Cloud: the total cost of operation Building the business case for change

white paper

Pure Commitment. T 01252 303 300 ukcloud.com

Cloud: the total cost of operation — building the business case for change

Executive summary

Cloud computing is now an integral part of the government’s ICT Strategy, offering the potential to deliver cost savings as well as agility, increased productivity and efficiency improvements. As well as being attracted by cloud’s proven ability to reduce costs, public sector organisations are also supported by policies such as Cloud First and Digital by Default to consider cloud when faced with new ICT requirements, and when legacy infrastructure needs upgrading to meet demand or reaches end of life.

Cloud solutions deliver maximum flexibility as resources are provisioned on-demand to match requirements, and scaled up or down as and when those requirements change. Genuine cloud providers offer consumptionbased pricing so buying organisations pay only for what is used.

But in the face of increasing austerity, buying organisations need to demonstrate that cloud really can deliver cost savings. Is the requirement similar to other public sector organisations that have realised actual benefits of cloud? Are the claims based on fact and can they be substantiated? Do they hold true when you compare the cost of meeting a requirement using a traditional hosted solution to that of meeting the same requirement using the cloud?

Other significant business benefits can also be realised by adopting cloud to include quicker and easier procurement, improved quality of service, increased staff productivity and greater security.

To accurately design and cost the correct ICT solution, one of the many complexities that buying organisations need to accurately predict or know is the demand that users and citizens will place on the application and exactly how that would vary over time, in order to ensure capacity to meet that predicted demand is in place. If the predicted demand is too high, infrastructure and resources will be under-utilised and investment wasted. Conversely, if predicted workloads are too low, there will not be enough capacity to meet demand, hence performance and availability may suffer, and users will be frustrated.

UKCloud | white paper

Taking all costs into account, in our experience, cloud computing will always deliver cost reductions whilst increasing both agility and availability.

When these additional soft benefits are considered alongside significant cost savings, the business case for implementing a cloud solution is not just strong but indisputable. That is why UK public sector are making a wholesale shift towards cloud services.

In this white paper Government ICT procurement

3

When are cloud solutions appropriate?

5

Building the business case

8

Can cloud really reduce costs?

10

Assessing the potential cost savings of cloud

23

The soft benefits of cloud

24

But what about security?

26

About UKCloud

27

2 of 28

Cloud: the total cost of operation — building the business case for change

Government ICT procurement

Cloud is a key aspect of government’s digital strategy, delivering more dynamic and agile ICT solutions, and moving government towards shared platforms and common services. A number of initiatives and policies have been put in place to drive cloud adoption in government: • G-Cloud was introduced to encourage adoption of cloud services by providing an Official Journal of the European Union (OJEU) compliant Framework that buying organisations can use to procure cloud services. The government Digital Marketplace is an online catalogue of the services available for compliant purchase. The system enables buyers to easily compare and benchmark different options available. Cabinet Office estimates that G-Cloud can deliver savings of between 20 and 50%. •

The Cloud First policy1 announced in May 2013 by the Cabinet Office to drive wider adoption of cloud computing by the public sector. In practice, Cloud First means that central government organisations should evaluate cloud solutions before they consider any other option. This approach is mandated to central government and strongly recommended to the wider public sector. Departments remain free to choose an alternative to the cloud — but only if they can demonstrate that it offers better value for money.

1

Cloud First policy: https://www.gov.uk/government/news/governmentadopts-cloud-first-policy-for-public-sector-it

UKCloud | white paper

•

Digital by Default — the Government Digital Strategy recognises that moving to digital channels could save up to £1.8bn a year. As part of the strategy, government departments are redesigning services that handle over 100,000 transactions each year. All transactional services offered by all departments that have gone live since April 2014 must also meet a new Digital Design service standard and comply with the Technology Code of Practice. Digital services depend on cloud computing because of the requirement for short procurement and quick deployment times, and its contribution to reducing application development lead times

3 of 28

Cloud: the total cost of operation — building the business case for change

Central government buying organisations driven by budget cuts and targets for increased productivity and efficiency are therefore looking to cloud when they have a new ICT requirement. As these organisations adopt cloud services, they move away from traditional devicecentric operating models and towards service-centric cloud options. This enables them to start to realise the benefits of scalability and the ability to use resources on a subscription or utility basis, paying only for what they consume. This approach underpins the delivery of the substantial long-term cost savings that the Digital by Default Strategy aims to realise.

UKCloud | white paper

However in adopting cloud, buying organisations are faced with the challenge of moving from a procurement model they understand, and working with suppliers and services they know, towards using unfamiliar frameworks and cloud solutions offered by a myriad of cloud suppliers. How do they evaluate a cloud solution to see whether it can offer better value for money?

