Yes, You Are Overpaying For Cloud Services

Ever since cloud computing came into prominence in the late 2000s, there is more focus on the cost savings in the industry and customer conversations. Cloud costs are a much more complex discussion than a simple statement on cost savings. We have heard tons of stories from organizations that save money on the cloud but we have also heard stories about burgeoning costs and move back to On-Premises data centers. In this post, we want to tackle cloud costs and help users consider the nuances that are in play.

Stating the obvious

There are few things about cloud costs that are obvious and one cannot argue against them.

• Cloud changes the financial model from Capex to OPEX. You don’t have to invest heavily in capital expenses building out the infrastructure anymore. Also, don’t confuse this with paying upfront for Reserved Instances, a confusion that still exists for users moving to the cloud from hosting services. Reserved instances differ from the long-term up-front payments to hosting companies. Reserved Instances not only offer considerable cost savings but there is also a market to offload unused Reserved instance capacity
• The very fact that you pay for what you use will ensure that you don’t pay for what you don’t use. But there is a nuance here which we will highlight later. Just the fact that it is pay per use will make cloud costs lower than legacy hosting costs
• At lower scales, cloud costs are cheaper than both On-Premises and hosting service providers. There could be some edge cases where the costs are higher but this is mostly true

But many of you are overpaying in the cloud

Most organizations are overpaying the cloud providers than what they should actually be paying. This is due to various factors such as

• Not having an elastic infrastructure that takes advantage of various compute or storage types that are available from the cloud providers
• Not having control over resource wastage
• Wrong sizing

Let us now discuss these two factors a little deeper

• Cloud providers rely on the On-Demand pricing for their margins and most organizations pay On-Demand prices as they manage the fluctuating needs for their workloads. Even though many are using Reserved and Spot Instances at the infrastructure level, cloud providers still benefit from the On-Demand pricing of most of their cloud services. Even if you are convinced that Reserved Instances and Spot Instances are giving you enough cost savings, it is only with compute service. The other cloud services like Containers, Serverless, DevOps services, etc. are still priced comparable to On-Demand pricing. Clearly, customers are overpaying for their cloud services
• Resources wastage is another unnecessary customer spend on the cloud. Resource wastage happens on many fronts. If we just consider the compute service, we will see unused virtual machines kept on all the time. Some resources will not be needed to run on the weekends but they are not shut down because the operational cost of handling this shutdown and restart process is more than what organizations pay for the resource. Many organizations procure more Reserved instance capacity than they will ever need during the life of these Reserved instances. There are many other ways resources are unused or underutilized. Customers pay the cloud provider even though they don’t use these resources
• Usually, users over-provision the resource sizes either as a precaution or due to lack of knowledge about their workload needs. Many times, we see resources running at less than half the capacity. Such underutilized resources are contributing to cloud waste

Be smart about cloud costs

Predictive Analytics and automation will play a critical role in optimizing cloud costs. By tapping into predictive analytics and automation, users can tap into Spot Instances, Reserved Instances, and On-Demand Instances to save a considerable amount of money while also meeting the SLA needs of enterprises. The same thing can be done about cloud storage too. Predictive analytics and automation can store data in the low-cost storage disks while not in use and match higher-priced disks based on performance needs. Even container workloads can be run on elastic infrastructure that taps into spot instances. For example, SpotInst Elastigroup is a platform to use all types of instances and save 90% on cloud costs. You can do it for containers using SpotInst Ocean (equivalent to AWS Fargate). Similarly, Qubole offers savings for big data and machine learning workloads using spot instances

To rein in cloud waste, either in the form of runaway instances or unused or under-used instances, it is critical to have a good management and monitoring platform to cut down on the resource waste. Whether it is resource shutdown or right-sizing, predictive analytics and automation can help organizations save on cloud costs. Cloud Governance platforms like CoreStack or VMware’s CloudHealth are good examples of platforms that can help cut down on cloud waste. Univa NavOps offers similar cost optimization tools for HPC workloads.

Conclusion

Whether or not you accept it, most organizations are overspending on the cloud. It is time to wake up and realize that you can have considerable savings in the cloud but you need to have the right strategy and use the right set of tools to save costs without incurring additional overhead. Keep in mind that you are not obligated to improve the cloud providers’ margins but you need to save costs for your organization by not overpaying for the cloud services.