There have been a few recent analyses showing that cloud computing has significant efficiency and cost advantages. I can think of four reasons why cloud computing is (with few exceptions) significantly more energy efficient than using in-house data centers:

Green:Net MiniNote: Jonathan Koomey on Green Cloud Computing

There have been a few recent analyses showing that cloud computing has significant efficiency and cost advantages. The most recent one with which I am directly familiar was conducted by Jon Taylor’s team at WSP Environment & Energy for Salesforce.com, and it showed per-transaction emissions reductions averaging 95 percent for companies that shift to using the cloud.

I can think of four reasons why cloud computing is (with few exceptions) significantly more energy efficient than using in-house data centers:

1. Economies of scale. It’s cheaper for bigger cloud computing folks to make efficiency improvements because they can spread the costs over a larger server base and can afford to have more dedicated folks focused on efficiency improvements.

For example, there are usually significant fixed costs of implementing simple techniques to improve Power Usage Effectiveness (PUE), like the costs of doing an equipment inventory and assessment of data center airflow (same for implementing institutional changes like charging users per kW instead of per square foot of floor area). Whenever there are costs that are substantially fixed (i.e. only weakly related to the size of the facility), bigger operations have an advantage because they can spread the costs over more transactions, equipment, or floor area.

There’s also a substantial advantage to having “in house” expertise devoted to efficiency, instead of having staff split between different jobs. Technology changes so rapidly that it’s hard for people not devoted to efficiency to keep up as well as those that are.

2. Diversity and aggregation. More users, more diverse users, and more users in different places means computing loads are spread over the day, allowing for increased equipment utilization. Typical in house data centers have server utilizations of 5-15 percent and sometimes much less, whereas cloud facilities for major vendors are more in the 30-40 percent range.

3. Flexibility. Cloud installations use virtualization and other techniques to separate the software from the characteristics of physical servers (some call this “abstraction of physical from virtual layers”).  This sounds like a great thing for software and total costs, but why is it an energy issue?

Using this technique means that you can redesign servers to optimize them and drop certain energy costly features. For example, if software can route around physical servers that die, you no longer need to have two power supplies in each server; the death of any one particular server doesn’t matter to the delivery of IT services.

In essence, this technique redefines the concept of reliability from one that is based on the reliability of a particular piece of hardware to one that is based on the reliability of the delivery of the IT services of interest, and this is a much more sensible approach.

4. Ability to sidestep organizational issues instead of having to address them head-on (which is hard and slow). While most company in-house IT operations face the problem of a disconnect between IT departments driving server purchases, and facilities departments paying the electric bill, that problem has largely been solved for the cloud providers. They generally have one data center budget and clear responsibilities assigned to one person with decision making authority.

Economies of scale are more powerful in the cloud scenario, because you’ve gotten rid of the impediments to taking action and can allow those economies to work their magic. Finally, it’s much easier and cheaper for people stuck with the in-house organizations to use a credit card to buy cloud services instead of waiting around for their internal IT organization to get its act together.

These four big energy advantages will over time translate into more and more pressure for companies to adopt cloud services, because the economic advantages (driven by the energy advantages) are so large.  And it’s not just energy costs, it’s the capital cost of all the supporting equipment, which in a standard in-house facility can be $25,000/kW and (together with the energy costs) add up to half or more of the total costs of the facility (for details see Koomey, Jonathan G., Christian Belady, Michael Patterson, Anthony Santos, and Klaus-Dieter Lange. 2009. Assessing trends over time in performance, costs, and energy use for servers. Oakland, CA: Analytics Press.  August 17.)

Of course, there are still issues to work out. For example, people haven’t really ironed out the complexities about liability for cloud outages.  And there will always be providers who will want to have their own in-house facilities for security reasons (like big financial institutions). But even in that case, the benefits of a virtualized cloud infrastructure can be brought to the in-house facilities.

You won’t get the same diversity, but the other benefits of cloud will still be powerful. I’ve also heard of companies creating “private clouds” for use by other companies that pay in to use them on a “members-only” basis, thus dealing with the diversity and security issues. So things are evolving rapidly, but the economic benefits are so large that we’ll see a whole lot more cloud computing in coming years.

This post originally appeared on Jonathan Koomey’s blog.

Jonathan Koomey is a researcher, author, lecturer, and entrepreneur whose work spans climate solutions, critical thinking skills, and the energy and environmental effects of information technology. He’s been a Consulting Professor at Stanford University since 2004, and recently held visiting professorships at Yale (Fall 2009) and Stanford (2003–4 and Fall 2008), and worked as a researcher and scientist at Lawrence Berkeley National Laboratory (LBNL) for more than two decades

Image courtesy of Pike Research, Grigorieff Photography, GigaOM Events

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  1. I have one question… when company A gets a bill from cloud computing company and they say… we aren’t paying for that. We disagree with your how you are billing us… and cloud computing company says well you’re not getting your email then! Or whatever application they want to host… what does company A do? Their Business Suffers? Over a billing dispute. There are a few “concerns” about cloud computing however for a small company I think it makes sense.

