How Cloud Costs Are Computed and How to Reduce Cloud Costs?

How to reduce cloud costs is a question on everyone’s mind since cloud computing has revolutionized the ways in which workspaces function. They have sped up processes and helped save a lot of time and effort thereby making the workspace more efficient. But the reality is that Cloud computing is rather expensive, especially when cloud spending is on a large scale. Today, we will look at how you can reap the benefits while reducing cloud bills. But before we do that, to get a holistic picture of the process, one needs to understand how most companies price their cloud computing service. Below mentioned key points would certainly help you in getting the answer to the big question, ‘How to reduce cloud costs’?

The types of pricing

Pricing is classified into fixed and dynamic pricing. The hallmarks of both these types of pricing are as follows: In fixed pricing the service provider states that a specific sum of money will be charged for a specific amount of usage. The various types within this will be dealt with in the following paragraph. In dynamic pricing, the service provider provides the service at different prices for different customers based on various factors. The determinants of such costs too will be dealt will extensively in the following paragraphs. One crucial way to avoid overspending is to choose a pack wisely.

Types of Fixed pricing

Within fixed pricing, one may select a subscription based model, a pay-per-use model or a hybrid model. A subscription model is akin to a prepaid service. Here the customer chooses a pack based on the data available and the benefits provided and this is all done at a fixed rate for a fixed period of time, usually monthly. A pay-per-use model, is akin to a post-paid service where the consumer is charged after usage, only for the data used a benefits availed. A hybrid model is one where it is subscription based up to a limit and pay-per-use post that.

Determinants of cost in Dynamic Pricing

A dynamic model charges different customers in different ways. The pricing is negotiated before the commencement of service and carried out accordingly. Consumers have bargaining chips here and they can drive down the price. In determining the price, service providers look at the cost they are incurring, the value that they are providing, the price of competitors, the willingness of the consumer and maybe even the location of the consumer. These pricing models are often provided by smaller companies with whom you can have personal contact and is suitable for similarly small companies, whose requirements might not be very tasking.

Reduction of Costs

If you opt into cloud computing with large cloud service providers such as Microsoft Azure, Amazon Web Services or Google-cloud-platform, you will end up running your bills to the thousands, if not millions of dollars. This is especially true for large corporate. It is not a problem if you paying for what you use, but in reality that is not the case. These companies often end up paying more than they should due to lack of maintenance. Proper monitoring and regular check-ups along with de-cluttering within the same domain can almost save you a fortune. Here is how they can go about it. 

1.      Find Unused Resources

Some resources are temporarily used. The administrators of the company IT department will purchase a tool in order to enhance performance for a task. The issue however is that more often than not, they neglect to turn off this tool after the job is done. This programme then just stays on the cloud and takes up data, but in exchange, offers no value for you. But when you get your cloud computing costs you will find that you have been charged for this data as well. So the first thing you can do is identify unused programmes and uninstall them.

2.      Use Heat Maps

A heat map is a data analyser tool. It provides valuable data on the usage of your cloud service by showing instances of spikes or dips in cloud data usage. This happens to be a crucial tool in cloud cost management. You can use it to note processes which are increasing the costs and manage them effectively. It gives you a holistic idea of when the activity is at the highest or lowest, and based on this information, you can shut down the system and save money very easily. Do this by using automatic sensors to avoid human labour costs. 

3.      Buy Reserved Instances

RIs, also known as reserved instances, are a must for companies trying to optimize their cloud costs. These RIs are essentially long term commitments by paying the bills upfront as opposed to later, after the usage. It is said that investing by purchasing RI can save up to 75% of the cost being incurred earlier. RIs are offered in many plans and you should buy one which suits your needs. To determine this, you need to look at your usage over the years and purchase RIs based on that, consistent with such usage and by also allowing for future scaling.

4.      Adapt Multi Cloud Process

If you run a single cloud system, you run the risk of incurring very high costs. It decreases your ability to use your resource. Therefore, it’s prudent to consider a multi cloud environment. Instead of buying your entire service from say, Amazon, you buy one chunk from Google and one from Amazon and one from Microsoft. The problem however, is that when you do this you will risk losing out on discounts offered for meeting certain caps, which would be possible only if you use one provider. So you must determine your priority, but it is an option worth considering.

Conclusion

There is no debate on whether you should adopt cloud computing in your workspace. This is because there isn’t much of a case against it. The only thing that can be said is that it’s expensive and using the steps mentioned in this blog, you can nullify that argument as well. In the end you will run two benefits. Firstly, low cost due to streamlined cloud and as an unintended benefit, better performance due to lower pressure. This too will increase your profits. Hence, don’t think of this as a cost, but as an investment, for it will yield returns.