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Cloud pricing only one factor in bottom line

To get an actual cost of public cloud, look at more than just price per instance. Factor in security, types of service and network costs as well.

Public cloud providers cut prices or expand their services under the same pricing structure on a nearly weekly basis. But comparing cloud pricing involves more than just numbers. Enterprises need to consider types of service, network costs, security and more to get a better idea of the final cloud service price tag.

Amazon Web Services has cut its price 44 times in the last six years, forcing Microsoft and Google to drop their prices in response. Just considering storage, the average monthly cost per gigabyte of RAM for a set of various workloads has dropped across the board over the past few years. AWS dropped prices 8% from October 2013 to December 2014, while both Google and Microsoft cut prices 6% and 5%, respectively, in the same period, according to Business Insider. Other cloud providers, such as Rackspace and AT&T, have lowered their prices even more.

As I work through these cost models, it's not just about the prices but also about how the cloud services are delivered. There are many factors to consider, including service-level agreements, or SLAs, points of presence, types of service (bare-metal storage), charge for network traffic, security, management and other similar features. This makes it difficult to compare apples to apples when it comes to public cloud pricing; no two cloud service providers are the same.

The actual price of the service is only a single data point; companies have to consider the larger issues around requirements -- existing and future. Make the wrong cloud choices and that low price won't matter if it fails to meet expectations. Pick a service without understanding cloud pricing, and you could end up paying 10 to 20 times more than you should for that cloud service over the next five years

Knowing what the cloud service actually offers

When it comes to cloud choices, start with the requirements. This means listing everything that the public cloud service needs to provide now and into the future. Do this for two core reasons:

1. If the cloud service does not fit your requirements, it would not be right at any price.

2. This exercise allows you to select a few specific clouds that meet the requirements, and then do a comparison on how the services price out.

Service providers take very different approaches to cloud pricing models. Some charge for network traffic; some do not. Some charge for replication services, and some provide it as a standard feature. Understanding the pricing models of each public cloud contender will constitute most of the work when comparing prices, cost differences and which services are delivered.

Don't pay much attention to endless price cuts from public cloud providers. Assume that prices will continue to drop, and dial that into any costing model. In addition, it's a good idea to consider all public clouds for fit and function in support of your cloud implementation. The higher-priced services could be lower-priced over the years, when you consider the public cloud holistically.

Next Steps

Determining cloud costs and risks

How cloud costs affect the channel

This was last published in April 2015

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What is your enterprise's process for choosing a public cloud provider?
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For us it came down to combination of security, management and someone basically saying "our policy will be to use this provider" and the rest of us said "OK". Seriously, though, security and ability to manage and monitor effectively was the prime driver, price was important but significantly lower on the list.
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I recently gave a talk on this very topic. Security is always the first concern and is a binary decision. Once past it, you focus on capabilities and fit for your application. Finally, you focus on the estimated cost. This is where it gets difficult. In the SaaS world, not so much. Seats times monthly price pretty much gets you there. But comparisons of IaaS providers can be almost impossible. Tools like Krystallize CloudQoS™ are invaluable in capturing workload proxies and allowing true price/performance comparison across providers.
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