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You Can’t Trust Microsoft’s Azure TCO Calculator

[UPDATE: As of January 2, 2018, the double counting of VMware compute category costs has been corrected. The other errors noted in the calculator remain.]

Last month, Microsoft posted an online “Azure TCO Calculator” that supposedly compares the cost of on-premises infrastructure, based on VMware vSphere, with the cost of running the same workloads in the Azure public cloud. Here at VMware, we pay a lot of attention to the Total Cost of Ownership (TCO) of on-premises vSphere versus public clouds. Our customers and industry analysts have told us that a well-managed private cloud often costs less than basic public IaaS clouds. We’ve recently written about a 451 Research study that found 65% of surveyed IT professionals felt their private clouds cost at most only 10% more than public clouds. So, when Microsoft’s blog posts and white papers claimed an 84% TCO advantage for Azure, we knew their figures needed scrutiny.

It didn’t take much digging to find numerous errors and biased assumptions in the Microsoft TCO calculator that wildly skew their results. In fact, the errors were so glaring, we wonder if anyone at Microsoft bothered to test it before going live.

What were they thinking?

The Microsoft calculator provides enough details in its listing of assumptions and in its expanded results breakdown to make it easy to replicate their TCO methodology in a spreadsheet. We did just that, and errors immediately became apparent. Here are just a few:

  • VMware license fees are paid every year of the selected timeframe! Selecting a 3-year TCO timeframe results in vSphere Enterprise Plus license costs being tripled. C’mon Microsoft, we know vSphere isn’t free, but our customers only need to buy it once, not every year.
  • vSphere hosts are grossly overconfigured for CPU and RAM. Using the scenario from the Microsoft white paper of 500 VMs, each with 2 vCPUs and 4GB, results in a server hardware requirement totaling 1,984 cores and 33TB of RAM. That’s 4x the CPU and 16x the memory that should be required! Perhaps they were using Hyper-V host configuration guidelines. Either way, you do NOT want these guys sizing your data center hardware.
  • For Azure Pay As You Go VMs, the calculator is using CPU-throttled B-series VMs that Microsoft describes as appropriate only for small dev/test-type uses.
  • VMs in Azure are powered on only 40% of the time with the calculator defaults. Perhaps a small dev/test team can turn off their VMs when they leave for the day, but the production enterprise workloads that run on vSphere are powered on 24×7, so hosting them on Azure should require the same continuous uptime.
  • The Microsoft calculator assumes vSphere Enterprise Plus, which includes features like High Availability, Dynamic Resource Scheduling, Fault Tolerance, vRealize Log Insight, and more. Azure VM instances don’t have those features – you would need to pay for extra Azure services like Premium storage and Operations Management Suite to come close.
  • On-premises servers, storage and networking hardware are assessed 20% per year maintenance fees in the Microsoft calculator. Are you paying that much? Didn’t think so.
  • The Microsoft calculator doesn’t apply any residual value for the on-premises servers and software at the end of the selected TCO timeframe. I guess Microsoft expects you to send all your servers straight to the landfill on their third birthday.
  • To cap it off, we found that a new math error was recently introduced into the Microsoft calculator. It now double counts all the costs in the “Compute” category for the VMware on-premises configuration – hardware, software, electricity, and virtualization costs are added twice. Really guys, this is getting absurd.

Let’s fix their calculator and see the effects

With all those errors in the Microsoft calculator, it’s not surprising to see that the 500 VM scenario noted above results in an enormous TCO difference between on-premises vSphere and Azure. Fortunately, we can make some simple corrections to their calculator and re-run the numbers. We’ll use vSphere Standard Edition, since it’s more comparable to Azure VM and storage features, and we’ll only charge for it once. We’ll reduce the vSphere server count to properly provision CPU and memory. A more reasonable 6% annual hardware maintenance fee will be assumed. The Azure PAYGO configuration will be upgraded to more realistic F2 VMs needed for steady workloads. Lastly, we’ll keep the Azure VMs running 24×7, as they would be for production workloads, by setting utilization to 100%.

With those simple corrections, the picture changes dramatically. Now, the on-premises vSphere TCO is lower than all but the 3-year reserved Azure TCO – a result much more in agreement with costs reported by customers.

