base Dell model are listed below.
- Processor: Upgraded from Intel Core i3 330Ghz (3MB Cache) to the fastest available, an Intel Xeon E3, 3.50 GHz, (8MB Cache). Add $429.
- Operating System: Added Windows 2012 Standard edition, factory installed (the online config doesn’t come with any). Add $1189. Alternatives: Windows 2008 R2 (Add $1189). Amazon priced with 2012 edition, Datacenter version.
- Hard drive controller licence: Added C13 R1 for PERC H200, Exactly 2 SAS/SATA Drives. Add $0.
- Hard drive (RAID) controlller: Added PERC H200 Adapter RAID Controller (for 3.5inch HDD). Add $303. This is required for running two drives.
- Hard drives: Added two faster hard drives in a mirrored configuration for data security. 450GB 3.5-inch 15K RPM SAS6 Hard Drive – Non Hotplug to mirror the data. Removed the stock hard drive 500GB 3.5-inch 7.2K RPM SATA II Hard Drive ($237.60). Minus $237.60; add $1212.02.
- Networking card: Added Intel(R) Pro/1000 PTx1 PCIe Single Port Copper Gigabit NIC. Base model has no network card. Add $93.
- Support: Upgraded from 1 Year Next Business Day support to 3 years of ProSupport: (7×24) 2-hour Onsite Service. Add $444. Amazon has instant-chat support 24×7 with 10-minute response times.
As mentioned in the table, it’s impossible to compare like for like because the Amazon servers use enterprise-grade components. A Dell server with the same configuration would cost over $22,000 but the comparison is meaningless. No small business would spend that much on a budget machine.
The numbers for the Amazon cloud server are straightforward and were calculated against an average month (30.42 days).
A standard reserved medium instance running a Windows operating system in the Sydney data centre for a three-year contract costs 8 cents per hour.
The monthly cost of operating this cloud server is:
30.42 days x 24 hours x 8c/hour = $58.40
The total cost over three years:
$58.40/month x 12 months x 3 years + $600 set-up fee = $2702.40
The average cost per year:
$2702.40 / 3 years = $900.80
Amazon’s price is for running the server 24 hours a day. Businesses could choose to “pause” their server over the weekend if it was only used over business hours to save on costs. Other methods of reducing the cost of a cloud server will be addressed in another post.
Next: Backup, restore times and security compared.