The Truth about Cloud Costs: 5 Things You Should Know

7 minute read
The Truth About Cloud Costs: 5 Things You Should Know

If you aren’t already running applications in the cloud or if you’re planning to do so soon, you may feel far behind.  

According to an IDG survey, 72 percent of enterprises now have at least one application running in the cloud and spend an average of $2.87 million on cloud services. In 2012, just 57 percent of enterprises had at least one application in the cloud.

Companies that have embraced continuous integration and continuous delivery (CI/CD) dominate their industries. Just think of how Netflix, Airbnb, and Uber have disrupted their industries. These companies leverage CI/CD with the cloud to provide them with an innovation platform.

Discover whether you should go big with a cloud revolution or move strategically with a cloud evolution. Get your guide to developing a successful cloud strategy.

Today’s businesses demand greater agility, flexibility and the ability to quickly bring new products to market and outpace their competitors. That’s why IT organizations can no longer just manage hardware. They must broker cloud services that will help the business stay competitive. 

To do this, organizations must embrace the hybrid cloud.

The Cloud Isn’t All or Nothing

A hybrid cloud model is appealing because it lets you start small. You don’t need to move everything to the cloud all at once. You can select which compute, network and storage resources you want to deliver on demand. Then, you can add more cloud services that will help you build and enhance your applications.

And end users don’t care if you offer apps via a public or private cloud, as long as you meet your service level agreements (SLAs) for uptime, performance and service delivery. But not offering these services can lead to shadow IT, as end users will potentially use the cloud with or without your approval.    

Why Cloud Costs Get Out of Control

While moving to the cloud can bring you a number of business benefits, it may cost more than you had planned.

According to a cloud costs survey, 79 percent of IT decision makers said they have encountered $75,000 in unplanned cloud expenses over the last three years. One in five companies has paid $1.5 million in unplanned cloud costs.

These unexpected costs include:

  • Connectivity

  • Customizations

  • Upgrades and maintenance

  • Disaster  recovery and backups

  • Security

  • Service level agreements (SLAs) and federation across public cloud deployments

  • Personnel to deploy and maintain cloud services

Many of these costs stem from a lack of a cloud strategy. The key to benefiting from the hybrid cloud — without driving up your costs — is to go in with a plan. You need a defined cloud strategy and an understanding of all your cloud costs before you migrate.

5 Ways to Reduce Your Cloud Costs

Cost savings should never be the number one driver for moving workloads to the cloud. Instead, focus on the real value that the cloud delivers. This includes flexibility with infrastructure workload management, agility in provisioning services and reduced time to market.

Here are five ways you can gain control of your cloud costs:

1. Identify your business requirements.

Look at your environment and the services that you deliver to the business. Once you determine and categorize your service groupings, you can do a “constraint analysis” around these groupings that give you a better idea of what to place in the cloud.

Then look at how mature your platforms are. For example, is the infrastructure supporting the application stack standardized and fully virtualized? Are you running any type of orchestration and/or automation tools? All of these factors can impact your cloud costs. Until you do an analysis to determine your risks and true costs, you can’t answer these questions and make decisions about the cloud.

Also determine how moving to the cloud will impact your security, compliance and application SLAs. Make sure you are in alignment with your security and compliance teams on which data you can move to an off-premise cloud solution provider.

Finally, develop the rationale for why you want cloud services. Do they drive flexibility in your infrastructure, make you more agile or help you support the business?

2. Don’t expect a tool to do it for you.

The biggest cloud misconception is that everyone should use a hybrid cloud model.

But most companies struggle to deploy and manage a true hybrid cloud model. They may have a cloud vision but they don’t have a long-term strategy. They try to take the same processes that they’ve been using for 15 years and upload them into a “cloud strategy.”

Many organizations believe that a tool will manage the cloud for them, so they buy tools but don’t know what to do with them. To succeed with the hybrid cloud, you must develop a strategy, redefine your operating and service management processes, and build a cloud operating model.

3. Don’t put your junk in the cloud.

If you have an app that needs to be delivered on-premises (e.g. latency or tied to legacy infrastructure), shifting it to the cloud won’t give you value.

You also can’t take traditional monolithic apps, throw them in public cloud infrastructure and expect them to work like Google or Netflix. Google and Netflix have designed their application architectures from the ground up to be highly available, loosely coupled and multi-geo. If you don’t build your applications with this architecture or understand how your cloud provider model is architected, you’ll have problems.

4. Start your cloud journey by doing a proof of concept for a small environment.

You likely already use software-as-a-service (SaaS) apps such as customer relationship management (CRM) or email, so you have already overcome the security, performance and culture concerns related to moving workloads off premises.

Remind your executive team that you already took baby steps and achieved value from the cloud. Then, explain how other areas of your organization can benefit from cloud hosting.

Look at your environment and recommend applications for cloud hosting. What services can you move to the cloud for improved efficiencies with accepted risk?

Start by putting a toe in the water — you don’t need to move your entire environment to the cloud all at once.

5. Compare apples to apples when it comes to costs.

Most cloud vendors have total cost of ownership (TCO) calculators that show the cost benefits of their products.

But when it comes to knowing your true costs (e.g. facility hosting, infrastructure, maintenance, backups, connectivity, licenses, support, etc.), you must do a TCO analysis.

Compare your costs to services such as Amazon and Google and see how they line up, apples to apples.

For example, if you buy $0.30 per central processing unit (CPU) per hour with Amazon, how does this cost compare with what you have in your current environment over the lifetime of that asset? Also consider your migration, monitoring, management, security and auditing costs involved with migrating services to a cloud solution provider.

While some apps will be a good fit for the public cloud, you might find that it’s more cost-effective to run other apps in a private cloud.

Consider if you just need infrastructure-as-a-service (IaaS) or if you want a provider who also provides managed services. Many public cloud solution providers only offer commodity compute and storage and may not help with any management issues that you struggle with.

The Key to Cloud Success  

Moving to the cloud is about determining what is best for each application and for the business — not about cutting costs.

It’s also not an all or nothing decision. You can take advantage of the cloud while running most of your workloads on premises.

The priorities of vendors or analysts can’t determine your cloud strategy. Rather, your business priorities and required outcomes should drive your cloud considerations.

The key is to have a defined, long-term cloud strategy that will prepare you for new development models and the software-defined enterprise. In the future of IT, applications will no longer tie to a specific infrastructure and will have the flexibility to move between cloud environments in a federated model.  

Learn how to gain control of your cloud costs and lead a prosperous IT transformation. Download your guide to creating and executing a successful cloud strategy.

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