The Cost of Proprietary vs. Public Cloud

June 22, 2011
Open Cloud

How does open cloud stack up on price?

After Australia’s Melbourne IT unceremoniously dumped VMware vCloud Express, I wondered whether proprietary offerings like vCloud Express can provide the margin to compete with equivalent open source cloud offerings (e.g. based on Xen or KVM).

I am not alone either. Respected analyst Dale Vile (co-founder of Freeform Dynamics) posed similar questions on Twitter.

One VMware employee asserted that vCloud Express pricing is “very competitive with any cloud”

In response, one VMware employee posted a Virtacore vCloud Express price list and asserted that vCloud Express pricing is “very competitive with any cloud” and that the cost of proprietary cloud was a “non-issue”.

However, it turns out that the ‘non-issue’ status of vCloud Express pricing is far from universal, even within VMware. At the recent Cloud Expo event (my roundup and slides for my three sessions are here), another VMware employee seemed to think it an issue worth addressing, as he chose to highlight the same pricelist in his presentation as ‘proof’ that proprietary cloud was actually more cost effective than a public cloud offering.

Moreover, one pricelist in isolation says nothing about competitive pricing; rather it simply demands comparison.

So spurred on by this broad concern and spirited commentary, I decided to compare the published list prices of multiple proprietary offerings (including the now-defunct Melbourne IT vCloud Express price list) with roughly equivalent offerings (based on open source Xen) from Amazon and Rackspace.
This turned up some confusing results that, for the most part, do not seem to support the VMware position. For example:

Melbourne IT’s cheapest offering was over twice as expensive as the lowest paid-for offering from Amazon
  • No proprietary offering comes close to matching the price of the cheapest open offering, AWS’s ‘Free Tier’
  • Melbourne IT’s cheapest offering was over twice as expensive as the lowest paid-for offering from Amazon, which offers the same CPU, but four times the RAM
  • Melbourne IT’s cheapest offering was almost five times the cost of the cheapest Rackspace service, which offers (up to) four times the CPU power, albeit only half the RAM
  • Every one of Amazon’s offerings are cheaper than proprietary equivalents, except for the 4 CPU, 2 GB server service
  • Every one of Rackspace’s offerings are cheaper than proprietary equivalents, except for the (up to) 4 CPU, 16 GB server service
  • For a relatively standard server (1 CPU, 2Gb RAM), Amazon is half the cost of Melbourne IT, and two-thirds the cost of the other equivalent proprietary offerings
  • For a high-powered server (4CPU, 8Gb), an open offering from Rackspace is around the same price as two of the three equivalent proprietary offerings
  • At the most expensive price point ($0.96/hr), a proprietary offering beats Rackspace for the same memory while providing twice the CPU, but is still more expensive than an equivalent Amazon service ($0.68/hr)

Perhaps this helps to explain why the CTO of Melbourne IT, Glenn Gore, is reported as saying “the market for [SMB] customers was already dominated by large scale American offerings such as Amazon Web Services and Rackspace”.

Of course, list price should never be the sole factor in deciding the value of a cloud service. Many other factors should come into play, including reliability, security, manageability, uptime, integration, portability, support, and much more. Nor is this a clear apples-to-apples comparison. Each service has differences in specific offerings, few services compare equally head-to-head, and each provider has different cost structures for bandwidth and storage. Amazon and Rackspace in particular obfuscate the CPU basis for their offerings, making any comparison difficult at best, flawed at worst.

Can a proprietary cloud compete on price with open source? What am I missing?

In the interest of open discussion then, I have included my full data set below, along with some additional explanatory pricing notes and links to the original sources. Maybe I have interpreted some of the sources incorrectly. Maybe there are additional values I have not accommodated. Most notably, my conversion of Amazon’s “Compute Units” or Rackspace’s variable CPU allocations may be flawed (they do not make it easy). While I think this data does enable a valid comparison, in the end it is just my interpretation of some very dissimilar price lists.

I would love to know what you think. Can a proprietary cloud offering compete on price with an offering based on open source? It appears to me that this is the exception, rather than the rule, but VMWare keep insisting that it is true.

So what am I missing?

Please post any comments and corrections below – I would love to figure this one out.


