With the increased investment in remote workforces since the start of the pandemic and subsequent acceleration in cloud adoption and digital transformation, cost reduction initiatives have grown in importance as a critical consideration for technology leaders and C-Suite.
According to research from Deloitte, two of three (66%) organisations globally are currently pursuing cost reduction strategies and, overall, cost reduction initiatives have dramatically increased – by 74% – since pre-COVID. Within this, a common assumption is that migration to the cloud instantly translates to cost savings for a business. But without the right evaluation process in place, the true costs of cloud computing can add up fast.
Not all clouds are equal in terms of the potential support and cost savings they can offer to organisations, costs can be significant and must be closely looked at. Hidden fees, complex pricing models and other variables can drive up total cost to way beyond the original tender and make the economic framework for evaluation difficult to navigate.
Further, with so many cloud providers now on the market, it can be difficult to look beyond the hype surrounding the big brands and to identify the right partner for your business. Whilst many will no doubt beat the costs of a traditional, on-premises environment; the additional savings offered by partner providers can be difficult to discern at first glance.
So, it is critical that organisations compare features, capabilities and metrics across all providers like-for-like from the outset of the evaluation process, to set achievable expectations against both performance and cost and evaluate these appropriately.
As a starting point, technology leaders must debunk the top three myths around cloud costs.
MYTH #1: One size fits all
The old adage, “You get what you pay for” applies here. Moving to the cloud is no small feat, but moving to the wrong cloud (cloud type or vendor) can create an economic or service level disaster for the business (or both)!
Focus on Priority Business Applications
CTOs must start by understanding the main business driver for moving their organisation to the cloud, and those drivers need to be reconciled with business application requirements. Some applications are CPU-intensive, others are memory-intensive, and others are cost-sensitive.
Balancing Cost, Security and Performance
All applications may require high levels of security and protection. In a “one size fits” approach, applications are bound to the lowest common denominators of the platform, in terms of performance, cost and security. In other words, you may be paying too much for one application to ensure another application hits your SLA. Conversely, you could be hurting your performance of one application to ensure another application fits your budget.
Recommendation: Consider multi-cloud types for your specific application needs. Examples include public clouds for cost sensitive apps and private clouds when performance is critical. A multi-vendor approach can also help reduce the risk associated with compromising performance and cost within a single portfolio.
MYTH #2: Lowest price equals lowest cost
This is perhaps the biggest myth and the most commonly overlooked when evaluating budget requirements and cloud costs. It’s critical to understand the total costs the company will incur from a vendor – including any hidden ones that aren’t necessarily advertised upfront. These will vary widely based on performance, security, management and other factors
Think about it like buying a house. The monthly mortgage rate may make a home’s price tag look appealing, but it’s important to remember that it doesn’t include utilities, insurance and maintenance, which can vary widely depending on usage and other factors.
Recommendation: Adopt a Total Cost of Ownership mentality with cloud. The advertised price is likely a single line item on the monthly bill. Understanding the other line items, and what your applications will require, before you deploy can help ensure you meet budget expectations.
MYTH #3: The bigger the cloud, the better
Gartner estimates that companies that make mistakes during due diligence and cloud adoption can overspend by 20-50% indefinitely. It’s common for organisations to look to hyperscalers like AWS, Azure and Google Cloud to reduce costs around cloud adoption and yet hyperscaler customers almost always end up paying for more than they need and these additional and unnecessary services can add up fast.
It is important to consider that a generic mass product can be difficult to fine tune for your unique business needs. For example, many of the integral components of an on-premises infrastructure, like monitoring day-to-day operations and network security, are not factored into the equation for cloud services (and are in fact, sold separately for Azure and AWS).
Recommendation: Remember that cloud infrastructure matters. There are technologies that will be superior to others, for a specific business requirement and in general, whether or not they are adopted by the masses.
When commencing cloud services evaluation, IT leaders must ensure that they undertake due diligence from the outset and that they truly understanding the economics of a cloud deployment upfront.
IT leaders can right-size their cloud investment and avoid falling for these common myths by tackling the evaluation process with a comprehensive audit of their organisation’s unique business needs and properly benchmarking vendor solutions against this, considering performance, costs, security and management.
In recognising that each individual organisation’s cloud requirement will be unique, IT leaders can fast track through evaluation frameworks to identify the true cost of cloud investment and deliver a robust bespoke solution which translates into real cost savings for the business.
Written By Sam Woodcock, Senior Director of Cloud Strategy, iland