BUSINESS TECHNOLOGY MEDIA COMPANY
Companies
Sectors

The unknown number

Public cloud may be famously ubiquitous and flexible, but it’s also becoming well known for unexpected costs and budget overruns.
Read time 10min 10sec
Muggie van Staden, Obsidian Systems.
Muggie van Staden, Obsidian Systems.

The public cloud is still defined by the key words of ubiquity, flexibility, scalability and agility. Gartner believes that it’s set to become the centrepiece of digital experiences, and Forrester says public cloud is driving enterprise digital transformation. However, both believe that costs are an issue. Gartner says 60% of infrastructure and operations leaders will likely experience public cloud cost overruns that will affect their on-prem budgets, and Forrester believes there remains ‘tremendous confusion’ around how to manage cloud costs properly.

In a recent report titled ‘Understanding public cloud pricing strategies to save money today and tomorrow’, Forrester highlights issues around billing comprehension as being central to rising cloud costs. The key factors contributing to this lack of comprehension, in spite of line item visibility into spend, are: inconsistent pricing strategies between cloud providers; difficulty in managing pricing structures; different workloads demanding different cost strategies and approaches; and increasingly convoluted pricing structures that have evolved to meet equally convoluted customer requirements. 

This is echoed by Gartner, which suggests that hidden indirect costs can exact a hefty fee when implementing public cloud solutions. However, Gartner adds that costs tend to spiral during the migration phase and cites rushed app assessments, poor landing zone design, wrong emphasis on workloads, and mistimed work efforts as the key causes. Each of these contribute another layer to the final price tag.

Cloud optimisation

The heavy cost of public cloud is also reflected in a paper released by venture capital firm Andreessen Horowitz, written by partners Sarah Wang and Martin Casado. The research undertaken by the team found that while cloud was driven by the ‘powerful value proposition’ of infrastructure on demand and increased efficiencies, it came with long-term cost implications. The calculations on these costs, and how they scale alongside the size of the business and different use case scenarios, are a concern, particularly in light of the fact that cloud seems to cost more the longer the company uses it.

All is not lost, however.

The key to unlocking the cost cage and getting spend back on track can be encapsulated in one word – optimisation. Wang and Casado believe that cloud optimisation is what’s needed to squeeze out the value from public cloud. This can include anything from system design to implementation to re-architecture of cloud investments. For Gartner, it’s about optimising public cloud for business outcomes, something that can play a significant role in changing cost parameters and achieving measurable business value over both the long and short term. And for Forrester, it’s about being as savvy as possible so that the organisation can save money in the end, not just minimise damage to the budget.

A cloud cost management strategy is needed to plan, budget, and control costs. Enterprises can complete a thorough risk analysis by uncovering the hidden costs of their planned cloud migration and comparing them to existing costs and their risk appetite.

Mandy Duncan, Aruba

All three underscore one very important point – public cloud will meet business expectations and deliver extraordinary scalability and infrastructure flexibility, but only if the business is the one holding the tail. This changes the words that define public cloud from flexible, scalable and agile to optimise, analyse and prioritise. That’s the trick to catching the tail.

Q&A

Call me in the morning, I’ll tell you what to do

Brainstorm: What are the most common hidden costs that affect public cloud cost management?

Paul Smuts, senior cloud economist, Nutanix Western Europe and Sub-Saharan Africa: Egress charges are usually the highest unanticipated cost as many cloud providers will happily encourage you to put data in but charge a fortune to get it out.

Marilyn Moodley, country leader for SoftwareONE in South Africa and WECA: Demand-based usage and per-second billing can result in exponentially increasing costs. Additionally, transparency with regards to leveraging resources and corresponding costs is also missing, since the billing information can be very detailed and simultaneously cryptic.

Adrian Hollier, channel manager, Microsoft Azure, Westcon-Comstor Southern Africa: Overprovisioning is a big one. When cloud instances are left running after they’re no longer needed, it leads to what we call forgotten instances. This isn't a big problem in an on-premise environment, but the clock is always running in the cloud.

Robynne Todd, business manager: Cloud Enablement at Decision Inc: Storage costs for backups that aren’t regularly deleted can back up quickly and cause large, unnecessary costs.

Lee Ambrose, group executive: Liquid Cloud and Cybersecurity: Use a tool that can deliver the detailed reporting required for your business, combined with a tagging policy to ensure costs can be directly attributed to a business division or function. Get advice from a partner or service provider with the skills that a business may lack internally.

Willem Conradie, CTO and technical director, PBT Group: It’s difficult to predict how a solution will be used once it’s in the cloud. In some instances, use of the system may exceed initial estimates extensively, adding to the costs. Other times, it’s a case of not using it to its potential.

Brainstorm: Why do companies fall into these cost traps and what can they do to avoid them?

Sumeeth Singh, cloud provider manager, VMware SSA: Companies often fall into these cost traps by not having a clearly defined cloud adoption strategy and, by inference, a cloud cost management framework that effectively evaluates the costs associated with public cloud platforms.

