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Cloud cost savings debatable in build-vs.-buy issue for providers

Editor's note: This is the second part of a two-part series on the reasons why vendors have caused a growing number of cloud providers to do more in-house development. Don't miss part one: "As cloud providers consider build vs. buy, many lean toward 'build.'"

Where commercial products have fallen short, cloud providers have had to fill in the blanks by building their own hardware and software. From a technology perspective, the decision to commit resources to in-house development is rather simple: Either the vendor has the desired capability, or it doesn't.

Determining whether it's cost-effective is another story.

From a cost perspective, relying solely on commercial vendors for hardware components puts any cloud provider "at a fundamental disadvantage in the marketplace," according to Jeff Deacon, chief cloud strategist at Terremark Worldwide.

Leading cloud providers like Google and Amazon have all developed homegrown technologies -- from networking to storage -- and this trend is becoming even more pronounced now throughout the broader market as other large providers, including Terremark, follow their lead, Deacon said.

"Where initially the large cloud providers were still purchasing commercial hardware, today it's not the case," he said. "It's gotten to the point now where you can purchase that same hardware directly from assembly lines in China that your vendor used to buy your equipment from."

Christopher "Kip" Turco, senior vice president of data center operations at Windstream Communications, didn't go as far as to criticize vendors in the recent Cloud Carrier Forum workshop at Interop 2012, but he acknowledged that his company is saving money by developing more cloud technologies in-house and by using open source platforms. In turn, he's relying less on vendors like Cisco Systems and VMware.

"From a software perspective, using an open source platform is the easiest way to cut down costs," Turco said. "From a hardware perspective, it's not just buying cheaper hardware from vendors. It's repurposing hardware in your company that's already been theoretically or realistically paid for."

David Frattura, senior director of cloud strategy solutions at Alcatel-Lucent, said cloud providers facing the build-vs.-buy question can achieve more savings with commercial products like the company's CloudBand line.

"In the face of rapidly growing cloud services and competitors, carriers need to focus on executing their strategies and their core competencies rather than tying up financial and intellectual capital building and managing cloud technologies and solutions," Frattura said in an emailed statement. "Carriers no longer have to incur the time, cost or risk associated with developing their own platforms."

Back to part one: Build vs. buy: Have vendors met cloud provider needs?

Let us know what you think about the story; email: Jessica Scarpati, Site Editor.


This was first published in October 2012

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