Nokia: Don't Be Too Quick To Dismiss Private Cloud Savings

Nokia's total cost of ownership study finds most enterprises can save 25% of data center costs by converting it to private cloud.

Charles Babcock, Editor at Large, Cloud

January 25, 2017

5 Min Read

The private cloud has taken it on the chin recently as a concept the enterprise should invest in, with sources such as InteropITX saying organizations are moving off private clouds. But Nokia is supporting a different point of view: The private cloud will save enterprise IT 25% of its expenses over a five-year adoption cycle.

That notion that the private cloud is worth implementing and provides real savings has been a nearly constant target of critics, who say the real savings are only found in the public cloud. The mix of workloads from many enterprises on Google, IBM, Microsoft or Amazon Web Services allows an operational savings that are not achievable inside an individual enterprise's data center, some cloud advocates believe, such as Accenture's Jack Sepple writing on The Fallacy of Private Cloud.

Nevertheless, Nokia has ignored such comments and has adopted its own total cost of ownership analysis to demonstrate the value of private clouds. One reason it would do so is that Nokia is one of several commercial vendors of OpenStack, the open source set of software that can be used to assemble a self-service, horizontally scalable cloud in the enterprise data center.

Nokia offers a range of consulting and private cloud building services and claims it has worked with half of the Global 50 top companies to reach its conclusions. Furthermore, IDC has inspected Nokia's Enterprise Private Cloud Total Cost of Ownership Model and concluded it is satisfied "that the assumptions, all supported by third party references, are reasonable and comprehensive enough to establish a fair comparison of total costs of private cloud and legacy environments," said Randy Berry, IDC VP of business value strategy. Nokia's manner of calculating IT costs "adhere to commonly accepted financial guidelines," he added in the Jan. 24 announcement.

[One element needed by the private cloud is an ability to see enterprise data in the public cloud. For more, read Andrew Froehrich's Achieve Application And Data Visibility In the Cloud.]

Here's what the TCO model showed: An IT staff can save 50% of its operating expense by moving to private cloud, due to the cloud's higher degree of automation. The conclusion is based on a study conducted at Bell Labs. More complete rack utilization will save 20% of capital expenses, Nokia concluded from a study on its own customers. Support costs can be reduced by 25%, Nokia said. Total savings may be 25% but that's a conservative estimate. They have the potential to reach 35 to 48%, according to a Nokia infographic outlining where the savings lie.

In addition, Nokia concluded from using the model that:

-Enterprises can expect to break even on a private cloud investment in less than three years.

-A private cloud investment will pay for itself in 31 months.

-The savings materialize from either an all-private cloud operation or a mix of private and public clouds.

The model does not require a forklift removal of legacy systems but assumes the private cloud "sits atop existing IT infrastructure as an overlay." In Nokia's version of private cloud, a Nuage Networks software-defined network sits on top of an OpenStack cloud infrastructure, unifying compute, storage and networking and allowing more efficient use of resources. The Apache CloudStack, contributed to the Apache Software Foundation by Citrix after its acquisition of, may also be used. Its goal is to create a cloud overlay that unites data center, WAN and existing public cloud workloads, if they exist.

A private cloud deployment strategy that can sit on top of existing infrastructure "would minimize changes to day-to-day IT operations," Nokia concluded in its announcement.

Nokia's head of large enterprise business, Mike Loomis, said the Nokia total cost of ownership model ignores other private cloud benefits, such as faster time for new application development, faster time to market for new products or a more agile company in favor of the cost analysis. "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,'" he said.

The Nokia approach imposes a leaf and spine switching system on the data center network, as explained in this white paper. Further information on how the total cost of ownership model works can be found here.

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InteropITX reseach writer Joe Emison's critique of the private cloud cited numerous drawbacks, including the difficulty of getting an existing data center environment to work with a public cloud service.

"Running applications divided between public and private environments introduced too much complexity, increased the challenges of application design and introduced unpredictable network latencies. Skipping the hybrid phase and moving straight to public cloud "solves these issues… Attempting to bolt a private cloud onto a public cloud does not," Emison noted.

Whatever the state of hybrid operations, a private cloud might still win out over an all-legacy or legacy with toehold in the public cloud combination. Enterprises often have data that is too mission critical to the company to feel comfortable sending it into the public cloud. They have legacy applications that may run best on their legacy hardware instead of more advanced public cloud hardware.

And they may want to avoid the complexities of dealing with most of their workloads off premises and in the public cloud. For these and other reasons, Nokia's bid to stand by the idea of private cloud may work. It doesn't hurt that there's an advocate of running the legacy data center more efficiently as private cloud at work in the marketplace.

About the Author(s)

Charles Babcock

Editor at Large, Cloud

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive Week. He is a graduate of Syracuse University where he obtained a bachelor's degree in journalism. He joined the publication in 2003.

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