4 of 28

Cloud: the total cost of operation — building the business case for change

When are cloud solutions appropriate?

When deciding whether a cloud solution meets the requirements of a specific application, buying organisations need to consider the different demand or workloads the application will generate — see examples below.

An application with steadily increasing traffic

A 24x7 application with a spiky traffic flow

To maintain service levels for a 24x7 application with a spiky traffic flow using an on-premises solution requires provisioning for the maximum peak in workload. However, it can be hard to predict this accurately: predict too high, and equipment will be under-used for a significant amount of time, as indicated by the orange arrows. Predict workloads too low (shown by the line in blue) and capacity will be insufficient to meet demand, service may become degraded and users (employees or citizens) will be dissatisfied. With a cloud solution, capacity can be scaled up or down as required to meet traffic peaks, so that service is always available to users.

UKCloud | white paper

An on-premises solution built to accommodate an application’s increasing workflow for up to five years will lead to years of under-utilisation of equipment. Deploying additional equipment each year to meet increased demand is an alternative approach, but involves significant capex and multiple procurements; and requires careful judgement about when to deploy new equipment to maintain service levels. Deploy too soon and expensive equipment will be underutilised. Deploy too late and there will not be capacity to meet demand, service performance may suffer and users will be disappointed. A cloud solution offers capacity that scales rapidly to match demand plus the buying organisation only ever pays for the capacity used.

5 of 28

Cloud: the total cost of operation — building the business case for change

An application with a steady traffic flow

An application with defined usage periods

When an application has a steady workload requirement, a buying organisation can order, pay for, install, configure and manage equipment to meet that predicted workflow. Accurately specifying the resources required calls for significant technical knowledge and experience — there is no margin for error. The predicted workload must be accurate in order for the buying organisation to be confident that service levels will be maintained and there is no room to flex if demands change. Predict the workload too high and resources will not be used to capacity, investment will be wasted here when it could have been better utilised elsewhere. Predict too low and there will not be enough resources in place to meet the workload, performance will be affected and users will be frustrated.

If an application has defined usage periods, such as working hours only (8x5) or a non-production environment required once a quarter, an in-house or hosted solution must be able to meet demand during usage periods; but will lie idle at all at other times. The buying organisation will need to accurately predict workloads during usage periods and will run the risk of not meeting demand if the workload predicted is too high. Conversely, if the predicted workload is too low, demand will not be met.

A cloud solution, on the other hand, offers flexibility over time. Some cloud providers offer discounts for committed consumption, which could offset any savings that may be associated with utilising existing/legacy infrastructure in favour of implementing a more flexible cloud solution.

UKCloud | white paper

A cloud solution provides the capacity to meet demand when required; while outside usage periods, the servers can be powered down. Because the buying organisation pays only for what it uses, there are no charges when the servers are off, significantly reducing costs. This type of workload can also be met by using an in-house solution provisioned to meet the mean workload (signified by the blue line) and then ‘bursting’ out to a cloud solution to meet demand above that mean.

6 of 28

Cloud: the total cost of operation — building the business case for change

Aggregated workflows operating over a shared infrastructure

Buying organisations can rarely treat individual applications independently. Their ICT infrastructure must serve a wide range of departments and functions all using or providing a variety of applications and services, each with very different workload patterns. When you combine these workloads, the aggregated usage becomes extremely unpredictable with spikes in demand and constant fluctuations. Specifying resources to meet aggregated workflows is near impossible. A cloud solution comes into its own when you consider aggregated workflows. Resources can be available as required to ensure performance is always maintained.

UKCloud | white paper

When you combine workloads, aggregated usage becomes extremely unpredictable and specifying in-house resources particularly challenging. This is when a cloud solution comes into its own. 7 of 28

Cloud: the total cost of operation — building the business case for change

Building the business case

Buying organisations with an ICT requirement need to evaluate the different solutions available that will meet their technical requirements, address any legacy constraints and meet data confidentiality requirements. A key step in this evaluation is identifying all costs associated with each possible solution — in many cases the cost of a cloud solution will need to be compared to the cost of an alternative or more traditional solution, taking into account the management, support and hosting costs associated with an on-premises or hosted solution as well as upfront capital expenditure.

UKCloud | white paper

Table 1 outlines the different costs that should be considered and compares how the costs associated with a cloud solution differ to those for a traditional on-premises solution. Considerations range from initial purchase of software and hardware, professional design services, hardware refresh and software upgrades through to training and certification of support staff.

