Cloud Pricing Guide

Given that the shift to the cloud is expected to affect more than $1 trillion in IT spending within five years, organizations are sold on the benefits of moving their operations to a network of servers that allows them to provide services in an efficient and cost-effective way.

However, organizations are not necessarily buying-in correctly. Some researchers estimate that one-third of cloud spending is “wasted” on unused or underutilized services.

Organizations often struggle to align organizational goals and budgets with their cloud spending because technologies, service providers, and pricing models are complex and change continuously.

Public cloud versus private cloud. AWS versus Azure. Monthly versus daily.

"Organizations often struggle to align organizational goals and budgets with their cloud spending because technologies, service providers, and pricing models are complex and change continuously."

Whether you are considering where to move your data, who to move it to, or how to pay for it, as a senior technology leader, you must make hard decisions as you are pressured to provide costs savings, ROI, and value while reducing overall spending. Understanding pricing models and the decision criteria of cloud platform/partner choices will help your organization make sound choices.

Public cloud

International Data Corporation projects that annual worldwide spending on public cloud services and infrastructure will increase at a compound annual growth rate of 21.9 percent, increasing to $277 billion in 2021 from $160 billion in 2018.

Major public cloud providers AWS, IBM, Google Cloud, and Azure are cutting prices as they compete for market share. But securing the best deal can be difficult because pricing models are increasingly complex. Chapter 2 Interior 3 final v2 Ask potential vendors questions such as:

What types of instances do they offer?
What are the terms and conditions for those instances?
What would be the benefits if you were to commit to terms such as one year of service or three years?

Public cloud pricing can appear to be straightforward and inexpensive, but can actually be complicated, unpredictable, and often a higher cost overall.

"Major public cloud providers AWS, IBM, Google Cloud, and Azure are cutting prices as they compete for market share. But securing the best deal can be difficult because pricing models are increasingly complex."

Private Cloud

Private cloud gives you the customizable, flexible, and scalable features of public cloud with the increased control, computing power, and security you need for critical systems. You also may find that it would be cheaper than public cloud services after you work through the complexities of the public cloud.

The global private cloud market is comprised of dedicated private cloud and virtual private cloud services.

Factors to consider in pricing for VMWare and other private cloud providers include:

Computing power
Storage
Bandwidth
Public IP addresses
Support

Hybrid Cloud

Hybrid cloud computing offers spending flexibility by mixing internal and external cloud services. When evaluating costs of a hybrid cloud environment, account for expenses such as costs for your platforms, infrastructure software, and applications integration. You also should consider factors like compliance and software maintenance.

Multi-Cloud

Almost 90 percent of enterprises have adopted a multi-cloud strategy or plan to, according to Forrester Consulting. The ongoing proliferation of IoT devices and the need for big data analytics is driving the shift, along with enterprise revenue goals and demands. Cost-effectiveness is one of the benefits of adopting a successful multi-cloud strategy. Chapter 2 - Resized - final Variables to consider when selecting multi-cloud management technology include how best to manage workloads and application performance prior to transitioning.

Ask these questions when selecting multi-cloud technology:

Are there resource management tools?
Will I have access to automation and provisioning?
Is it scalable?
What is the cross-platform interoperability?
How can I ensure compliance, governance, and reporting?
What types of support and training are available?

Other Costs to Be Aware Of

You may have additional factors to consider if your company develops software. If DevOps is important to your organization, consider costs associated with reducing downtime and providing scalability.

According to a Forbes article on the relationship between the cloud and DevOps, “Companies that focus on operations for developers often use cloud computing to speed developer productivity and efficiency. Cloud computing allows developers more control over their own components, resulting in smaller wait times.”

Containers

Container cloud computing lets development teams achieve next-generation software delivery more efficiently than traditional virtualization. Developers can spin up new instances free of constraints and tooling conflicts. They also can collaborate with sysadmins by sharing updates and changes, as well as linking and testing against the application. Consider the capacity you would need for containers and the associated costs.

Economics of scale and the enterprise IT team

Running multiple operating systems at economy of scale and IT infrastructure components can pose risks. Mitigating those risks could require additional expenses, such as custom-built solutions for multiple operating systems and IT infrastructure components. Chapter 2 Interior v2 Final Management consoles and automation can help you find possible problems caused by team members and streamline processes to avoid human error and mitigate risk.