Azure TCO Calculator Inputs

  • 500 compute VMs with Windows, 2 vCPUs and 4GB each, US East 2
  • VM density: 2 vCPUs/physical core
  • 100TB local disk/SAN storage
  • 3-year timeframe

If you really want a VMware-compatible public cloud with low TCO, look at VMware Cloud

So, now that we’ve shown that Azure doesn’t have a TCO advantage over on-premises vSphere, where should VMware customers look for a public cloud provider that can really save them money and increase agility with true hybrid cloud computing? The answer is the VMware Cloud offerings that provide vSphere-consistent infrastructure without the complexity of migrating workloads to an entirely different platform like Azure. You can choose VMware Cloud on AWS that features vSphere, vSAN and NSX with familiar vCenter management, all running on bare-metal AWS infrastructure with optimized access to AWS services. Or, select from the thousands of VMware Cloud Providers that offer VMware Cloud Verified infrastructure-as-a-service. You’re sure to find a provider that fits your needs and TCO budget when you’re ready take the easiest and most direct path to hybrid cloud.

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About Eric Horschman

Eric Horschman, Product Marketing Director at VMware Eric joined VMware in 1999 where, as product manager, he brought the first x86 server virtualization product to market and helped establish VMware as the leader in enterprise virtual infrastructure. Since then, he’s worked to launch and market a broad set of VMware enterprise platforms. Currently, Eric leads product marketing for Azure VMware Solution as part of the VMware Cloud Infrastructure Business Group.

6 thoughts on “You Can’t Trust Microsoft’s Azure TCO Calculator

  1. James Fecteau

    What about the VMWare products that would make the “corrected” environment cloud-like? I would think to make this as similar as possible that NSX and vRealize should be included in the “corrected” environment’s costs. Called out as a third option OR at the very least identified as something missing. Propaganda and marketing on both sides.

    1. Andrew c

      You’re missing the point. It was Microsoft that produced the calculator and, in trying to compare apples to oranges, made the glaring errors. As MS weren’t comparing Azure to vRealize (or VMware cloud on AWS) why should VMWare? If a competitor makes basic calculation errors (like charging licenses every year) then surely it’s only fair to have those errors corrected.

      Besides, there’s a very clear paragraph at the end of the article where VMware cloud on AWS is suggested as another alternative. That does include NSX, vSAN and potentially vRealize too. It’s easy enough to stay a quote for it from AWS though so there’s no real need for a TCO calculator.

  2. Mark Butcher

    I’d argue that no vendor has an accurate or realistic TCO or ROI model. There is a tendency to create generic models full of assumptions that either are widely inaccurate from the start or is woefully out of date within minutes.

    Every one I’ve ever seen shows unrealistic TCO figures, ROI metrics that make me giggle and assume savings that would or could never be realised. An IBM one from 3-years ago was the funniest I’ve ever seen, it showed a customer TCO saving over 3-years of £23.5m and an ROI in 7 months. The problem with this was simple – their entire annual budget for IT in that period was £2.5m……..

    Nearly every vendor TCO over estimates costs for anything they don’t sell themselves (i.e. storage vendors think servers are expensive, Public Cloud vendors think on-premise storage costs 5 times what it actually does).

    1. James Young

      Couldn’t agree more however the challenge is customers often want ROI/TCO examples but don’t want to spend the time or even have the details around the relevant inputs to create a tailored model, hence why we have created generic models and these are very comprehensive and flexible – one of our models is externally validated by Forrester using their Total Economic Impact (TEI) approach. Even so VMware and are VMware partners are more than happy to work with our customers to create a tailored model on a case by case basis with their own inputs, and we are increasingly doing this but takes time and needs the customer to ready to make the effort. Even still no model will ever be perfect.

  3. matt

    Curious… was power/cooling, floor space, physical security, vSphere administration labor, etc considered in the on-prem numbers? Those add up and can add up quickly especially over 3+ years and are values that are already included in the Azure published rates. The scary thing is that the numbers in this exercise are so close. Even as a long time VMware admin, it’s scary that the writing seems to be on the wall for on-prem as the big boys are chipping away at the prices every year and the ability to extend networks to these places gets easier and cheaper. The justification for on-prem will have to come from somewhere else over the next few years or the tides are really going to start to turn and you don’t have to look any further than the offerings/partnerships that VMware is already offering with AWS to see that.

    1. Eric Horschman Post author

      Matt – Yes, Microsoft’s calculator includes all those costs plus a $52/VM/month charge for virtualization infrastructure. The $52/VM/month charge is arguably excessive, but we left all those costs in the corrected amounts shown above. Our corrections focused on the most obvious errors in Microsoft’s calculator. There are more biased assumptions that we left in place. We are also including the Windows Server OS licensing costs on the VMware side and the cost of Azure instances with Windows on the Azure side.

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