8 of 28

Cloud: the total cost of operation — building the business case for change

Table 1. Cost considerations Solution element

Traditional on-premises solution

Cloud solution

UPFRONT COSTS Capital expense

Initial purchase of software and hardware

None

Network infrastructure enhancements or additional facilities

Pay-as-you-go subscription pricing that covers all software, hardware, networking, storage, monitoring, security and administration

Third-party monitoring, test tools and security products Design and deployment

Professional services can cost up to 3 x initial software purchase

Defined and provided using consistent set of best practices

Staff or contractors required to research design, integrate, test, tune, launch and train RECURRING COSTS Ongoing infrastructure costs

Hardware replacement every 3–5 years

Provided by the supplier

Additional networking equipment and bandwidth to accommodate incremental growth Software maintenance and upgrades Connectivity (Internet or government networks)

Ongoing operational costs

Application operation, support and monitoring as well as upgrades

Provided by the supplier

Recruitment, training and certification of support staff Data centre/hosting costs including power and cooling; PUE rating can be 2.5 or higher

UKCloud | white paper

Some suppliers offer a PUE as low as 1.1

9 of 28

Cloud: the total cost of operation — building the business case for change

Can cloud really reduce costs?

Once an understanding of requirements is clear, a buying organisation can compare the cost of the different solutions available in order to deduce which solution offers lowest cost and best value for money. To analyse whether cloud solutions really can deliver cost savings when compared to a traditional hosted solution, consider three real world requirements for compute resources that have been included in tenders issued by public sector buying organisations in the last six months: •

A compute platform for Test & Development of new and existing applications

•

A compute platform used to host a high-traffic web application used by citizens

•

A compute platform used to host an Enterprise Application (eg SAP or SharePoint)

Each requirement has been detailed below in terms of utilisation profile and technical specification of the platform. The initial upfront costs, recurring costs over 3 years and hence the total cost of a traditional dedicated solution has been compared to the cost of an equivalent cloud solution available today via the G-Cloud Digital Marketplace2.

Recurring costs associated with providing staff to install, manage and maintain an in-house solution haven’t been considered. These would vary significantly across different organisations according to the legacy infrastructure in place, current staff resources, whether or not additional staff would need to be recruited and employment terms. The operational costs associated with establishing an in-house OFFICIAL platform (for the second scenario) or OFFICIAL SENSITIVE platform (for the third scenario) have not been considered. These costs would be difficult to estimate and would vary significantly across different organisations depending on which accreditations they may already have in place for existing infrastructure, their experience of running secure environments and access to any additional resources required to ensure the security of any additional platforms. By not including staff costs or accreditation costs in the cost of providing a dedicated solution, the calculated percentage savings are conservative. In practice, you could expect the actual cost of the dedicated solutions detailed to be more.

All efforts have been made to ensure the cost comparisons are honest and transparent. Scenarios have not been specified to ensure that unfeasibly high costs for a dedicated solution are compared to ridiculously low charges for a cloud solution. Costs have been considered over a three-year period as this was judged to be the average time an organisation might regard the lifespan for new equipment in an environment of fast-paced technology change and with a desire to adopt shorter-term contracts. Costs could have been considered over a longer term, perhaps five years; however this would incur increasing maintenance charges that would be difficult to quantify. 2

The cost of each dedicated solution was gained by requesting a commercial quote (including significant volume discounts) from a leading IT distributor in February 2016. Individual components of each dedicated solution are costed and specified with calculation notes. The cost of each cloud solution was calculated based on prices for UKCloud Compute-as-a-Service as listed in the Digital Marketplace for G-Cloud 8. Full workings and data are available upon request.

UKCloud | white paper

10 of 28

Cloud: the total cost of operation — building the business case for change

Scenario 1: A typical compute platform used for Test & Development of new and existing applications Utilisation profile: As the platform is used on a project basis, it is typically not used every week of every year. Instead, a project might last 6 weeks followed by a 4 week lag until the next project starts. During a project, developers typically only require the platform during office hours.

Environments: Test & Development environments tend to be quite small as there is no requirement for full resilience and scale. However, most Test & Development projects require a number of simultaneous environments such as sandbox, system test, integration test and user acceptance test. For this scenario, this comes to a total of 22 virtual machines and 1.6TB storage. Comparison: This scenario compares a cloud platform with a dedicated virtualisation platform — each platform is specified in the table below.