You also may want to consider managed services providers that can custom-build solutions to address issues such as operating systems, security and compliance, backup, disaster recovery, and storage. Managed services providers often have proven processes in place to improve efficiency at scale, which allows your enterprise IT team to focus on strategic initiatives and business goals.

Cloud providers may offer no-cost trial instances or development/test instances to get your business, believing that once you start using their services, you may be less likely to stop.

Also, Google offers an always-free, no-cost usage tier. Amazon AWS and Microsoft Azure offer free tiers, as well.

However, free tiers do have limitations. Determine whether your organization’s effectiveness would be limited before committing to long-term usage of instances or tiers.

Ad hoc consumption, or pay-as-you-go models, are also available. These models could be efficient for you if you know how much you will use public cloud services. You also should confirm that you are staying within your expected usage so that you do not pay more than you would if you were to commit to a plan, such as for reserved instances or dedicated hosts.

"Determine whether your organization’s effectiveness would be limited before committing to longterm usage of instances or tiers."

Usage options

Cloud services providers have traditionally priced plans for monthly, daily, or hourly usage. You can now choose per-second pricing, as well.

Shorter time periods provide you more control over your spending, but you can get better discounts for longer time periods.

When considering which pricing model is best for your business, identify how often your server will be running. If it is a test server that is only going to be used for a short period of time, daily or hourly charge models will most likely be the most cost-effective. Chapter 3 Interior - Final 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.

Consider consulting with a cloud technology partner that can help you find the right pricing model for your organization. Avail yourself of their expertise in deciding which model to use based on your data and their experience in managing cloud environments.

Defined server packages are often presented in 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 amount of CPU and memory, and may also include a predefined amount of storage. These defined packages make it easy to pick a server; however, as your environment grows and evolves, this model eventually results in overpayment.

Custom server configuration is another pricing model. It 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 it can be right-sized for what you truly will be using.

Regional differences, such as by country or state, can also impact cloud pricing.

"These configurations will have a set amount of CPU and memory, and may also include a predefined amount of storage."

A provider may charge you transfer rates both for internal network traffic that is used between your systems in the cloud and for external network traffic used. The rates vary depending on if the traffic is inbound or outbound.

It can be difficult to project the amounts that you actually would pay in transfer rates, but know that they could be significant. A qualified outside partner may be able to help you estimate and manage your rates.

Resources

[Guide]

Most businesses today operate with multiple cloud-based systems. To assist with provisioning, managing, and integrating all of these scattered technologies, many enterprise organizations are turning to a cloud broker model as a solution.

[Article]

There are many misconceptions circulating about the cloud and cloud management. Here are cold, hard facts aimed to debunk 5 of the most common myths.

[Article]

Discover the six key ways a hybrid cloud architecture can contribute to enhanced business efficiency in your organization.

[Guide]

OurCloud Computing Success Kit provides several resources to plan, test, implement, and optimize cloud options.

Storage pricing is relatively straightforward with a fixed price per GB of storage. The main differentiator in storage is the varying degrees of storage based on performance. Confirm the performance and service level agreement (SLA) tied to the storage you are purchasing.

Backups are typically treated separately and are not bundled in with the storage offering. The result: additional charges will be included to back-up your data. The backup offer will be to store the data within the same data center facility in which you are hosting your cloud environment or in a geographically dispersed data center.

With the backup you are paying for, most cloud providers include 1-2 days of retention in their initial backup price. Additional retention is then charged based on the total amount of data that is retained. If you must retain data longer to comply with laws or regulations, confirm the costs of doing so before choosing a cloud provider.

"Backups are typically treated separately and are not bundled in with the storage offering."

Organizations often pay for resources they don’t use. You may be able to cut costs by monitoring your actual usage and only paying for what you use. Idle cloud resource challenges may include on-demand instances or VMWare, for example. Also look for the following:

Relational databases

Databases are frequently left running when not needed. Only some providers allow you to park certain types of relational database services (RDS) resources, while others have no provision for idle database parking services. In this case, you should review your database infrastructure regularly and terminate anything unnecessary—or change to a smaller size, if possible.

Load balancers

AWS Elastic Load Balancers (ELB), Azure Load Balancers, and GCP Load Balancers are all unable to be stopped (or parked), so you need to remove them to avoid getting billed for the time you need. Alerts can be set up in Cloudwatch/Azure Metrics/ Google Stackdriver when you have a load balancer with no instances, so be sure to use those alerts.

