Three Myths about Cloud Costs, Debunked

As organizations have adapted to the new normal of increased remote workforces, cloud and digital transformation journeys have accelerated over the past year. With it, cost reduction initiatives have been put in the limelight and increased in importance.

According to research from Deloitte, cost reduction initiatives have increased 74% since pre-COVID, with two of three (66%) organizations globally currently pursuing cost reduction strategies. To achieve cost reduction, it has been a common assumption that migration to the cloud translates to reduced costs, when in fact that’s not always the case. Without the right evaluation process in place, the true costs of cloud computing can add up fast.

With so many cloud providers on the market, it can be difficult to look past all of the hype and mindshare surrounding big brands to choose the right partner. While many  cloud providers can likely reduce the costs of a traditional, on-premises environment, the difference in achieving additional savings between providers can be significant.

Between hidden fees, complex pricing models and other factors that may impact the total cost, not all clouds are equal in terms of cost savings to the organization. It is important from the beginning of the evaluation process that organizations compare features, capabilities and metrics across providers to set achievable expectations for both performance and cost.

So, how do organizations navigate this economic framework of evaluation and choose the best cloud provider for their business with costs in mind? First, start by debunking the top three myths when it comes to evaluating cloud costs.

MYTH #1: In the cloud, 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 your business (or both)! Understanding your business driver for moving to the cloud is critical (i.e. cost reduction), but those drivers need to be reconciled with your application requirements. Some applications are CPU-intensive, others are memory intensive, and others are cost sensitive.

At the same time, all of your applications may require high levels of security and protection. In a “one size fits” approach, your 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 cloud costs. It’s critical to understand the exact costs (and any hidden ones that aren’t necessarily advertised upfront) that the company will incur from any vendor, which can 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.

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

It’s common for organizations to look to hyperscalers like AWS, Azure and Google Cloud to reduce costs through cloud adoption. While they may be popular, they can quickly add up in price. Remember that anything sold to the masses can be difficult to fine tune for unique 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).

These additional and necessary services can add up fast. Hyperscaler customers almost always end up paying for more than they need. Gartner estimates that companies that make mistakes during due diligence and cloud adoption can overspend by 20-50% indefinitely.

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.

By truly understanding the economics of an organization’s cloud deployment upfront, IT leaders can right-size their cloud investment and avoid falling for these common myths.

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