Component

Dedicated

Cloud

Server Hardware

3 x HP Gen9 Servers

Integral to Compute-as-a-Service

Storage Hardware

iSCSI Storage array

Integral to Compute-as-a-Service

Network Hardware

HP 2920 Network Switch

Integral to Compute-as-a-Service

OS Licences

Assumes Open Source (Linux)

Assumes Open Source (Linux)

Virtualisation Licences

vSphere 5 Enterprise

Integral to Compute-as-a-Service

WAN Bandwidth

Share of existing connection

1000GB per month

Data Centre Colocation

1.4KW, PUE2.5 total load 3.5KW

Integral to Compute-as-a-Service

UKCloud | white paper

11 of 28

Cloud: the total cost of operation — building the business case for change

Scenario 1: cost of dedicated solution Component

Notes

Cost calculation

Cost

UPFRONT COSTS Server Hardware

Physical hardware to run the 22 virtual machines

3 x HP DL360 Gen 9 inc 3 year maintenance

£15,000.00

Storage Hardware

Storage for the virtual machines and test & dev environments

HP MSA 2040 inc 3 year maintenance

£8,500.00

Network Hardware

Network switches for the physical servers and iSCSI storage

HP 2920 Switch

£2,600.00

Red Hat Enterprise Linux

OS licences for the 22 virtual machines

3 x RHEL Standard inc 3 year maintenance

£3,700.00

VMware vSphere

vSphere and vCenter to provide a virtualisation platform

vSphere 5 Enterprise and vCenter Standard inc 3 year maintenance

£29,000.00

RECURRING COSTS Data Centre Colocation

Physical accommodation, power and cooling for the servers and storage during active weeks[1]

1.5KW of equipment load £1.00 per KWh for combined power & accommodation[2]

£632.00

Monitoring and Management

UKCloud assumes existing support teams will monitor and manage this solution — not all organisations will have spare resources to absorb this

£0.00

WAN

UKCloud assumes existing connectivity will be used — not all organisations will have spare bandwidth available

£0.00

Totals Total upfront costs

£58,800.00

Total recurring costs over 3 years

£22,752.00

Total cost (ex VAT)

£81,542.31

[1] Host servers running 24x7 during active weeks (see [2]) as virtual platform must be available on request. Assumes platform would be powered down during inactive weeks so this cost is 58% (30 active weeks/52 weeks) of the equivalent 24x7x365 cost. Note actual cost will be higher as a charge will be incurred for accommodation regardless of whether the servers are active or inactive.

UKCloud | white paper

12 of 28

Cloud: the total cost of operation — building the business case for change

Scenario 1: cost of cloud solution Component

Notes

Cost calculation

Cost

UPFRONT COSTS None

£0.00 RECURRING COSTS

22 x 2CPU/4GB VMs

ESSENTIAL VMs on the Assured OFFICIAL platform Running 8x5 = 100 hours[1] per month

Additional 500GB Storage

£0.04 per VM per hour x 100 hours[1] x 22 VMs including persistent storage (@£0.10p per GB per month)

£201.92

£0.10 per GB per month

£50.00 £88.00

22 x Red Hat Enterprise Linux

Support and Subscription

£0.04 per VM per hour x 100 hours[2] x 22 VMs

1000GB Internet Bandwidth

Required for developers to access the Assured OFFICIAL environment

Free

£0.00

Totals Total upfront costs

£0.00

Total recurring costs over 3 years

£12,237.04

Total costs (ex VAT)

£12,237.04

[2] 100 hours calculated as follows; 8 hours a day, 5 days a week = 40 hours a week. Assuming projects last 6 weeks, with 4 weeks lag between projects = 5 projects per year = 30 active weeks per year = 1200 active hours per year = 100 active hours per month.

UKCloud | white paper

13 of 28

Cloud: the total cost of operation — building the business case for change

For scenario 1, the comparison shows that when considering total cost of each solution across 3 years, a cloud solution is 85% cheaper than the cost of the dedicated solution.

UKCloud | white paper

14 of 28

Cloud: the total cost of operation — building the business case for change

Scenario 2: A typical high-traffic web application serving content to the wider public (citizens) Utilisation profile: As the platform is used by citizens, it has an unpredictable usage profile with peaks and troughs in terms of demand. The platform must be available 24 x 7 to provide service to the public as required. During high peaks in demand additional servers need to be provisioned to handle the load — this happens once every quarter.

Environments: Due to the nature of the data handled by this application, an OFFICIAL platform is required. As a live production system, the environment needs to be highly available, so servers are deployed in a N+1 configuration. Some components of the architecture (e.g. Web Tier) need to scale out to handle increases in workload. In addition to the production system, the solution requires a representative pre-production environment (for volume and load testing) and a Disaster Recovery (DR) environment. Comparison: This scenario compares a cloud platform with a dedicated hosted platform — each platform is specified in the table below.

