3 min read

The Smoke and Mirrors of Cloud Pricing

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Lions and tigers and bears, oh my!  This is what pops into my head in reviewing the various pricing models that exist for cloud providers.  Unfortunately, I have found that what appears to be pretty straightforward and inexpensive pricing at first glance, from some of the major cloud providers, ends up being extremely complicated, unpredictable, and a much higher cost overall.  In working with various clients and completing our own research, we have found there are various pricing models and several elements that impact the pricing.  The important thing to remember is to do your research and make sure you are reading all of the fine print and asking questions, as what appears to be straightforward, may not be.

Monthly vs. Daily vs. Hourly Charges
Depending upon the provider, the CPU, memory and storage fees may be billed as a fixed monthly rate based on a defined server configuration, or it may be a usage based charge which is based on the number of hours or days the server resources are used.  When considering which pricing model is best for your business, make sure you identify how often this server will be running.  If it is a test server that is only going to be used for a short period of time, than the daily or hourly charge model will most likely be the most cost effective.  However, if you plan on running the server daily, a fixed monthly fee based on a server configuration may result in a lower monthly fee, and provide greater predictability for your financial forecast and budgeting.

Defined Server Packages vs. Custom Server Configuration
Some providers have a catalog of defined server configurations, allowing you to choose the configuration you require for the specific server needed (i.e. small, medium, large, extra-large). These configurations will have a set number of CPU and memory, and may also include a pre-defined amount of storage.  This model makes it easy to pick a server, however, we have found that as clients’ environments grow and evolve, this model eventually results in a client over-paying for certain elements in the package.  The other pricing model is a customized approach which allows you to set the amount of CPU, memory and storage based on the exact configuration you require.  This model is still a fixed monthly fee, but can be right-sized for what you truly will be using.

Transfer Rates
Some of the cloud providers will also charge transfer rates for both internal network traffic that is used between your systems in the cloud; and external network traffic used.  The rates may vary depending on if the traffic is inbound or outbound.  This is a very difficult element to estimate and predict.  In certain cases, the pricing to move your data to a cloud provider will be much lower than what you are charged when you extract your data away from that provider.  Make sure you understand how this network utilization will be invoiced as it can become fairly significant.

Storage and Backup
The storage pricing for most cloud providers is relatively straight-forward with a fixed price per GB of storage. There are varying degrees of storage providing different types of performance.  Make sure you understand the performance and SLA that will be tied to the storage you are purchasing.  
Backups are typically treated separately and are not bundled in with the storage offering any longer.  As such, there is an additional fee to backup your data.  The backup may be to storage within the same data center facility, or it may be backed up to a geographically dispersed data center, each with a different price point.  In addition, most cloud providers will include 1-2 days of retention for the backups within their initial backup price. Additional retention is then charged based on the total amount of data that is retained.  Again, this can be a difficult item to predict and forecast, but if you have compliance requirements that require retaining backups for a longer period, make sure you understand what capabilities truly exist with the cloud provider and how much that extra retention is going to cost.

Service and Support
Lastly, there are various degrees of service and support options available from the cloud providers which may range from only being able to communicate to the provider via email or a chat feature; only 8-5 telephone access; to full 24x7 telephone access; all the way up to a dedicated account manager providing customized service.  Along with the support you receive, most providers have a variety of SLAs that are tied back to not only the availability of the systems, but how responsive they need to be to questions and issues.  Depending upon the criticality of the applications you are running at the cloud provider, make sure you have aligned the SLA and support model with the response times you will require in order to operate your business.  

I hope these tips help you understand the various elements that impact the pricing from cloud providers.  Cloud solutions make sense for a lot of business applications ranging from core critical applications to test and development environments.  The important thing is to make sure you are doing your research and understanding all of the elements that will impact your pricing, and truly completing an apples to apples comparison between providers, as what may appear to be a really low price on the surface, may not be what you experience in the end.  Doing the research upfront will help avoid the surprise when the first invoice is received.

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