"Cloud discounting options are abundant, but they are also complex."

Containers

Optimizing container use is a project of its own, but there’s no doubt that container services can be a source of waste. Evaluate the ability to park container services, including ECS and EKS from AWS, ACS and AKS from Azure, and GKE from GCP, and the ability to prune and park the underlying hosts. In the meantime, you’ll want to regularly review the usage of your containers and the utilization of the infrastructure, especially in non-production environments.

You also could cut costs by obtaining a discount through a cloud provider. Cloud discounting options are abundant, but they are also complex. Factors such as usage and commitment terms affect how much of a discount you can get and for how long. Chapter 7 Interior - Final You could get commitment-based discounts by agreeing to certain levels of consumption, including of reserved instances and dedicated hosts. An InfoWorld article on cloud pricing comparisons suggests evaluating flexibility in terms of ease of purchase, ease of changes, ability to cancel, and payment options when considering commitment-based discounts.

When purchasing reserved instances, InfoWorld suggests you consider the following factors:

Historical usage
Steady-state usage versus part-time usage
Future plans

As organizations move workloads to the cloud, they often fail to manage their capacity, which could cause them to have less capacity than they need or to buy more than they use. Companies often ignore this pricing component, though, assuming capacity flexes up and down due to the elastic nature of the cloud.

However, cloud instances, services, or providers can proliferate if you lack visibility or control over your cloud computing resources. Cloud sprawl is the unchecked growth of cloud-based computing resources at a rate that surpasses the requirements of the existing user base.

Properly managing and controlling cloud sprawl, including cost containment, is a necessary part of a comprehensive IT strategy. Regularly check aspects of cloud services such as storage, applications, and VM instances.

You also may be able to save money with AWS spot instances, which are unused instances that cost less than the on-demand price.

You also must pay to maintain your cloud resources. Aligning spending with the most efficient service and support areas will help you increase your return on investment.

Investing in your current team may spare you the time and expenses associated with searching for external resource providers. But your internal resources should be certified, trained, and experienced in cloud migration if you are to save time and money. They also should have the time to handle support so that you can move quickly, thereby reaping the benefits of your cloud strategy sooner

"A cloud technology partner would require external spending, but they may be able to help you accelerate and maximize your return on investment."

A cloud technology partner would require external spending, but they may be able to help you accelerate and maximize your return on investment. For example, a partner might help you optimize your data before migrating to avoid downtime and save on computing costs. One way to leverage your relationship with a cloud technology partner is by having them assist you in securing your cloud data and managing unstructured data on a consistent basis.

You also may be able to justify the additional costs of cloud management tools through the efficiencies that they would provide, such as helping you to track billing, which could be extensively detailed and extremely confusing because of the complexities of working with public cloud providers.

An effective cloud management platform will provide IT system monitoring, management, and server provisioning across your entire environment. The insight could provide could be invaluable, even if you were using a cloud technology partner. Chapter 9 Interior - Final Look for features such as the following:

Self-service IT that lets you manage and monitor existing virtual Windows and Linux systems and check the status of tickets
Multi-cloud management with self-provisioning functionality for servers at multiple cloud providers
Service lifecycle management with provisional operating systems and environments that speed time-to-market with enhanced automation capabilities
Centralized management and reporting with a single access point for the ticketing system, monitoring tool, and security platforms

If one-third of cloud spending is indeed “wasted” as researchers estimate, then you could squander a significant portion of the funds that you invest in the cloud. This could happen relatively easily due to the complexities associated with cloud strategies, pricing, and usage. A cloud technology partner can help you avoid waste and increase your ROI by using their expertise and experience, and perhaps their own cloud management tools, to secure the optimal pricing for your organization based on your needs. Optimize your spending by aligning your cloud spending with your organizational goals and budgets.

Public cloud

Private Cloud

Hybrid Cloud

Multi-Cloud

Other Costs to Be Aware Of

Containers

Economics of scale and the enterprise IT team

Usage options

Resources

Relational databases

Load balancers

Containers

Download a PDF version of this guide

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Cloud Pricing Guide

Public cloud

Private Cloud

Hybrid Cloud

Multi-Cloud

Other Costs to Be Aware Of

Containers

Economics of scale and the enterprise IT team

Usage options

Resources

Relational databases

Load balancers

Containers

Download a PDF version of this guide

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Technology Partners