JAX London 2014: A retrospective
Cloud Computing

Data centers grappling with cloud computing economics

arun

While the demand for cloud computing-based hosting is on the rise, how profitable is it for data centers to provide it? There is interesting data to compare the cost and returns for three different hosting models: colocation, managed hosting and cloud computing. In sum, the jury is still out. But cloud computing is still some distance away before replacing other hosting models in data centers.

The demand for cloud computing-based hosting is on the rise, but how profitable is it for data centers to get into this business?

Datacenter Knowledge has interesting data to compare the cost and returns for three different hosting models: colocation, managed hosting and cloud computing.

First the cost. The baseline cost of all the three models is the same: $1,200 per square feet. But managed hosting and cloud computing cost an additional $ 6,800 per square feet.

So, if a data center seeks to go beyond simple colocation hosting model, it has to overcome a stiff entry-level cost barrier.

The data on Return on Investment (RoI) has a surprise. On each dollar spent, colocation fetches .90 cents annually. The annual return on cloud model is $1.50 per dollar. On managed hosting it is $2.50 per dollar.

Managed hosting is three times more profitable than cloud computing business for data centers.

But there are other voices. Rackspace says the average revenue per server is higher with cloud as it packs more users per server and is more efficient.

The jury is still out. But cloud computing is still some distance away before replacing other hosting models in data centers.

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