Component

Dedicated

Cloud

Server Hardware

3 x HP Servers for Web/App VMs in each site 2 x HP Servers for Databases in each site

Integral to Compute-as-a-Service

Storage Hardware

FC Storage array in each site with dual-path FC fabric

Integral to Compute-as-a-Service

Network Hardware

2 x HP Network Switches in each site

Integral to Compute-as-a-Service

OS Licences

Windows and SQL licensed via EA

Windows and SQL licensed via SPLA

Virtualisation Licences

vSphere 5 Enterprise

Integral to Compute-as-a-Service

WAN Bandwidth

20Mbps for Production, 10Mbps for DR

10000GB per month

Data Centre Colocation

5.0KW

Integral to Compute-as-a-Service

UKCloud | white paper

15 of 28

Cloud: the total cost of operation — building the business case for change

Scenario 2: cost of dedicated solution Component

Notes

Cost calculation

Cost

UPFRONT COSTS Server Hardware

Physical hardware to run the web/app virtual machines and SQL servers

11 x HP DL360 Gen9 inc 3 year maintenance

£54,000.00

Storage Hardware

Storage for the virtual machines and pre-production environment

2 x HP MSA 2040 inc 3 year maintenance plus 4 x FC Switches

£17,000.00

Network Hardware

Network switches, firewalls and load balancers

4 x HP 2920 Switches, 4 x Cisco ASA 5525 Firewalls, 4 x F5 Load Balances

£88,000.00

Windows and SQL Licences

EA licence for the environment

11 x Windows Datacentre plus SQL Server licences

£155,000.00

VMware vSphere

vSphere and vCenter to provide a virtualisation platform

vSphere 5 Enterprise and vCenter Standard inc 3 year maintenance

£52,000.00

Accreditation and Assurance

UKCloud assumes existing accredited environments will be extended to host this solution using internal CLAS resources

£0.00

RECURRING COSTS Internet Bandwidth

Internet bandwidth at Production and DR sites

20Mbps Production 10Mbps DR

£1,100.00

Data Centre Colocation

Physical accommodation, power and cooling for the servers and storage

5.0KW of equipment load £1.00 per KWh for combined power and accommodation

£3,650.00

Monitoring and Management

UKCloud assumes existing support teams will monitor and manage this solution — not all organisations will have spare resources to absorb this

£0.00

PSN WAN

UKCloud assumes existing connectivity will be used — not all organisations will have spare bandwidth available

£0.00

Totals Total upfront costs

£366,000.00

Total recurring costs over 3 years

£171,000.00

Total Costs (ex VAT)

£537,000.00

UKCloud | white paper

16 of 28

Cloud: the total cost of operation — building the business case for change

Scenario 2: cost of cloud solution: Component

Notes

Cost calculation

Cost

UPFRONT COSTS None

£0.00 RECURRING MONTHLY COSTS

35 VMs (various sizes)

POWER VM on Assured OFFICIAL platform Running 24x7 = 730 hours per month

5 x Large HM @ £0.75/VM/hr 15 x Medium @ £0.22/VM/hr 10 x Small @ £0.12/VM/hr 5 x Tiny @ £0.09/VM/hr

8 additional VMs

Additional 8 VMs to handle peak load one month per quarter only (ie four months per year)

8 x Small @ £0.133/VM/hr including OS licence

Additional 1000GB Storage

£0.10 per GB per month

Windows and SQL Licences

SPLA licences for Microsoft Windows and SQL

5 x Large HM @ £0.366/VM/hr 15 x Medium @ £0.026/VM/hr 10 x Small @ £0.013/VM/hr 5 x Tiny @ £0.007/VM/hr

10TB Internet Bandwidth

Required for developers to access the Assured OFFICIAL environment

Free

£6,351.00

£776.72 [3]

£100.00 £1,741.05

£0.00

Totals Total upfront costs

£0.00

Total recurring costs over 3 years

£304,234.44

Total costs (ex VAT)

£304,234.44

[3] As these servers are not running all the time, the full cost is only incurred whilst they are active. The servers will be deleted when inactive and reprovisioned when required again to avoid charges for persistent storageThe monthly cost listed of £776.72 would only be incurred 4 times per year

UKCloud | white paper

17 of 28

Cloud: the total cost of operation — building the business case for change

For scenario 2, the comparison shows that when considering total cost of each solution across 3 years, a cloud solution offers cost savings of 43% versus a dedicated solution.

UKCloud | white paper

18 of 28

Cloud: the total cost of operation — building the business case for change

Scenario 3: A typical compute platform used to host an Enterprise Application (eg SAP or SharePoint) Utilisation profile: As the platform is used for a production system, it is used throughout the year. However, it is used by internal UK staff so only used between the hours of 6am and 8pm, Monday to Friday. At the end of each month, for eight hours, additional application servers are provisioned to handle the batch processing load.

