Cloud solutions: Costly, or cost-effective?
Cloud solutions can result in significant savings amongst other business benefits, but they can also increase the total cost of operations if they aren’t well executed.
There are a lot of misconceptions about cloud -- the biggest being that all solutions are the same and it’s just pricing that’s different. This is certainly not the case.
There are thousands of cloud service providers; hundreds of thousands if you include various types of cloud services such as IaaS, PaaS, SaaS or other growing XaaS providers. Even when cloud services appear to look the same, or similar, they are rarely “equal.” Each provider has its own collection of services, pricing models, end-to-end supplier chains, and service wrap offerings, making it difficult to compare the total cost of a service from one provider to another without expert advice.
At Leidos, we support a number of our clients at various stages of their cloud journey and we want to highlight some key considerations that can be the difference between reducing costs and increasing them.
Buying a cloud service could be compared to buying a T-shirt online. A potentially simple task, if you know exactly what you want. Let’s explore this analogy:
- Who will use it? Is it for a male, female or child? In the context of cloud, will you use it to deliver services to your consumers or is it limited to your staff or a subset of your staff? Know your business use case.
- How will you use it? Function influences form. Will you use it as an undershirt or does it need to be light and breathable for running? When looking at a cloud solution, know the type of service required and select appropriately. Will it be an infrastructure, platform or software-as-a-service cloud offering?
- When will you use it? Is it for casual, business or everyday wear? Is it for summer or winter? In the context of cloud, will you be using it for your test, development or production environment? Will it run 24-7 or only during office hours?
- What's your colour/look? Do you have specific needs like a custom logo, generic print or a certain colour? For cloud, what are your specific business needs in terms of security, compliance, availability, etc., and how must they align to potential suppliers?
- What’s your size? Are you looking for small, medium or large? This is about fit and what’s comfortable. Looking at a cloud solution, this relates to your users and how well they adapt to the new service(s); its acceptance as a tool in your business is critical to its success.
- How many do you need? Is it for a single purpose, or will it have multiple uses and requirements? If you need more, can you buy more of the same without having to worry about the fit or whether the additional units may be different? Focusing on cloud, this is about scale, presence and agility.
You can see from this T-Shirt analogy that the questions above influence the attributes of the shirt you buy and the online store you buy from.
Cloud is no different. Even a large, cotton, basic white T-shirt can fit differently and vary in cost depending on where you buy it. No two cloud services are the same beyond the surface appearance.Think of the move from on-premises to cloud like moving from tailor-made clothes to off the rack. You are not going to get an exact fit or any customisations or add-ons – these will ultimately increase the cost of your off the rack purchase, or drive you to tailor-made.
Recommendations before you start buying cloud services
Our key recommendations before you start buying cloud services are to:
- Understand your specific needs and requirements – develop a use case and evaluate different services against it.
- Develop a multi-cloud capability strategy aligned to your digital strategy. Try to align to best-of-breed or the service most closely matched to your requirements. You don’t need to put all your eggs in a single basket.
- Define pattern based design requirements. one size does not fit all. To avoid paying for functionality you do not need, break down your requirements by service and allow the design of your cloud solution to be different using patterns to ensure you do not increase support costs. For example, for services where you will be handling official sensitive data on production systems with high integration to other eco-systems, it will require additional security controls and add-on services. As a starting point consider patterns per data classification and environment type (test, development and production).
- Think big, act small. Managing a cloud solution is very different than on-premises. Give yourself time to adjust and evolve your requirements.
- Be prepared for change. Engage all potential stakeholders and make the end users part of the initiative. User acceptance and satisfaction is a key success factor often overlooked in projects that make fundamental changes but remain focused only on the technology.
The common cost surprises with cloud solutions
Before we go into the things you need to consider when you start buying cloud services, I want to share the most common cloud cost surprises we hear about:
- Pay by the drink vs. consumption – Most people think cloud services are all pay-by-consumption, as in you only pay for what you use. In a lot of cases, however, it is a pay-by-the-drink model that bundles a number of services in a variable pricing point, e.g. per user pricing for SaaS solutions.
- The extras – Virtual servers, cloud storage tiers, backup, support, service level agreements (SLA), storage performance, resilience, bandwidth and other attributes are often considered extras and have their own pricing and add-on charges.
- Suitability - When designing their cloud solution, most start with the basic workload in mind and apply different requirements based on the service as they go and fine-tune the environment. You will get better value for money by tailoring needs for different uses vs. a generic requirement across all services.
- Renewal costs can be higher – Most contracts do attract high renewal costs but are often up for negotiation.
- Usage discounts – Whilst usage discounts can be lucrative, the whole purpose is to scale up and down (elasticity). Depending on the discount thresholds and tolerances in the contract, your costs per unit can go up significantly. Where possible, negotiate tolerances to the discounts and make IT budget provisions to minimise risk of overspend.
- Payments start on Day 1 – Once you activate the service, you will pay for the service whether you use it or not. Scale up as you ramp up the workload or negotiate pre-live concession rates, especially for SaaS offerings.
- Location costs – The region you select to host your cloud service can make a big difference to the cost. Unless you have to have some or all of your data stored in a particular location, think about a multi-region cloud strategy aligned to the workload.
- Payment for service types – The way you pay for services are different for each provider. Whilst one vendor may look cheaper than the other, it is often not a like-for-like comparison because different charging metrics are used. Don’t be fooled by similar descriptions; they may be called the same thing but they will have different inclusions and, more importantly, exclusions.
Recommendations when buying cloud services
Our recommendations when buying cloud services are:
- Check if SLA’s and the performance exit provision (ability to exit contract due to performance without penalty) include the end-to-end supplier chain
- Check your renewal terms
- Check your discount thresholds and tolerances
- For SaaS and pay by the drink solutions, look into pre-live concession rates or start small
- Be clear on measurement periods and your SLA definition
- Consider when your data needs to be local and when it can be hosted off-shore
- Specify the data access limitations to avoid providers using your data within the contract guidelines
- Have a clear exit strategy for “if it goes wrong” or you simply need to move somewhere better/cheaper
The key takeaway is that cloud services may seem similar to your virtualised on-premises solution, but they are very different. You can achieve significant savings with a cloud solution underpinned by a solid design and planning in addition to some application of lessons learnt.