Calculating hidden storage costs

Cloud storage is priced like a utility. Over and over again, virtually all vendors repeat the same mantra: “Customers pay only for what they use.” Pricing for public cloud storage ranges between 12 and 25 cents per gigabyte per month.

Yet the real savings in cloud storage may have more to do with all of the ancillary costs associated with companies storing their own data. “Lots of data centers are already starting to fold under the amount of data under management,” notes Terri McClure, an analyst at Enterprise Strategy Group. “If you are out of space, power and cooling, it doesn't matter how cheap [storage] gets — starting to offload data into the cloud is a better and cheaper alternative than building a [new] data center.”

Marc Staimer, president of Dragon Slayer Consulting, a Beaverton, Ore.-based IT management consultancy, suggests that the best way to calculate the cost of storage is to take into consideration a laundry list of ancillary costs, including power and cooling expenses, annual licensing fees for storage software, and the cost of data center floor space and security. All of those expenses plus others add up to what he calls the “burdened storage cost.”

“The conventional wisdom is overall storage costs per gigabyte are rapidly declining,” Staimer noted in a 2008 report on a price/performance comparison of Nirvanix's cloud storage services and in-house storage. “In fact,” he explained, “conventional wisdom is completely wrong. Overall, the burdened storage costs per gigabyte in most data centers are actually increasing or at best staying flat. This is because the hard disk drive acquisition cost is a very small part of the overall burdened storage costs.”

Douglas Menefee, CIO at Schumacher Group, an emergency medicine management and staffing company based in Lafayette, La., says cost reduction is one of the primary reasons he continues to explore moving more and more terabytes of data to the cloud. “While storage costs have decreased for SANs, we can't compete with the buying power of the emerging cloud storage providers,” he says.

“But cloud storage providers do need to simplify their pricing models,” Menefee adds. “It can be dizzying to dissect the formulas they come up with for pricing.”

Another thing to consider when weighing the potential cost savings of cloud storage is the age of your current storage gear.

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