Environments: Due to the nature of the data handled by these applications, a platform suitable for hosting data marked as OFFICIAL SENSITIVE is required. As it is a production system, the environment needs to be highly available so servers are deployed in a N+1 configuration. Some components of the architecture (e.g. Application Tier) need to scale out to handle the batch load. In addition to the production system, the solution requires a representative pre-production environment (for volume and load testing) and a DR environment. Comparison: This scenario compares a cloud platform with a dedicated virtualisation platform — each platform is specified in the table below.

Component

Dedicated

Cloud

Server Hardware

2 x HP Servers for Web/App VMs in each site 2 x HP Servers for Databases in each site

Integral to Compute-as-a-Service

Storage Hardware

FC Storage array in each site with dual-path FC fabric

Integral to Compute-as-a-Service

Network Hardware

2 x HP Network Switches in each site

Integral to Compute-as-a-Service

OS Licences

Windows and SQL licensed via EA

Windows and SQL licensed via SPLA

Virtualisation Licences

VMware vSphere 5 Enterprise

Integral to Compute-as-a-Service

WAN Bandwidth

Uses existing bandwidth

5Mbps PSN per month

DC Accommodation

4.5KW

Integral to Compute-as-a-Service

UKCloud | white paper

19 of 28

Cloud: the total cost of operation — building the business case for change

Scenario 3: cost of dedicated solution Component

Notes

Cost calculation

Cost

UPFRONT COSTS Server Hardware

Physical hardware to run the web/app virtual machines and SQL servers

8 x HP DL360 Gen9 inc 3 year maintenance

£40,000.00

Storage Hardware

Storage for the virtual machines and databases

2 x HP MSA 2040 inc 3 year maintenance plus 4 x FC Switches

£17,000.00

Network Hardware

Network switches

4 x HP 2920 Switches

£5,000.00

Windows and SQL Licences

EA licence for the environment

8 x Windows Datacentre plus SQL Server licences

£145,000.00

VMware vSphere

vSphere and vCenter to provide a virtualisation platform

vSphere 5 Enterprise and vCenter Standard inc 3 year maintenance

£36,000.00

Accreditation and Assurance

UKCloud assumes existing accredited environments will be extended to host this solution using internal CLAS resources

£0.00

RECURRING COSTS Data Centre Colocation

Physical accommodation, power and cooling for the servers and storage

4.5KW of equipment load £1.00 per KWh for combined power and accommodation

£3,285.00

Monitoring and Management

UKCloud assumes existing support teams will monitor and manage this solution — not all organisations will have spare resources to absorb this

£0.00

PSN WAN

UKCloud assumes existing connectivity will be used — not all organisations will have spare bandwidth available

£0.00

Totals Total upfront costs

£243,000.00

Total recurring costs over 3 years

£118,260.00

Total costs (ex VAT)

£361,260.00

UKCloud | white paper

20 of 28

Cloud: the total cost of operation — building the business case for change

Scenario 3: cost of cloud solution Component

Notes

Cost calculation

Cost

UPFRONT COSTS None

£0.00 RECURRING COSTS

35 VMs (various sizes)

POWER service level with 14-day snapshot on the Elevated OFFICIAL platform Running 14x7 = 303 hours per month

5 x Large HM @ £1.50/VM/hr 15 x Medium @ £0.45/VM/hr 10 x Small @ £0.27/VM/hr 5 x Tiny @ £0.19/VM/hr plus persistent Tier 2 storage with 14-day snapshots

£5,459.47

8 additional VMs eight hours per month

Additional 8 VMs to handle peak load eight hours per month

8 x Medium @ £0.476/VM/hr (including OS licence) plus persistent Tier 2 storage with 14-day snapshots

£42.33

Windows and SQL Licences

SPLA licences for Microsoft Windows and SQL

5 x Large HM @ £0.366/VM/hr 15 x Medium @ £0.026/VM/hr 10 x Small @ £0.013/VM/hr 5 x Tiny @ £0.007/VM/hr

£723.45

£0.20 per GB per month for Tier 2 storage

£900.00

PSN Protected Connectivity

£1,024.00

Additional 4500GB Storage 1TB of data transferred

Required for access to the Elevated OFFICIAL environment

£1.00 per GB

Totals Total upfront costs

£0.00

Total annual recurring costs

£97,791.09

Total costs (ex VAT) over 3 years

£293,373.27

UKCloud | white paper

21 of 28

Cloud: the total cost of operation — building the business case for change

For scenario 3, the comparison shows that when considering total cost of each solution across 3 years, a cloud solution still offers a 20% saving over the cost of the dedicated solution. It is worth noting again that in calculating the cost of the dedicated solution specified, the cost of checking the security of a dedicated solution has not been included. If you consider the day rate for a CESG Certified Professional (CCP) consultant and the costs of an IT Health Check (ITHC) test service plus the fact that this type of activity requires a minimum of 10 days, significant costs can be incurred. Nor have staff costs or additional network bandwidth costs been considered. The average support person can incur a £50,000 cost. Secure government network circuits demand high up-front costs and even low bandwidth circuits can cost in the region of £1,000 per month. If these costs had been included, we are confident that the cost saving offered by the cloud solution would be considerably higher than 20%.

