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The true cost of the cloud

Image: Adobe Stock/ Gorodenkoff

With some large enterprises now spending hundreds of millions each year on cloud computing services, the true cost of cloud has come into sharp focus, and many organisations have identified a need to cut this cost wherever they can.

As a result, some businesses are tempted to enter multi-year contracts and reciprocal strategic partnerships with the leading ‘big three’ three cloud service providers for a reduced annual spend.

As recently outlined in Forbes, however, the packaged services often do not suit the businesses’ technological needs, and may not be cost-effective. Frequently, the true expense to companies only becomes apparent following the commencement of a multi-year contract. To avoid these pitfalls and maintain control over their cloud costs, businesses must make smart decisions about who to partner with, what support they need, and what it is really going to cost them.

The real cost

Cloud service providers often tempt enterprises with promises that they will save money by moving to the cloud, despite the significant initial cost required to do so. However, companies usually must continue running and supporting their legacy infrastructure in parallel to their migration to the cloud. Although this is usually a temporary measure, it is an expensive one.

Regardless of whether businesses decide to run all, or more likely, part of their infrastructure on the cloud, the question remains whether this will ever become more cost-effective than their current set-up and if so, how. There are obvious benefits: cloud migration means that businesses no longer have to upgrade their on-premises systems every five to seven years. Companies often do not have the right sizing exercise for such upgrades, because workloads hosted on-premises are often sized to meet peak capacity.

The opposite is the case with the cloud, where on-demand scaling is possible. Additionally, they need to be aware of and take advantage of the funding programmes available to them, such as the AWS Migration Acceleration project (MAP) or Microsoft’s Azure Migration & Modernisation Programme. Ultimately, companies must decide on a cloud migration plan that truly makes sense for their specific needs. Most are looking to migrate to the cloud for increased reliability, and performance agility. Therefore, companies must consider what cost is worth it and have a clear picture of their return on investment.

Lock-in

Enterprises commonly become concerned about being ‘locked-in’ to a specific vendor, particularly if they have experienced the reality of being bound to a specific cloud service provider for numerous years. As a solution, they turn to multi-cloud agreements. I would not recommend this unless a business already has an extremely high cloud maturity. The multiple-provider arrangement does not alter the overall structure of the service model.

In fact, it is by far the most expensive – staffing must be maintained to support with the different specialities and make key decisions around tooling which integrate with both public cloud providers. In essence, enterprises remain ‘locked in’, simply to more providers. If businesses do decide to transition from an entirely in-house model, it would be more practical to move to a hybrid model, which is often the most cost-effective for enterprises.

By adopting a step-by-step process, businesses can strategically evaluate the benefits and challenges of each phase and make informed decisions. This approach allows for a clearer understanding of the organisation’s specific needs and ensures that the cloud migration aligns with the desired long-term goals. Companies need to be forward-looking to effectively build a cloud strategy. Simply moving workloads that are not adequately modernised, or only using the basic benefits of the cloud (like OS maintenance or patching, load balancers, security groups, auto-scaling and PaaS) are an extremely expensive way to host workloads, because it only uses one third of the available cloud functionality.

In order to understand their needs and facilitate a step-by-step process from all on-premises to a hybrid model and finally to a fully-cloud based system, organisations must have a clear view of their potential ROI and what workloads it makes sense to migrate.  When you compare cloud to on-premises, you are comparing apples and oranges not apples and apples. It is important to leverage the added value of professional services and funding programs to modernise legacy systems, or move away from expensive software licenses to an open source model.

Looking ahead

Despite these potential pitfalls, when implemented thoughtfully and with a clear view of future goals, cloud services really do transform organisations for the better and set them up for success. By leveraging cloud technology strategically, businesses can improve agility, enhance collaboration, scale resources on demand, and focus more on core competencies while leaving infrastructure management to the cloud service providers.

However, these benefits will only be available to organisations that can be agile, keep costs under control, and plan appropriately for a cloud implementation that fits their actual needs. Businesses must implement cloud-based systems in a way that still leaves them in full control, and able to measure their success at every stage. Business leaders should consider all these factors before signing themselves up for contracts that may not benefit their business.

Aaron East
Aaron East
Lead Associate at esynergy

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