How to better anticipate hidden cloud costs

Explore the hidden costs of joining the cloud, including on-demand and third-party services.

One of the ultimate ironies about the infrastructure-as-a-service (IaaS) segment of the cloud computing marketplace

is that these "on-demand" services can easily cost an organization far more than expected. Despite escalating price wars that appear to be producing unprecedented commodity pricing for increasingly robust compute power, corralling this new resource can be more complicated than anticipated.

The idea that cloud services could create serious cost control issues seems antithetical to the basic premise of these low-cost alternatives to overly complex and expensive on-premises systems of the past. How can cloud services, which Amazon Web Services (AWS) is giving away for free, end up costing organizations far more than they expected?

Even AWS has recognized the rising need for cost management solutions and offers its own tools to help customers control their costs.

The first problem is the "consumerization" effect of the Cloud and shadow IT unilaterally procuring cloud services. Numerous end  users and business units acquiring cloud services on an ad hoc basis to satisfy their individual needs can create added costs. They often fail to capitalize on volume discounts, which may improperly configure the cloud services, and they may pay higher than necessary fees. For instance, users may only need a cloud service for limited periods of time, but acquire cloud instances for longer durations than needed.

Second, users of cloud services may not select the appropriate services to meet their evolving needs. This can result in additional integration costs when trying to port or integrate their initial services to new services or existing on-premises systems.

Third, cloud service users often fail to recognize important configuration and security requirements that could make their organization vulnerable to service disruptions or external threats. Not only could a service outage or security incursion be costly, but attempting to modify the cloud services to meet the organization's needs could be as well. Take into consideration that procuring additional backup and recovery, security and optimization services will produce added costs.

The costs can come in these three forms:

  • Additional cloud service fees
  • Management solution costs
  • Added internal and/or external technical support costs

The good news is that there are plenty of add-on cloud services to address many of these issues. There is also a growing assortment of management solutions to help organizations control their cloud resources. But, cloud services have only been available for a few years and there is a limited supply of experienced support engineers. Finding experienced technical support skills may be a challenge.

A widening array of entrepreneurs and established IT management vendors are responding to the escalating demand for cloud cost controls. The competitive landscape of AWS cost management tools vendors includes relatively new companies like Cloudability and Cloudyn as well as legacy IT management shops such as CA, HP and IBM. Even AWS has recognized the rising need for cost management solutions and offers its own tools to help customers control their costs.

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Yet, deploying these tools can entail specialized skills. Since the skills are in short supply, a new generation of cloud consulting companies has emerged to fill this gap. Companies like 2nd Watch and Cloud Technology Partners are offering planning, design, implementation and management services aimed at helping their clients better manage their cloud costs and maximize their value. The major IT outsourcing and services companies are also adding cloud consulting and cost management solutions to their portfolios.

Along with third-party consulting services is the real revelation of today's cloud cost -- your in-house IT staff costs may not go down as much as you expected. Leveraging today's cloud services can reduce your dependency on in-house technical skills that were previously dedicated to keeping data center systems and enterprise applications up and running. Bear this in mind: Shifting from internal IT requirements to cloud services brings a new set of management responsibilities.

They begin with working more closely with the corporate business units to understand their needs and identify the best cloud services to satisfy their demands. The IT organization will have to take a closer look at the cloud providers' service delivery capabilities and focus more of its energy on vendor management. IT will also have to work with the cloud providers and outside consultants to properly configure and integrate the cloud services into the company's operations.

The net result is that moving to the cloud has its own costs. So, don't be fooled into measuring your success in terms of cost savings alone. Instead, take into consideration the added business benefits gained from these services, such as greater agility, faster time to market and higher productivity.

This was first published in June 2014

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