Cloud vs dedicated pricing – which is cheaper?

By David Mytton,
CEO & Founder of Server Density.

Published on the 29th September, 2016.

Editor’s note: This is an updated version of an article originally published on GigaOm on 29/11/2013.

Using cloud infrastructure is the natural starting point for any new project because it’s one of the ideal use cases for cloud infrastructure – where you have unknown requirements; the other being where you need elasticity to run workloads for short periods at large scale, or handle traffic spikes. The problem comes months later when you know your baseline resource requirements.

As an example, let’s consider a high throughput database like the one we use here at Server Density. Most web applications have a database storing customer information behind the scenes but whatever the project, requirements are very similar – you need a lot of memory and high performance disk I/O.

Evaluating pure cloud

Looking at the costs for a single instance illustrates the requirements. In the real world you would need multiple instances for redundancy and replication but for now, let’s just work with a single instance.

Amazon EC2 c3.4xlarge (30GB RAM, 2 x 160GB SSD storage)


$4,350 upfront cost

$0.497 effective hourly cost

Rackspace I/O1-30 (30GB RAM, 300GB SSD Storage)


$0.96/hr + $0.15/hr for managed infrastructure = $1.11/hr

Databases also tend to exist for a long time and so don’t generally fit into the elastic model. This means you can’t take advantage of the hourly or minute based pricing that makes cloud infrastructure cheap in short bursts.

So extend those costs on an annual basis:

Amazon EC2 c3.4xlarge

$4,350 + ($0.497 * 24 * 365) = $8,703.72

Rackspace I/O1-30

$1.11 * 24 * 365 = $9,723.60

Dedicated Servers/Instances

Another issue with databases is they tend not to behave nicely if you’re contending for I/O on a busy host, so both Rackspace and Amazon let you pay for dedicated instances. On Amazon this has a separate fee structure and on Rackspace you effectively have to get their largest instance type.

So, calculating those costs out for our annual database instance would look like this:

Amazon EC2 c3.4xlarge dedicated heavy utilization reserved. Pricing for 1-year term:

$4,785 upfront cost

$0.546 effective hourly cost

$2 per hour, per region additional cost

$4,785 + ($0.546 + $2.00) * 24 * 365 = $27,087.96

Rackspace OnMetal I/O Pricing for 1-year term:

$2.46575 hourly cost

$0.06849 additional hourly cost for managed infrastructure

Total Hourly Cost: $2.53424

$2.53424 * 24 * 365 = $22,199.94

Consider the dedicated hardware option…

Given the annual cost of these instances, the next logical step is to consider dedicated hardware where you rent the resources and the provider is responsible for upkeep. Here at Server Density, we use Softlayer, now owned by IBM, and have dedicated hardware for our database nodes. IBM is becoming very competitive with Amazon and Rackspace so let’s add a similarly spec’d dedicated server from SoftLayer, at list prices:

To match a similar spec we can choose the Monthly Bare Metal Dual Processor (Xeon E5-2620 – 2.0Ghz, 32GB RAM, 500GB storage). This costs $491/month or $5,892/year. This is 78.25 percent cheaper than Amazon and 73.46 percent cheaper than Rackspace before you add data transfer costs – SoftLayer includes 500GB of public outbound data transfer per month which would cost extra on both Amazon and Rackspace.

… or buy your own

There is another step you can take as you continue to grow — purchasing your own hardware and renting datacenter space i.e. colocation. But that’s the subject of a different post altogether so make sure you subscribe.

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