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Why Cloud Will Reduce the Cost of Acquisition Lead Time

by Hu Yoshida on Jun 8, 2011

Many IT departments acquire storage on a three year or five year cycle. They refresh their storage on this cycle, because after three years, the cost of buying new storage is lower than the cost of maintaining their existing storage. That means they buy all their storage requirements for the next three or five years at today’s price, even though the price of storage has eroded by about 30% per year for the last 50 years.

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Purchasing storage in this manner means that they will be buying a lot of storage that they will not be using for some time, as you can see in the simple chart above. There is also an overlap of capacity for migration from one acquisition cycle to the next. Migrations usually take about six months to a year before all the applications are migrated to the new storage. During this time, you have two storage systems on the floor consuming power, cooling, and floor space, two sets of software licenses, and one system may be on very expensive maintenance. You barely finish one migration before it is time to start the next migration. David Merrill estimates that this migration effort costs about $7K to $10K per terabyte.

Virtualization can reduce the cost of migration by enabling the migration to be done in the background. That may shorten the migration time and cost by 60-80 percent.  Thin Provisioning and other storage efficiency techniques may help to provide a reduction in the total amount of storage that we need by about 40%. However, as long as we acquire storage in this manner, we will continue to see the cost of acquisition lead time.

Cloud promises to eliminate this waste through the use of on demand, pay as you go provisioning. Clouds can eliminate the silos of allocation and reduce the cost of acquisition by spreading it across many users.

This is one of the many reasons why I believe that cloud will be a reality. It will transform the way we acquire and provision IT resources.

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