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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.

Discover How Much You Can Save by Choosing VMware for Your Private Cloud with Our Updated TCO Comparison Calculator

A brand-new update to the VMware TCO Comparison Calculator is now available for you to compare the Total Cost of Ownership of VMware and Microsoft virtual infrastructure and private cloud platforms. We’ve taken our familiar calculator and updated it with the latest prices, features and independent lab test results to help you evaluate the complete lifecycle costs – combining operational and capital expenses – of a virtual infrastructure and private cloud solution matching your requirements.

Operational Expenses – latest testing reconfirms the VMware advantage

The VMware TCO Comparison Calculator refresh incorporates the results from new independent testing conducted by Principled Technologies that measured the operational costs of running a private cloud based on the latest product releases from VMware and Microsoft. In the case of VMware, Principled Technologies tested vSphere 6.5 and vRealize Suite 7.0. Their Microsoft testing was on Windows Server 2016 Hyper-V and System Center 2016. By measuring the steps and time needed to complete an array of essential virtual infrastructure and private cloud operations tasks, Principled Technologies provided the raw data the calculator uses to estimate the OpEx costs you can expect to pay. As with similar OpEx studies conducted over the last several years, Principled Technologies found VMware OpEx costs to be substantially lower than Microsoft’s. A few of the contributors to the VMware OpEx advantage are:

  • Patching hosts – Principled Technologies again confirmed that vSphere, with its bare-metal architecture, has much lower patching costs than Hyper-V, which comes bolted to a multi-gigabyte Windows Server OS. [Gartner also just reiterated how much more downtime is required for Hyper-V patching.]
  • Protecting VMs – The new VM encryption feature in vSphere 6.5 is much easier to use than the VM protection features in Hyper-V. A simple storage policy setting in vSphere encrypts all VM data at the hypervisor-level and works with any guest OS. Microsoft’s approach requires separate infrastructures for shielding VMs with newer Windows versions, and completely different methods for Linux and older Windows guests.
  • Operations management and automation – The VMware vRealize Suite makes setting up dashboards for infrastructure monitoring and managing capacity much faster than with Microsoft’s System Center components. Your system administrators can better configure vRealize Operations and vRealize Automation to match their operations management and automation needs. In addition, ongoing monitoring is more efficient.

Capital Expenses – influenced by density, licensing, and management resources

The other half of the TCO equation is capital expenses – what you pay for the servers, networking and storage hardware, as well as the software licenses.

Because most of our customers need to run Windows Server VMs, the TCO Comparison Calculator includes the cost of Windows Server 2016 Datacenter licenses for all hosts in both the VMware and Microsoft configurations. Licensing all hosts this way enables you to run as many Windows VMs as you wish. As a result, you might expect Microsoft to edge out VMware on CapEx because Hyper-V comes bundled with Windows Server. However, that’s not the case. Some reasons why are:

  • Management overhead – As management and automation capabilities get more sophisticated with each release, VMware has better avoided bloated compute and memory resources needed for those services. Management components like vCenter, vRealize Suite, and System Center run in their own VMs. The calculator applies the documented sizing guidelines and best practices of both VMware and Microsoft for the management VMs needed by each vendor. Following those guidelines leads to Microsoft infrastructure that needs almost four times the compute and memory resources for management VMs. And this translates into more hosts, more software licenses, and higher CapEx.
  • VM density – Every time we talk to a VMware customer that comes back to vSphere after trying Hyper-V, they confirm that they can run more VMs on their servers with vSphere. It is primarily due to the powerful memory economizing technologies built into vSphere that operate in any out-of-the-box installation, versus the cumbersome and rarely used dynamic memory feature in Hyper-V. The conservative, but adjustable, VM density advantage factored in by the calculator reduces VMware hardware and software requirements, lowering CapEx.
  • Per processor vs. per core licensing – Microsoft’s switch to core-based pricing for Windows Server 2016 and System Center 2016 has raised their prices on any multi-socket server with more than eight cores per processor. Microsoft licenses for a two-socket server with 18-core processors cost 125% more than they did a year ago – OUCH! VMware users also feel that pain, since most are running Windows VMs, but Microsoft private cloud users pay the new higher prices twice – once for Windows Server and again for System Center – driving their CapEx higher. Fortunately for VMware users, vSphere, vRealize Suite and vCloud Suite have CPU-based licensing, so when Intel and AMD pack more cores into their processors, you enjoy the benefits without paying a “core tax.”

Try the calculator and see how much you can save

The VMware TCO Calculator Methodology white paper explains in detail how the calculator works. Here’s an example of the calculator results comparing the TCO of a 1,000-VM private cloud based on VMware vCloud Suite Enterprise (our top-level private cloud bundle combining vSphere Enterprise Plus with vRealize Suite Enterprise) to one built with Hyper-V 2016 and System Center 2016.

VMware TCO Comparison Calculator example


Even with conservative assumptions for VM density, VMware provides healthy TCO savings compared to Microsoft. Use the calculator to see what your TCO savings could be.