Why Does The Cloud Cost So Much? Maybe It’s Your Fault.
Note: These are some of my personal views on how to get to the cloud (economically). It’s not intended to be an indictment of the cloud. In fact, the cloud is amazing. But with great power comes great responsibility. AWS, Azure and GCP have transformed the way in which technology services are consumed. I’d like to help you avoid some of the expensive lessons I have learned. Hopefully, this article helps you put a better plan in place and you can reap the benefits of cloud computing.
If the cloud does cost too much, you’re probably doing it wrong.
Sorry if my editorial comments or the title of this article hurts your ego, but it’s really just to make a point. I commit to you, it’s not just click bait. In fact, if at the end of this article, you don’t think there is anything useful within, please contact me and we can discuss 1:1. I’d be happy to have a deeper conversation on the topic.
“The Cloud Is Cheaper.”
They, the ACME Company
If your cloud strategy consists of taking your on-premises workloads and simply moving them to AWS, Azure or Google Cloud Platform, you will most likely see your infrastructure bill go up. Lift & Shift is not a comprehensive cloud strategy. In order to benefit from the cloud economy, the applications you run in the cloud will need to be appropriately configured. Let’s start with a simple formula to help inform our discussion on cloud transformations.
The hypothesis that “the cloud is cheaper” is something many CIOs and CTOs accept as true before they embark on their cloud transformation. That hypothesis is loosely based on the formula above. Pitch decks and PowerPoint presentations have also helped to further gain their trust. There are some other variables in the formula we could consider (and we will), but before we complicate things, let’s talk about this simple equation.
Total Cost of Ownership vs. Transformations Costs
The distinction between these two variables (TCO & transformation costs) is really around the cost to run your infrastructure compared to the cost to build your infrastructure. Total cost of ownership costs are YoY (year over year) costs that occur more than once. Transformation costs occur just one time. Consider the following theoretical scenario from the ACME Company. Today, all of ACME’s infrastructure is on-premises in their own data centers. Last fiscal year, ACME spent $1M on technology infrastructure. We’ll refer to this as the status quo cost. ACME’s CIO wants to transform the company and go to the cloud. If the following formula is true, the journey to the cloud could be a good thing for the CIO’s career. It would mean the CIO would see a direct cost savings by transforming to the cloud.
What is Total Cost of Ownership?
TCO is made up of 2 kinds of general costs – direct costs and indirect costs. Direct costs are for things like hardware, software and people. Indirect costs are for things outage impacts and break-fix work; the costs that are incurred indirectly.
Do you know how to estimate the direct costs to run workload in the cloud?
All cloud services are not created equal when it comes to the total cost of ownership. The cost of human capital to support cloud services varies by the skill set required and the complexity of the service. The industry has rallied around 3 general groups of cloud services – SaaS (software as a service), PaaS (platform as a service) and IaaS (infrastructure as a service). Generally speaking, the human capital cost to run technology goes down as cloud service consumption goes up, with respect to this triangle.