Yuri Mohan, commercial manager, TechSoft: Data-driven automation is an obvious solution for reducing operational costs. An organisation can acquire valuable insights that help eliminate manual, time-consuming, error-prone, and resource-intensive tasks with analytics.

Heman Kassan, chief commercial officer at Technodyn International (IFS): Nuanced differences in cloud software and services adoption on both architectural and functional sides can significantly impact budgeting. Correcting the strategy when adopting a solution is critical if a company has already deployed in the cloud. It all begins with an audit of systems to ensure they work optimally for the business, and the ones that aren’t must either be removed or their usage reconsidered.

Richard Vester, executive director: Cloud and International, iOCO:Many of the savings can be achieved by simply applying more organisational discipline to the task. That starts with making informed decisions about which applications to put in the cloud in the first place.

Barry Kemp, head of division for Cloud, Vox: An engineer going into the cloud is like a child going into a candy store – you can grab as many servers and processes as you like and come out with a massive bill. Rather, you need to have someone who applies common sense, uses restraint, and tells you that you don't need all the features and functionality because you have to base your cloud environment on a proper, budgeted-for design.

Brainstorm: What would you define as public cloud cost management best practice?

Sumeeth Singh, VMware SSA:Cloud cost management helps businesses control their spending on cloud services while also maximising their resources. By prioritising cloud cost management, an enterprise can control its costs and practise good governance while ensuring that it has the cloud resources it needs to stay competitive.

Muggie van Staden, CEO, Obsidian Systems: To always be on top of everything is impossible; setting limits and controls in a real-time, continuously compliant automation tool will improve performance drastically. Track everything you can with alerts.

Andrew Essey, cloud practice manager, Dariel: Determine if a certain service makes sense at a given scale and if it would be cheaper to run a component on-premise. Look at what services cloud providers have out of the box that you can use instead of recreating them as this eliminates the need for you to maintain the infrastructure.

Mandy Duncan, country manager, South Africa, Aruba: A cloud cost management strategy is needed to plan, budget, and control costs. Enterprises can complete a thorough risk analysis by uncovering the hidden costs of their planned cloud migration and comparing them to existing costs and their risk appetite. Risks can’t be eradicated but they can be accounted for.

The analyst view

Companies want cost-effective, efficient, fast, scalable, flexible, and digitally transformative solutions. They’ve been turning to public cloud to slip all those features into their systems without having to invest in hard tin and infrastructure. However, this has seen many fall foul of unexpectedly high costs and limited results.

According to Forrester senior analyst Tracy Woo, there are multiple factors that impact on this cost, and the value that organisations get from their investment. The most important factors that influence public cloud expenditure and cost come down to the number of resources the company is using, and whether these are functions, such as serverless compute, or instances, such as compute, storage and network.

“The more a person uses these resources, the higher the price,” says Woo. “Another important factor is the data egress cost that’s incurred when removing data stored in the public cloud to another environment, such as a company’s own datacentres.”

By prioritising cloud cost management, an enterprise can control its costs and practice good governance while ensuring that it has the cloud resources it needs to stay competitive.

Sumeeth Singh, VMware SSA

It’s data egress costs that, Woo adds, tend to alarm companies, especially when they’re using it for data-heavy processes like high-performance compute, artificial intelligence or machine learning toolsets that use big data analytics.

“Other areas that can impact on costs are idle instances that were provisioned and used for a demo or a project and then abandoned but continue to incur costs as they weren’t shut down,” says Woo. “Another risk factor is using the wrong-sized instance, for example one that’s too large for your needs.”

Companies fall into these cost traps because they believe that using the public cloud is a cost saving, but often it isn’t and they’re overwhelmed by complex and unmanageable billing. Although most billing systems are line-by-line, there are hundreds of services to wade through and every year companies put out hundreds more services. This lack of visibility and increased billing complexity means that companies run the risk of missing items on the billing schedule, adding items that aren’t needed, and losing granular control over their public cloud budgets.

Centralised visibility

“The most effective billing management strategy is to use a third-party cost management tool,” suggests Woo. “These are easy to use, easy to implement and generally you’ll see cost savings within two weeks to three months. It also provides you with centralised visibility. Most public cloud solutions have their own cost management tooling free of charge for basic features, butr they tend to be light on optimisation and multicloud visibility.”

An engineer going into the cloud is like a child going into a candy store.

Barry Kemp, Vox

In addition to these benefits, Woo says, third-party cost management solutions also help with scheduling and turning off resources for off-peak hours; optimisation via rightsizing by helping identify the right instance sizing; and budgeting alerts and forecasting to notify you when projected spend is going to exceed budget.

“This is best practice for public cloud cost management, as well as being able to manage chargeback and showback by tagging, identifying and charging the responsible groups for their respective cloud spend,” says Woo.

* This feature was first published in the May edition of ITWeb's Brainstorm magazine.

See also