UKCloud | white paper

22 of 28

Cloud: the total cost of operation — building the business case for change

Assessing the potential cost savings of cloud

The scenarios detailed above demonstrate that significant cost reductions can be realised by adopting cloud computing over more traditional dedicated solutions. Obviously the requirements of individual buying organisations are unlikely to match the scenarios outlined exactly and costs will vary, depending on specific business and technical requirements.

Unlike the scenarios provided, full operational costs, to include staff and security costs, will need to be considered when costing an in-house solution. Taking all these different elements into account, in our experience of working with the UK public sector, in all situations, cloud computing will deliver cost reductions whilst increasing both agility and availability.

In building a business case, buying organisations should ensure they identify all costs associated with individual solutions offered by different suppliers to include any costs related to exiting an existing contract/service, procuring and contracting the new service and then onboarding and running the new service. Prices, workloads and running costs should be carefully analysed. Buyers should also check whether any discounts apply.

In our experience, cloud computing will always deliver cost reductions while increasing both agility and availability.

UKCloud | white paper

23 of 28

Cloud: the total cost of operation — building the business case for change

The soft benefits of cloud

Although a cost comparison is a fundamental part of any business case for ICT expenditure, a cloud implementation can deliver more than cost savings. As well as transforming ICT from a high-risk capex item to a business enabler, cloud computing offers many other valuable business benefits.

Quicker, easier procurement: through compliant frameworks such as GCloud, services can be contracted, ordered and set-up in hours or days rather than months. The G-Cloud Framework complies with the OJEU and is regularly refreshed to ensure that the best that the market has to offer is available to the UK public sector.



Adherence to government policies: by implementing a cloud solution buying organisations are adhering to initiatives such as Cloud First. The drastically reduced procurement and deployment times offered by cloud services can also support reduced application development lead times for buying organisations striving to migrate transactional services online in-line with Digital Design service standards.



Improved availability: with cloud there is no need to set-up a redundant system at a separate disaster recovery location. Additional resources are accessible as required so as workload increases so can your capacity, ensuring that performance doesn’t suffer. Cloud solutions offer significantly less downtime and better application availability. This enables you to meet demand and achieve improved user satisfaction.

UKCloud | white paper



Consumption-based commercial models: your exact requirements can be met cost-effectively, such as 8x5 rather than 24x7 availability; and you can cater for unpredictable workloads with no need to over-provision. With usage-based pricing, costs are transparent, giving you the ability to accurately track costs and budget.



High quality of service: with cloud services wellestablished and some suppliers having gained significant experience of successfully delivering cloud solutions to the UK public sector, industry-leading Service Level Agreements are available, assured by experts in virtualisation and cloud computing.



Reduced risk and increased agility: cloud solutions from assured providers can quickly and easily flex and adapt as requirements evolve and don’t lock organisations into long-term contracts. Most established cloud service providers do not charge any set-up costs or enforce any minimum contract term.



A business model that encourages innovation and thought leadership: Test & Development environments can be set-up in minutes at low cost so ideas can be tested quickly and without significant expenditure.

24 of 28

Cloud: the total cost of operation — building the business case for change



Increased developer and IT staff productivity: cloud solutions enable faster application development as they can be deployed in minutes, and your cloud provider will be responsible for ongoing maintenance of all facilities, hardware and software. This means your staff can spend less time managing your infrastructure and more time delivering innovative projects that support improvements in efficiency and productivity.



Greater security: there is no requirement to manage extensive and often scattered or disparate in-house resources; instead the onus is on service providers to meet the high levels of data centre, service and data security required to adhere to CESG Cloud Security Principles and to sustain these standards. UKsovereign service providers are also insulated from the potential uncertainty arising from Privacy Shield not yet being legally tested.



Greener solutions: cloud solutions offer reduced energy consumption, sustainable procurement and better hardware utilisation. Some cloud providers also have CarbonNeutral® Company status and operate data centres with a low carbon footprint and low PUE rating. Some also offer CarbonNeutral® Cloud Services.

UKCloud | white paper

25 of 28

Cloud: the total cost of operation — building the business case for change

But what about security?