    1. You can’t just stop sending a client’s email due to a bill dispute. In the UK at least, this is illegal.

      1. Not necessarily It would depend on the dispute resolution terms that are in the SLA or contract you signed.

  2. IMO Cloud computing is a marketing concept. Technology makes a difference marketing concepts don’t. The technology that drives cloud will remain the marketing concept will wither and die.

    1. Your statement makes absolutely no sense at all

  3. David Robis Monday, July 25, 2011

    As the connection gets faster and the data storage gets safer, a simple Net_PC is all you need!

    1. In what parallel universe is that occurring?

      1. David is absolutely right, We own a private data centre and we are finding that cloud based solutions are more accessable than ever, you dont need expensive lease lines anymore to connect to cloud based data – we are able to bond broadband with great effect. Smartphones now provide great ‘fall-back’ for email collection and you dont have to go full measure when choosing hosted.

  4. Brookings recently released a report that may also be of interest to you and your readers: Addressing Export Control in the Age of Cloud Computing http://goo.gl/6xn8c

  5. Cloud computing is a very broad term so it’s always best to be as specific as possible when talking about Cloud. Microsoft 365 for instance is very different than saying hosting with the IBM Smart Cloud… Cloud Computing will continue to grow however, there is still a lot of growth within the Cloud Providers themselves in order for the economies of scale to be fully realized. Most of our customers are still very concerned about security and sla agreements.

    1. This “define cloud computing” is a tired old hack usually trotted out by people trapped in the spotlights of this oncoming train. Cloud computing is simple – it is a service accessible via a web browser and a network connection – nothing more needed by way of definition.

      1. Cloud is NOT a service accessible via a web browser, it is much more than that. Cloud is simply a more evolved form of previously known concept of web/server hosting services. It is just that the hosting concept is now grown to embrace other services as well, be it an ERP, a banking service, ATMs or pretty much anything that would require technology (more precisely Information Technology) to back it.

  6. The primary reason I see cloud computing as potentially more efficient is simple. If a new “greener” technology comes out, it is far easier for Amazon or Microsoft to implement that in 10 large datacenter vs. asking every IT team with a server room to update their infrastructure.

  7. EtherealMind Monday, July 25, 2011

    Blah Blah Cloud.


    Clouds are for poor people who can’t afford to build a proper application. When you get on public transport that is shared with other people, it never works quite the way you want. And there is no competitive advantage.

    Clouds are going to take a small, but significant group of companies that can’t afford decent computing power. And will live with the limitations. None of this is ever considered by the Cloud boosters. More reality, less “blah blah”.

    1. Wow. I think you are clearly unaware of who is successfully using cloud computing already. They definitely aren’t companies “that can’t afford decent computing power.” They are companies like Twitter, Salesforce, Cisco

    2. You are correct about one thing. Only rich people can afford products like Microsoft Outlook and CRM. These are expensive and inflexible apps that are hard to configure and use – gmail and salesforce.com, by comparison provide real competitive advantage on the basis of scale, ease of use and price. I think its you who needs to tone down the uninformed blah blah bla

  8. I agree with Ethereal;

    If you believe the hype, IT departments are about to become redundant and all that shiny hardware and flashing lights in the server room are about to become a thing of the past. We can look forward to the history and archaeology museums setting up displays of the IT Director’s office next door to the caveman exhibit!

    Well, sorry to burst the cloud computing marketing bubble, but this is just not so. Cloud computing is full of issues as the technology develops, and as with any relatively new and innovative service or product, the application to the real world is uncovering new issues just as much as discovering new ways in which old issues, such as privacy have to be handled. Cloud computing offers some extremely excellent benefits but, developers and users must exercise a degree of circumspection and engage in regular reality checks!

    1. I heard people talk like you in the 1980’s when the PC and the client server networking model emerged. I suggest you look harder at this before you go the way the COBOL programmers and Data Processing Departments did back then.

    2. Sharique Abdullah Hans Sunday, July 31, 2011

      Any concept that evolves from the scratch has issues, and that’s what evolution is for. Cloud computing would eventually grow into something better than what it currently is. Technology is meant to be like that.

  9. It is just a game change. You may forget about some of the earlier issues when joining a Cloud environment while having some new issues (SAN / Disaster Recovery issues mostly out while problems with services in case of a bill dispute are in). I believe larger, professional Service Providers may work at an economy of scale you never have in smaller datacenters. It is just true for all parts including energy use. Security, Integration – some new sort of challenges.

  10. We recently finished an exhaustive comparison of what it costs to run our IT department vs going to the cloud. The cost difference was staggering, the cheapest cloud offering (signing a 3 year lease) was 6x as expensive as it was for us to run it in house (this includes staffing colo rent, ISPs, software licensing), and that doesn’t even factor in the additional services provided by the IT department like monitoring (which costs extra in the cloud) and deep dive troubleshooting (which is largely unavailable).

    1. I believed in cloud computing will saved cost in germ of energy and resources. But whatever it is, life cycle analysis should be done first. Due to different nature of opertion, not all organisations could enjoy the saving. It is depends on how intensive and frequent changes in reprograming the apps that suit the business operation vs productivities.

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