How can you reduce electricity costs by using public cloud solutions? 

2023 01 16

Due to a full-scale Russian invasion of Ukraine, European countries are dealing with energy challenges resulting in rising electricity costs. A significant consuming element for enterprises is electricity usage for IT infrastructure. Companies seek effective ways to save energy costs generated by IT hardware. 

Public cloud services can reduce current electricity costs and improve your business profitability.   

This blog post presents three core areas that enable saving energy expenditures

Current situation 

Nearly 50% of companies worldwide still keep their workloads in on-premises data centres. However, a recent study by Microsoft and WSP Global Inc. shows that storing digital solutions in the cloud can be 22% to 93% more energy-efficient than on-premises data centres. Lawrence Berkeley, National Laboratory research, explains that companies can save 60-85% on energy costs by using public cloud solutions instead of on-premises.   

While the benefits of using the public cloud are not limited to the costs line, it is a win-win opportunity to gain technological advance and remain cost-effective. 

How do cloud solutions ensure the efficiency of electricity usage?  

Companies tend to store their IT hardware on-premises or use a local data centre. In both ways, they must cover multiple energy expenses that consist of: 

  • Electricity is required to keep the hardware working.  
  • Total facility energy such as cooling, lighting, etc.   

In such a scenario, companies are directly affected by rising electricity costs in the EU, as they must pay for all consumed energy. Businesses that keep their workloads and data in the public cloud gets different practice, and here is why:   

1# Top cloud providers achieve better data centre efficiency 

The Power Usage Efficiency (PUE) indicator describes the ratio between the total used facility energy and the energy required for IT equipment. The closer PUE is to 1, the less electricity is needed to run overall premises. If your local premises’ PUE on average equals 1.7, your costs for electricity will be up to 1.7 times higher than your hardware uses.   

Public cloud providers invest in the latest energetic solutions to achieve surprisingly low PUE. For example, AWS data centres have a PUE between 1.07 and 1.15, which positively impacts your general IT expenses.   

A tip: Calculate your data centre PUE and compare it with top providers. You can ask for that information from the current provider.   

2# Flexible pricing enables resources optimisation 

Public cloud providers allow you to use a consumption-based pricing model. You can choose between several pricing models: pay-as-you-go – suitable for temporary workloads or usage spikes; reserved instances – ideal for stable forecasted usage; spot instances – suitable for non-critical workloads that can be performed anytime. You do not need to pay for unutilised resources, and there are plenty of tools and practices to manage them efficiently. In other words – you do not pay for the energy of IT resources that is not required.   

With the fundamental shift in how you can get IT capacities, there is a great possibility to avoid waste of money on unused IT hardware capacities.   

A tip: When calculating a business case for migrating workloads to a public cloud, use a combination of all three pricing options – pay-as-you-go, reserved and spot instances. It gives much more realistic calculations of possible expenses.  

3# Explore different geographical regions for better pricing 

Public cloud providers operate data centres developed all around the globe. In 2023 AWS cloud spans 30 geographical regions, and Microsoft has a presence in 60+ countries. The pricing level for cloud services might differ with every region because the costs of exploiting specific premises may vary. 

Based on pricing policy in different locations, you can explore and compare specific services in multiple locations and choose the best option. Thus, if the service rates of European-based cloud data centres are too high, you can move it to the US or Asia Pacific, etc.   

A tip: Analyse scenarios of using Cloud services from different physical locations. Differentiation by geography can bring not only technological but also financial advances. 

Examples of electricity cost calculation 

The growing rate of electricity dramatically changes your IT electricity expenditures. Here are some examples to visualise it:    

Example 1. A single server with average utilisation of 70% capacity:

  • With the earlier average electricity rate at 0.18€/kWh, monthly costs were around €30-50; 
  • If your electricity rate increases to 0.6€/kWh, your monthly costs will be €100-120.  

Example 2. One rack (42U) of IT hardware with a demand of 7kW of power (a typical setup for an SMB company): 

  • With the previously average electricity rate at 0.18€/kWh, monthly costs were around €600-800; 
  • At an increased electricity rate of 0.6€/kWh monthly costs are now €2000-2500. 

A tip: If you know how much power requires for your equipment, you can convert it to kWh using a calculator and multiply it by your electricity rate to get exact monthly costs.   

If it is not your direct business, exploiting or maintaining your data centres is a costly and inefficient way. It requires dedicated space, personnel, and procedures to keep it running. With that comes additional costs (such as electricity) that are growing yearly.    

Yet, it can be solved by moving your digital solutions to the cloud. Public cloud providers take full care of data centres, which helps to down internal power costs needed for your on-premise solutions. Optimised electricity consumption is one of many benefits cloud service customers can enjoy. Migrating your workloads to the cloud can help improve security, boost agility, speed up your time-to-market, enhance operational performance, and others. 

Curious to find out more? You are welcome to dive deeper into cloud benefits or cloud pricing now! 

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