The public sector’s increased use of cloud computing environments requires them to fully understand and properly assess a number of potential security challenges. Technically whilst there may be little or no difference between public, community and private cloud architecture, the security considerations of each are likely to be very different, and will need to demonstrate alignment with the security controls necessary for the sensitivity of the data to be hosted as well as the risk appetite of the customer. Generally, public cloud service providers like Amazon, Google and Microsoft own and operate infrastructure which can only access via the Internet, frequently due to their off-shore hosting and support locations meaning that they are unable to provide access to UK public sector trusted networks. This model and the supporting connectivity options may be assessed as being suitable for those applications with few or no security concerns. However, will not be appropriate when an application manages more sensitive data: in this case a cloud provider offering a range of accredited, secure cloud services with connectivity to trusted networks should be used.

UKCloud | white paper

The CESG document “14 Cloud Security Principles” was published to provide a framework by which suppliers can assert their position on key characteristics of their cloud services, whilst simultaneously helping potential cloud customers to properly assess potential suppliers. The Principles form the basis for the UK Government’s Digital Marketplace, which supports the G-Cloud programme, and which provides clear, basic information on the characteristics and capabilities of different cloud services. Areas such as physical premises, virtual environment management, network protection, protective monitoring, data protection legislation, personnel security clearances and related due diligence are all addressed. However, the Digital Marketplace alone is unlikely to provide comprehensive information to a level which answers all of a customer’s security-related questions. It remains the responsibility of each data-owing customer to fully assess all of the available information about their potential cloud service providers, and ensure that the security of their data will be properly addressed. Cloud service providers should be expected to willingly demonstrate credible and independent evidence to support their assertions made within the Digital Marketplace, which will build customer confidence that their valuable data will be in safe hands in the cloud.

26 of 28

Cloud: the total cost of operation — building the business case for change

About UKCloud

UKCloud provides a true public cloud for the exclusive use of UK Public Sector organisations. We are dedicated to helping our customers gain value from the agility and cost savings of using a sovereign, assured cloud platform.

Supporting both cloud native and enterprise applications — based on VMware, OpenStack and Oracle stacks — the platform is used extensively to host both citizen web applications, and internal facing applications only available through secure government networks.

Focusing solely on Public Sector customers, we are able to provide a leading cloud proposition that delivers outstanding value and capability. This ultimately benefits the UK taxpayer, citizens and businesses by enabling Public Sector organisations to deliver better services through technology.

Our industry-leading platform is built on the unique and cutting-edge technologies of the UKCloud Cloud Alliance — QinetiQ, VMware, Cisco, EMC and Ark Data Centres — which continually drives innovation and product development, at the lowest price to meet the needs of the UK Public Sector.

Here’s how:

Additional information about UKCloud can be found at ukcloud.com or by following us on Twitter at @ukcloudltd

•

•

•

We’re focused on cloud. Delivering a true cloud platform that is massively scalable, flexible, assured and cost-effective – and customers only pay for what they use. We’re open. You are never locked in. Using industry standards and open source software our platform gives customers the flexibility and choice to transition and transform their applications and deploy across multiple cloud solutions. Dedicated to the UK Public Sector. Our business is designed specifically to serve and understand the needs of public sector organisations, and is UK sovereign, with UK cleared staff and we pay UK taxes.

•

We develop communities.  We bring together communities of users that are able to share datasets, reuse code, test ideas and solve problems that enhance services and benefit the UK citizen.

•

Customer engagement. We will only be successful if our customers are successful. We embody this in the promise: Easy to adopt. Easy to use. Easy to leave.

UKCloud | white paper

UKCloud. The power behind public sector technology. 

Contact us for a cloud costing If you have a specific ICT requirement that you would like us to cost for you now to enable you to compare cloud to alternative solutions available to you, get in touch: •

email details to [email protected]

• call 01252 303300

27 of 28

Reasonable efforts have been made to ensure the accuracy of the information contained in this document. No advice given or statements or recommendations made shall in any circumstances constitute or be deemed to constitute a warranty by UKCloud Ltd as to the accuracy of such advice, statements or recommendations. UKCloud Ltd shall not be liable for any loss, expense, damage or claim howsoever arising out of the advice given or not given or statements made or omitted to be made in connection with this document. No part of this document may be copied, reproduced, adapted or redistributed in any form or by any means without the express prior written consent of UKCloud Ltd.

UKCloud Ltd A8, Cody Technology Park Ively Road, Farnborough Hampshire, GU14 0LX

T 01252 303 300 E [email protected] ukcloud.com @ukcloudltd

©UKCloud Ltd All Rights Reserved. UKC-GEN-98-D • 08.2016