ElasticHosts substantiates over-spend claims

Back in April, Richard Davies, CEO and co-founder of ElasticHosts outlined his company’s position that the majority of cloud users, and in particular those using Linux IaaS providers, are over-paying for the services they use.

At the time, he estimated, the majority were being over-charged by around 50 percent because of the common practice of cloud service providers to charge for the resources specified in contracts – which in practice is often the maximum expected resources requirement. ElasticHosts, by comparison, had come up with a container-based operational model that allows the company to charge users for only the resources that are actually consumed.

Now the company has produced some substantiation of those claims with some research that suggests that customers are being unnecessarily overcharged a total of £1 billion each year, based on an analysis of independent industry figures.

 How has the company come to this conclusion? Well, it starts with the Gartner estimates that the global IaaS market is worth £5.4 billion. Of this market, Forrester claims that 47 percent of global web developers (representing £2.538 billion) use IaaS for compute, rather than storage or print; Frost & Sullivan claims 73 percent of the US IaaS market are compute users (£3.942 billion). As such, by taking a conservative average of 50 percent, based on the global figure from Gartner, the overall market for IaaS compute users is at least £2.7 billion.

Breaking this down further, the Linux Foundation estimates that 76 percent of organisations are using Linux servers for cloud, meaning Linux equates to £2.05 billion globally of the IaaS compute market. Figures from IBM, McKinsey, Google and Gartner estimate that servers are currently utilised anywhere from 6 to 40 percent on average.

From these different sets of figures, the company feels it is therefore safe to estimate that IaaS is being underutilised by a minimum of 50 percent, resulting in an estimated £1.026 billion of wasted spending on Linux based cloud compute each year.

ElasticHosts looked into specific use cases from its own customer data and found server under-utilisation was a problem for many different users, across a wide range of usage patterns. The three most common use cases are Web Applications, Testing and Development and Disaster Recovery.

Web application customers tend to run cloud servers on a 24/7 basis, but utilisation patterns vary significantly throughout the day with web traffic. There are regular intervals when the server is being underutilised, but the customer is still paying for assigned resources. At the same time, there are periods with a sudden surge in web traffic where there is not enough capacity allocated to the server; this results in performance issues, such as slow page loads or load errors. To avoid this, they would have to constantly monitor performance and provision extra servers as needed; or set capacity at an uneconomically high level.  

ElasticHosts also looked at customers running servers for testing and development. A a typical development team will run tests intermittently. Users do have the option of turning the server off when it is not being used, but many work in large development teams and for the sake of convenience they generally leave it turned on ready for the next user. This can mean the server can go unused for days, even though they are still being charged for the capacity.  

Disaster recovery is seen as the clearest example of waste. DR customers routinely replicate 50-100 percent of their servers as idle ‘hot spares’, constantly provisioning them at full capacity. 

“The latest updates to the Linux kernel have made containerised IaaS possible. This has huge ramifications for the IaaS market as customers no longer need to over provision – they are only charged for what they actually use and can therefore cut costs in half,” Davies said. “In the same way that virtualisation disrupted the physical server market; containerisation is set to disrupt the cloud market and has the potential to deliver £1 billion worth of savings to Linux cloud compute users every year.

“While usage patterns vary, it is clear from these graphs that most cloud servers frequently run at low utilisation and are not delivering on the early elastic promises of cloud. Advancements in containerisation technology mean these users no longer have to overprovision and sacrifice price for peak performance. The sooner the rest of the cloud industry offers containers, the quicker we will evolve to the