The Truth About Cloud Pricing

By Adam Stern | Forbes Technology Council  | Forbes

Within the last decade or so, cloud computing has had to earn its spurs as a viable, secure environment in which to compute and do business. As the cloud has matured and proliferated, its permutations (public, private, hybrid,) have made the simple proposition on which it was predicated for so long (on-premise or off-premise?) substantially less so. And as the migration decision has become more complex, and as the architecture has become more stable and secure, the business model has left some businesspeople scratching their heads.

Is the cloud still a bargain? What am I paying for, really?

The cloud was born at a time when IT outlays were major pain points. Its pay-as-you-go model — marked by minimal hardware expenditures and predictable monthly software rental fees — was a refreshing break from what had become a crushing, cyclical status quo (buy iron, deploy, depreciate, then do it all over again).

The conventional wisdom among businesses with significant IT investments is that cloud costs have been steadily creeping up of late. Among a certain set of vendors and their customers, that may well be the case — as far as anyone can tell. As Frost & Sullivan has observed, it was once possible to line up with similar configurations from the three major cloud service providers. But now you have reserved instances (AWS, Amazon Web Services), reserved VM instances (Microsoft Azure) and committed use discounts (Google) affecting the outcomes.

In its Stratecast Predictions 2018, Frost & Sullivan noted that 53% of IT leaders surveyed cited “managing costs to run cloud workloads” as a huge obstacle, and over 50% have difficulty justifying the expenses of some public cloud workloads. F&S predicted that cloud providers will address the issue “by consolidating and simplifying their own pricing tiers to enable users to better predict and compare costs.”

Let’s be clear: There is no “the cloud.” While too many on Wall Street seem to believe that the cloud hovers in a fixed point above Mount Rainier, Microsoft’s Azure and AWS are decidedly not the cloud. (Full disclosure: Infinitely Virtual participates in Microsoft’s cloud solution provider network.)

The cloud exists overwhelmingly for those small and midsize businesses that lack an IT army. In my opinion, Microsoft and Amazon simply aren’t set up to focus on niche segments without an S&P 500-style customer in the mix. They thrive on a “high volume, low transaction cost” model, which was never intended to accommodate small and midsize businesses.

Indeed, the cloud is nothing if not radically dispersed. It’s a vast ecosystem consisting of thousands upon thousands of vendors with offerings tailor-made for verticals and specific markets. By that measure, Amazon and Microsoft are but two players within a vast landscape.

As the CEO of a provider of cloud services for more than a decade, I believe it’s my responsibility to educate clients about their options. The industry doesn’t make it easy.

So how can small and midsize businesses cut through the pricing noise and find the right cloud provider? Understandably, it’s tempting to focus on the hosting quote from the provider (especially if Azure or AWS is in the mix), but it’s essential to look at what is and isn’t included in that quote, on a per-hour or per-month basis. More than likely, the provider or managed service provider is serving up an arbitrary number. It doesn’t include the charges that matter — the cost of consulting, software installs, backups, restores, software management, adding users and so on. Much of it comes down to labor (i.e., engineering time) once the customer is into the product — what level of support is included versus what’s extra?

Any organization needs to know what it’s buying at the outset. Depending on your needs as a company, you have options in terms of the services provided. For some businesses, simply a place to store your data may be all that you need. For others, an all-inclusive product — storage, backup, security, disaster recovery, 24/7 support, etc. — may be required. Regardless of what’s on your checklist, every business should ask the following questions as they begin doing research on a cloud solution:

  • What’s the entire life cycle of the host’s environment from the get-go?
  • What about adding storage, refreshing servers periodically or adding applications?
  • Will outlays be required for new Windows licenses every year or so, or will software be priced on a rental model?

In some situations, licensing costs can equal or exceed the price of hardware. The wisest move is to include these items in a contract; doing so tends to eliminate surprises down the road.

Small and midsize businesses need to know that cloud hosting isn’t a commodity business, and that some vendors do emulate the so-called big players in the quality of the environments they build and the kind of security, performance, software solutions, storage flexibility and support they provide. It’s entirely possible to deliver high function at modest cost, but doing so requires expertise, experience and a genuine understanding of what businesses need.

While cloud computing asks businesses to decide among a growing array of options, it hasn’t shed its essence as a tremendously good value. Management concerns and choices don’t undermine that inherent quality; in the right hands, those choices actually help enhance it.


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