

Why Public Clouds Could Win in the Enterprise - kerben
http://gigaom.com/cloud/why-public-clouds-could-win-in-the-enterprise/

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A1kmm
Cloud based technologies are a win for small to medium businesses* because
they are a more efficient and stable way to deploy hardware resources; the
amount of hardware you need to ensure that there is always enough resource for
a single website serving a million hits a day is more than a hundredth of the
total resources needed for a hundred independent websites each serving a
million hits a day, because the probability of them all hitting peak traffic
at the same time is low, the probability of experiencing 100 independent
hardware failures out of 1000 machines at the same time is far lower than
experiencing 1 failure out of 10 machines, and because it is cheaper to host
whole racks or data-centres of machines and secure the whole rack or centre
than to host and secure a few physical machines.

The cost benefits of these efficiency gains outstrip the costs of vertical de-
integration, allowing cloud hosts to make a profit and still be cheaper for
small businesses than hosting their own servers.

However, by the time a business is large enough to run its own sufficiently
large private clouds, it gets the benefit of cloud hosting, but can also
remain vertically integrated, and so private clouds can have a cost benefit
over public clouds where the cloud provided needs to make profits.

As more Free / Open Source software becomes available to make private cloud
hosting easier, I expect most businesses with sufficiently large server
deployments will choose to vertically integrate and run private clouds rather
than using public ones.

* Note that I am implicitly measuring the size of a business by the size of their server hosting requirements. I'm sure this measure is correlated with profits and revenue, but some companies with, say, high profits might not have many servers, and so would be small business for the purposes of this comment.