Melbourne IT



Amazon AWS


1 CPU, 0.5 GB $0.055 $0.040 $0.035 $0.042 $0.000
1 CPU, 1 GB $0.088 $0.060 $0.068
1 CPU, 1.5 GB $0.090
1 CPU, 2 GB $0.167 $0.120 $0.123 $0.085
1 CPU, 4 GB $0.326 $0.217 $0.224
1 CPU, 8 GB $0.401 $0.358
1 CPU, 12 GB $0.602
1 CPU, 16 GB $0.803
2 CPU, 0.5 GB $0.061 $0.040 $0.045 $0.020
2 CPU, 1 GB $0.101 $0.070 $0.070 $0.076
2 CPU, 1.5 GB $0.105
2 CPU, 2 GB $0.194 $0.130 $0.141 $0.138
2 CPU, 4 GB $0.378 $0.271 $0.256
2 CPU, 8 GB $0.482 $0.421 $0.340
2 CPU, 12 GB $0.686
2 CPU, 16 GB $0.844
4 CPU, 0.25GB $0.015
4 CPU, 0.5 GB $0.045 $0.049 $0.030
4 CPU, 1 GB $0.080 $0.084 $0.060
4 CPU, 1.5 GB $0.120
4 CPU, 2 GB $0.161 $0.154 $0.170 $0.120
4 CPU, 4 GB $0.260 $0.301 $0.272 $0.240
4 CPU, 8 GB $0.480 $0.567 $0.484 $0.480
4 CPU, 12 GB $0.762
4 CPU, 16 GB $0.899 $0.960
8 CPU, 16 GB $0.960 $0.680

Pricing Notes

Melbourne IT

  • As noted, Melbourne IT is no longer offering a vCloud Express service
  • Storage is additional $0.327 Per GB per month
  • Bandwidth is additional $1.047 per GB
  • Prices are all in AUD. At current exchange rate these prices are slightly higher in USD



  • Unused instances are charged at full rate, even if unused, unless ‘destroyed’
  • Bandwidth is free up to 3TB, although the time period for this limit is not clear
  • All plans include 50 GB Disk
  • Plans are actually listed as providing ‘VCPU’



  • System Storage $0.25/month per GB (billed with virtual machine)
  • Internet Bandwidth $0.17 per transferred GB
  • Public IP Addresses $0.01/hour per IP
  • Internet Services $0.01/hour per service
  • 8 VCPU also available


  • System Storage $0.50/month per GB (billed monthly)
  • Bandwidth $0.17/GB (billed hourly)
  • It is unclear if continues to offer vCloud Express. The vCloud Express web page does not appear to be accessible by navigating the menu system (only options are ‘Enterprise’, ‘Dedicated’, and ‘Private’), and the service is still classed only as ‘beta’, but the page can be found by searching the website.


Amazon Web Services (EC2)

  • AWS actually leases by EC2 Compute Units (virtual cores with 1 or 2 ‘Compute Units’, each providing “equivalent CPU capacity of a 1.0-1.2 GHz 2007 Opteron or 2007 Xeon processor”). I have converted these at a 1:1 ratio, but this obfuscation does make it difficult to compare on even footing with other providers.
  • All data transfer in – $0.100 per GB; Data Transfer out – First 1 GB / month free, and a reducing scale after that at an average of $1.07 per GB / month
  • Offerings listed as 0.5 GB RAM actually provide 613MB, not 512MB; Offerings listed as 2GB RAM actually provide 1.7GB RAM; Offerings listed as 8GB RAM actually provide 7.5GB RAM; Offerings listed as 16GB RAM actually provide 15GB RAM. These have been rounded for ease of comparison.
  • Free Tier is only available for 12 months for new customers



  • Bandwidth costs: Out 18¢ / GB; In 8¢ / GB
  • Rackspace’s CPU allocation methodology is not transparent, and may not be as interpreted. For Linux distributions, it appears to offer up to four virtual CPUs for every Rackspace Cloud Server. However, CPU measurement is based on a non-standard and dynamic weighting that is far from clear. This makes it difficult to compare 1:1 with other providers, even after consulting with Rackspace support.


Tags: , , , , , , , , , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *

Notify me of followup comments via e-mail. You can also subscribe without commenting.