Debunking the Cloud Service Pricing Myths: How to Keep Your Cloud Costs in Check
2022-11-16 10:13:02Cloud computing seemed like a silver bullet to soaring IT costs. But unfortunately, when switching to the cloud, businesses sometimes have to wait to see savings. Some even end up spending more than they would on on-prem systems. Much of this confusion stems from myths surrounding cloud service pricing.
The idea was simple. By moving away from high capital investment expenses (CapEx) associated with on-prem infrastructure to the subscription model, companies were supposed to save big and fast.
Unfortunately, the reality (and bills) proves that when businesses switch to the cloud, their savings may not be immediately evident. Some even end up spending more on their cloud services than they would on on-premise systems.
Much of this mismatch stems from the fact that many cloud consumers still subscribe to myths surrounding cloud service pricing. Unfortunately, these misconceptions obscure how complex it can be to figure out the cost of your cloud computing–let alone optimize it.
Let's shed light on such myths, and discuss what you need to know to control your cloud service costs better.
The most popular cloud service pricing myths
Myth 1: You pay only for what you use
You could assume that the cloud is more cost-efficient as you don’t pay for the resources you don’t need.
The reality is more complex. For example, orphaned instances can keep running, adding to your bill. Or you could pick instances which are too expensive for your workload’s needs.
You can overspend in the cloud just as easily as in on-prem – and cloud computing isn’t a safeguard against wasting money.
Myth 2: Cloud pricing is pay-as-you-go
The flexibility of paying only for what you consume may sound like there are no upfront costs or major capital expenses to worry about. It’s suddenly all about subscriptions and OpEx.
However, when using cloud services, you may still need to pay in advance, for example, when choosing reserved instances. Besides, there could be major expenses related to migrating workloads, refactoring applications, setting up new tools, and so on.
Myth 3: Cloud pricing is easy to understand
Perhaps the most flawed assumption you can have about cloud pricing is believing that each vendor’s prices are consistent and transparent.
In reality, providers regularly change their prices, and rates for the same services can vary across different regions. As a result, understanding cloud pricing can be challenging, which also makes optimizing your expenses a tall order.
And this leads us to a vital question.
What factors determine cloud service costs?
Typically, you’d have to cover infrastructure, platforms, and software expenses, so the three main types of cloud services reflect these tiers. Each enables flowing data between front-end clients and the cloud service provider’s systems but varies by what’s provided, so costs can vary accordingly.
In IaaS–Infrastructure-as-a-Service–the provider manages the infrastructure and handles outages and repairs. You need to take care of the operating system, apps, and middleware.
In PaaS–Platforms-as-a-Service–the provider handles hardware and the software platform. You can develop apps on top of that without having to build and maintain the infrastructure.
In SaaS–Software-as-a-Service–the provider handles all aspects of hosting, setup, and maintenance, so you can focus on using the application.
Decisions made at the beginning of your cloud migration will impact your future costs. That’s why it’s essential to consult experts and create a solid cloud strategy for the long term–and pick the right pricing model for your needs.
The most common cloud pricing models
Vendors offer different cloud pricing models, with the most common ones including on-demand, spot instances, reserved instances, and volume discounts. All options can bring different levels of savings.
On-demand or pay-per-use is the default pricing option. Available as you need, on-demand instances can be easily scaled up and down and don’t require a long-term commitment.
Spot instances can save you up to 90% compared to on-demand. However, the provider can withdraw them at very short notice, so they are only suitable for some workloads.
Reserved instances and volume discounts can also bring tangible savings. However, they usually require upfront investment and longer commitment – and don’t rule out wasting resources and money.
The cloud pricing challenge
Cloud services force IT departments to rethink their budgeting. Offered as subscriptions, they require keeping tabs on the scope and type of services your team uses at any given time.
Unfortunately, Flexera’s research demonstrates that most companies still struggle to control spend. As a result, optimizing the existing use of the cloud and generating cost savings remains the top initiative reported by participants.
Cloud cost optimization is a complex and multifaceted issue, but here are some top tips on improving your cloud services’ cost-efficiency.
How to keep your cloud service costs in check
First, improve your cloud cost visibility. Many tools help teams get a better overview of their cloud cost allocation, so getting on top of used and orphaned instances becomes easier. And with tools such as Prometheus and Grafana, you can better visualize your infrastructure costs.
Second, remove unused or unattached resources. Instead of overprovisioning, teams can leverage rightsizing and autoscaling to match the workload’s needs as these change. These tasks get easier with real-time monitoring and automation, so make sure you pick one.
Third, consider reserved instances if your company is committed to the cloud long-term. This option can potentially generate savings of up to 75%. However, since you purchase them for one or three years, it is essential to analyze your past usage and correctly predict future needs.
Fourth, use spot instances. Offering significant savings, spot instances come and go quickly, so using them requires automation, but it should definitely form part of cloud cost optimization strategies.
Fifth, look for other cloud service cost optimizations. For example, when it comes to data transfer costs in AWS, ensuring that your Object Storage and Compute Services are in the same region can help you avoid additional fees.
Optimize your cloud costs with the right partner
Each provider approaches its cloud pricing strategy differently and can charge you on a varying basis. That’s why it’s helpful to work with partners who know the ins and outs of the vendor’s strategy and can pick the right solution for your needs.
After many successful deployments for clients in different industries, Tenesys earned the AWS Advanced Tier Partner title. We also partner with Google Cloud and Microsoft Azure.
Get in touch if you’d like to consult your project needs – we’ll be happy to help you out.
Sources:
Amazon EC2 Spot
Trends in Cloud Computing
https://aws.amazon.com/aws-cost-management/aws-cost-optimization/reserved-instances/