Why does Bezo’s Law suggest it’s time to ditch the data centre?
Fri 22 Aug 2014
The end of the datacentre is nigh. That’s the view of AppZero’s CEO Greg O’Connor who says cloud computing will make datacentres in many cases redundant. This is because there is an ongoing titanic shift that’s about moving to the cloud, and this will require many companies to give up their datacentres as they are comparatively more expensive to own, run and manage than outsourcing to a cloud provider. Cloud computing offers non-IT firms the ability to gain operational efficiency saving and access to expertise to allow them to focus on their own core business. With a datacentre they would need to hire skilled people to manage it, but with cloud computing they don’t need them.
“The shift is going to occur over 10-20 years, but one of our customers, boutique brewery Pabst Blue Ribbon, has moved it’s IT to the cloud rather than run a datacentre”, he explains before adding that the move away from owning a datacentre will first of all start with “SMEs as they don’t have the economies of scale that the Fortune 1000 guys do.” The costs of owning, running and managing one are too prohibitive for SMEs and so it makes sense for them to outsource their IT to a cloud provider.
He adds: “About 5-10% of the enterprises in the world have IT as their cornerstone, but Porsche built their own cars and in racing IT makes them competitive and in this sense you would never get rid of your datacentre.” So he predicts that there may still be datacentres in the future, but most of them will be cloud-based. Yet he thinks that the banks of this world will still need their own datacentres, but most of the Fortune 5000 don’t fall into this category and so cloud computing makes sense.
This is in spite of the fact that the cost of running a datacentre’s hardware, storage, CPU, memory often becomes less of a cost over time. Labour and power them become the main outgoings, and this allows large companies such as Google, Amazon and IBM to run them more efficiently. They can, for example, locate their datacentres in areas in the world where the cost of energy is cheapest and where they can invest and innovate in the area cooling datacentres. This is important because in most enterprises systems administrators tend to manage 200 to 1,000 machines, but firms like Amazon have 100,000 machines per systems administrator and so they can economies of scale.
“There is a lot of innovation in power; the less you have to step down or up in voltage, the less it will cost you and yes most of the Fortune 5000 companies are not IT experts – they are focused on building houses, cars, shoes and so on”, he explains. This means that most businesses see IT as an overhead, but IT can make them more competitive than their rivals. About 90% of IT’s task is about helping the organisation to the job done and yet it’s not their whole business, so cloud providers need to work on making it more efficient for their customers.
According to Bezo’s Law, the increasing availability of cloud computing will lead to more computing power at a much lower cost. This law states that a unit of computing power price is reduced by 50% over the course of approximately three years. So in essence it measures the cost of any given unit of cloud computing over a certain period. Moore’s Law in comparison is about the number of transistors doubling each month, but Bezo’s Law is far more relevant because it allows organisations to analyse the total cost of infrastructure (TCOI). He says this means everything that is needed to run a datacentre and “which are packaged up as compute to run a datacentre in the cloud.”
He then comments that an IBM case suggests that hardware represents 35% of the overall cost of the datacentre and the CPU takes up 10% of it. So in his view it’s important to measure TCOI because this will help organisations to answer the question of: “Do I design and build my own datacentre or use the cloud?” They can then consider the comparative costs of running a datacentre versus moving their IT into the cloud.
The latter will offer SMEs increased agility to permit their businesses to change direction and this benefit is in his view hard to quantify. His arguments nevertheless show that the future of the datacentre isn’t always that certain. With regards to Bezo’s Law it just makes sense for SMEs to ditch the datacentre in order to embrace cloud computing.
By Graham Jarvis