Microsoft on Cloudonomics: Economies of Scale Favor Public Clouds

Nov.14.10 | About: Microsoft Corporation (MSFT)

Microsoft (NASDAQ:MSFT) has published a white paper on cloud computing economics and argues that large clouds could deliver computing power at up to 80 percent lower cost than small ones.

That’s an interesting argument and makes you wonder how private clouds are going to play out in the future.

In its paper, Microsoft says that supply, demand and multi-tenancy all favor the economics of large clouds. In fact, “private clouds may one day carry a cost that is as much as 10x the cost of public clouds,” said Microsoft.

What’s unclear is the timeline here. Microsoft is obviously pitching its Azure platform and the public cloud folks (Amazon Web Services, (NYSE:CRM) and Google (NASDAQ:GOOG)) are likely to agree with the conclusion. Vendors pushing private clouds and equipment (VMware (NYSE:VMW), HP (NYSE:HPQ), IBM and a bevy of others) are likely to disagree.

The open question is the timing of the shift from hybrid and private cloud approaches to mostly public ones. Nevertheless, the paper is worth a read. Among the notable graphics: