- Enterprise Private Cloud Total Cost of Ownership (TCO) model forecasts a minimum of 25 percent savings - over five years - on
overall IT costs for large enterprises that adopt a private cloud versus a legacy IT environment; break-even in less than
three years
- Analysis applies to OpenStack®-based private clouds, coupled with software defined networking (SDN) technology and built with
off-the-shelf components from a range of vendors
- Nokia offering a custom analysis free of charge for large enterprises from now until June 30, 2017
24 January 2016
Espoo, Finland - Most large enterprises can save a minimum of 25 percent on their IT costs over five years by moving to a
private cloud from a legacy IT environment, according to a financial analysis conducted by Nokia. The analysis, known as the 'Nokia
Enterprise Private Cloud TCO Model' - the first of its kind in the industry - also demonstrates that enterprises can expect to
break even on their private cloud investment in less than three years.
Advocates of enterprises moving to private cloud have typically focused on the operational and business benefits that this
approach can offer, in terms of flexibility, agility and the ability to scale quickly. The analysis underlying the Enterprise
Private Cloud TCO Model is among the first available in the market that exclusively explores the question that is most critical to
IT managers - what are the cost benefits of this move? The model shows that the common assumption that private cloud is too
difficult or costly to adopt is wrong, and that large enterprises should make the move directly to private or public-private hybrid
cloud because it utilizes off-the-shelf components and is less expensive.
The analysis began with an existing budget for a representative legacy IT environment, and contrasted that with the requirements
of a shift to a private cloud model and associated costs. More specifically, the analysis takes the overall operational budget of
the enterprise data center (eliminating costs that will be largely the same in either scenario such as facilities costs - power,
rent, air conditioning/heating), and then provides a high-level breakout by the software or operational tasks performed. The
breakout was then used to calculate potential cost impacts - both increases and decreases - for a cloud environment.
Nokia's financial model is based on a private cloud, or private-public hybrid cloud architecture that can be built at any large
enterprise today, incorporating commercial components from a variety of vendors as well as open source components including
OpenStack® cloud management software. The model also assumes that the cloud architecture is one that does not require 'forklift'
replacement of the IT environment, but instead sits on top of the existing IT infrastructure as an overlay. As a result, it also
assumes a deployment strategy that would minimize changes to day-to-day IT operations.
Leading industry analyst firm IDC validated the model overall, including the ranges of potential increased and decreased costs
by category.
Randy Perry, Vice President, Business Value Strategy, IDC, said: "IDC has conducted an extensive analysis of the
structure and operation of the Nokia Enterprise Private Cloud TCO Model. We are satisfied that the assumptions, all supported by
3rd party references, are reasonable and comprehensive enough to establish a fair comparison of total costs of private
cloud and legacy environments. Also, the industry data and default settings fall within acceptable ranges based on IDC business
value research with over 450 enterprises over the last two years. Finally, the algorithms and methodology for calculating cost
savings are accurate and adhere to commonly accepted financial guidelines."
Mike Loomis, head of the large enterprise segment at Nokia, said: "The Private Cloud TCO Model we are introducing today
is an industry first. Most advocates for the deployment of a private or hybrid cloud in large enterprises focus their arguments on
the benefits offered by a cloud approach, be it faster deployment times for new applications, a more flexible approach to deploying
and managing their resources and similar claims. While these claims in many cases are legitimate, our model differs by addressing
the core concerns most enterprise IT managers have: is this move worth the investment, and are the savings really there? Our
analysis provides a resounding 'yes'. Better yet, IDC, a highly respected analyst firm, agrees."
Lauren Sell, Vice President Marketing and Community Services, OpenStack Foundation, said: "More and more enterprises are
embracing OpenStack-powered private clouds for their performance advantages and their cost savings - both over public clouds and
proprietary private clouds. The Private Cloud TCO Model developed by Nokia is the latest example of OpenStack community members
creating valuable and validated tools that can help enterprises as they plan and execute their strategies for agile, open
cloud."
The cost savings identified by the model were calculated using the most conservative assumptions available, based on the needs
of highly regulated industries such as finance and healthcare. Further, increased costs, such as the costs of migrating legacy
applications to the cloud, were calculated at the upper end of a possible range of values. Therefore the overall 25 percent cost
savings can be considered a minimum baseline - actual savings in practice would likely be considerably higher.
Today, the Nokia Enterprise Private Cloud TCO Model offers a generic analysis of likely cost savings for large enterprises. For
enterprises that are interested, it can quickly be modified to incorporate a particular enterprise's data and deliver not only a
custom savings but also a budgeting estimate by cost category. Nokia will perform such analysis tasks without charge for large
enterprises from now until June 30, 2017.
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