How we pay for goods and services is changing. Now music is rented, rather than bought. Nearly nine out of ten new cars driven off the forecourt are leased or bought on contract, not owned outright. Razors come through the post for a monthly fee.
This shift towards subscription and monthly contracts can be attractive to users. But it can also mask compromised service and higher costs. Streamed music is of lower audio quality than CD or vinyl, and the musicians and writers earn less. The leased car is often ultimately more expensive for the user than if it had been bought. The subscription razors would often be cheaper bought from the chemist when needed.
The same shift to on-demand is happening in business. Most enterprises are pushing their digital services into the cloud where possible. And the economic model of the cloud is typically ‘pay-as-you-go’ or ‘as-a-service’. But as with music, cars and razors, this does not mean services are automatically better or cheaper. Benefits need to be worked on to be realised.
Controlling spending in the cloud is far from simple. Large organisations are struggling to calculate the costs and risks involved. In fact, according to some research, cost-control has become the number one cloud concern for IT leaders (overtaking security and skills-availability).
There are several reasons cost management is such a challenge:
– Cloud-pricing is endlessly complex – and rates can be changed without notice by vendors
– Prices in public cloud are vulnerable to real-time exchange rate fluctuations
– Enterprise business cases tend to be based on capital allocation to do a thing; cloud does not fit that model
– Procurement teams are used to buying things in chunks, and the default bargaining tool is volume. Cloud prices do come down with volume, but the standard model is pay-as-you-go (rather than, say, ‘buy three years’ worth’ at a set price)
– Enterprise agreements (where customer and vendor strike a bespoke deal) do exist in cloud. But they are not the norm, and arguably they should be phased out in favour of using published, scalable, universal rate cards
– Cloud computing is still new to many organisations, and services are expanding rapidly. Some enterprises are finding they lack the skills and experience to design and deploy effectively
– It is very easy to over-provision and overspend in the cloud. Machines and services must be deployed carefully to avoid excess capacity and needless run time. Every company on the learning curve has experience of leaving services running, and paying more than necessary
– Cloud encourages self-serve in the organisation; this means close controls must be introduced to ensure newly-empowered users behave responsibly
– Moving an enterprise to the cloud is a major, multi-year undertaking. There will be an extended period of managing and paying for cloud services and on-premise services, which compounds the difficulties in cost management
In public cloud, the lead vendors are diverging – and it is worth understanding their respective commercial models. Microsoft Azure is developing as a software-as-a-service company, and enterprise agreements are still in place. Amazon Web Services is an infrastructure player, but is becoming a rich repository of ready-to-run software from multiple third-party vendors. AWS delivers, for the most part, against published rates. Google is a mix of infrastructure and software options – which are a becoming a genuine alternative for enterprise customers for productivity, storage, collaboration and data management. Pricing is by consumption, although not necessarily easy to navigate. As Google pushes further into enterprise, there is room for negotiation for big customers. Big-ticket enterprise vendors like Oracle and SAP are moving their existing business models to the cloud. Platform players like Salesforce are pure cloud, and tend to operate on a monthly licence model. However, generous discounts can be achieved if large volumes of high-level seats are booked.
Here are some tips for managing cost control in the cloud:
– Design to scale services as usage increases – rather than provision big just in case
– Set up the tightest possible cost monitoring tools from the outset (the big vendors offer sophisticated capping and alerting systems as standard – but these have to be actively set and switched on)
– Keep architecture as simple as possible – and design for cloud. Migrations of existing architecture can work, but the move to cloud is an opportunity to reconfigure services
– Set roles carefully, so that only appropriate members of staff can scale services and increase costs
– Avoid enterprise agreements (they tend to be win-win for the vendor); instead choose the appropriate tariff for your needs, and build in flexibility from the start
– Each new service should be designed according to user need, and competitive comparisons made; do not just take the recommendation of the dominant supplier, or be tempted by a bundled service
– Where possible, roll up a costs dashboard to a single point of oversight. This may be impossible in a giant enterprise, but there should always be high-level controls to avoid a productive self-serve environment turning into a free-spending Wild West
– Look deep into the cost-saving opportunities in cloud; it is reasonably easy to reduce spend significantly by judicious use of block-booking and off-peak usage
– Stay close to the vendors and their partners; so intricate is the science of spend control in the cloud, expert knowledge is required to ensure good value is delivered