Yes, You Are Overpaying For Cloud Services

Ever since cloud computing came into prominence since late 2000s, there is more focus on the cost savings in the industry and customer conversations. Cloud costs is a much more complex discussion than a simple statement on cost savings. We have heard tons of stories from organizations savings 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 are in play.

Stating the obvious

  • 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 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

  • 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 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, you will see unused virtual machines kept on all the time. Some resources will not be needed to run in 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

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 platform like CoreStack or VMware’s CloudHealth are good examples for platforms that can help cut down on cloud waste. Univa NavOps offers similar cost optimization tools for HPC workloads.


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Future Asteroid Farmer, Analyst, Modern Enterprise, Startup Dude, Ex-Red Hatter, Rishidot Research, Modern Enterprise Podcast, and a random walker