The Cloud Part 4 -- Rent versus Own -- Dropbox versus iCloud

Capex vs. Opex - The Costs of Storing Your Data

One of the great debates in cloud computing involves business economics and the inherent expense that stocking and running a data center entails.  You may even hear the phrase "Capex vs Opex" in this debate.  This phrase refers to the trade-offs of investing in building and operating your own data center (Capital Expenditure and Operating Expenditure) versus using someone else’s data center (Operating Expenditure) on a pay-as-you-go or rental model.  It's important to consider the financial implications of both approaches in the long run - especially since “renting” costs less in the short term, but the investments in data centers will ultimately be passed on to the end users, making that approach more expensive.  

Owning and stocking a physical data center requires capital expenditure (Capex), large amounts of space filled with computer hardware, and the cash flow to pay the power bill.  Many "cloud-based" data centers, like Amazon's Elastic Compute Cloud (EC2), or iCloud, still rely on physical servers to store data.  The "cloud" allows users to access programs and data as a "virtual instance" on physical servers.  Thus Amazon rents space to businesses like Dropbox, but it is still expensive.  Dropbox may not have to invest in creating their own their data center, but they pay a higher operational cost than someone like Carbonite who built their own datacenter. 

The Capex Vs. Opex debate is really a “own versus rent” debate.  But either option still has two big issues – they use massive amounts of global energy to run and to cool, and data centers are still subject to the possibility of server outages.

An article from CIO.com highlights some of the cost  issues of owning and operating servers ((http://www.cio.com/article/484429/Capex_vs._Opex_Most_People_Miss_the_Point_About_Cloud_Economics):

1. The direct costs that accompany running a server: power, floor space, storage, and IT operations to manage those resources.

2. The indirect costs of running a server: network and storage infrastructure and IT operations to manage the general infrastructure.

3. The overhead costs of owning a server: procurement and accounting personnel, not to mention a critical resource in short supply: IT management and its attention.

Money Magazine has an interesting article on security ( see http://money.cnn.com/2011/04/21/technology/amazon_server_outage/index.htm).

Of course, neither option takes into account the "true cloud".

What is "true cloud?"  

Even though Amazon's Elastic Compute Cloud is called a" cloud", Amazon still has to host a warehouse of servers to make their "cloud" available to users.  This will always be more costly than using a "true cloud" service.  In fact, Amazon's "cloud" is no more than a marketing term, considering the need for a traditional data center to hold their "elastic" storage. For a service to be hosted on a "true cloud", the architects would have to eliminate the need for large, costly datacenters, completely. 

The Digital Lifeboat model is based on a highly secure peer-to-peer "true cloud" - which doesn't require a datacenter and the accompanying; computer hardware, floor space, and extra power.  This keeps our overhead low so that our service costs less than our competitors. In addition, Digital Lifeboat requires less computer hardware and less energy which makes our company greener than if we were to house your data in a large data center.).  We've pioneered a method of cloud-based storage that's automatic and continuous; self-managing and self-healing - all without a datacenter.  That's the "true cloud"; that's Digital Lifeboat's online backup and recovery service. 

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