Were you tricked into paying too much for cloud?

Cloud storage pricing is in a race to zero. Basic storage services are now $0.015 per GB/month from major providers like AWS and Google Cloud. 

Consumer and small business options like DropBox offer a limited amount of storage for free, and sell 1 TB for around $99/year — or less than a penny per GB/month. So why do some companies end up paying more than 20 times that for cloud storage?

From cloud markup to lock-in, let’s look at some of the traps organisations can fall into.

Did You Miss the Mark(up)?

For customers, falling prices are a net positive. It’s hard to find fault with “almost free” storage that lets you “pay as you grow”— especially when the alternative is buying enterprise storage arrays and paying for fixed capacity up front at $2 to $3/GB.

Since the price curve for cloud storage continues to trend down, it doesn’t make sense to buy more capacity up front than you need. You don’t want to follow the same archaic on-prem model of buying more fixed capacity than you need when you shift to cloud storage. You should not need to worry about capacity planning and buying ahead with storage that is essentially a service.

Cloud storage has quite a few cost advantages over the traditional on-premises storage model. When third party providers play markup and price lock-in games with cloud storage, it completely contradicts the ability to consume cloud storage as a utility. Solutions that connect on-premise infrastructure to cloud storage in some way may bundle the cloud storage with the solution, and mark up prices on cloud storage by up to 20 times – $3 per GB/year – and charge for planned usage, not actual usage.

Meanwhile Gartner estimates the total TCO for on-premise arrays at approximately $2.52 per GB/year. It just makes no sense to pay more for cloud storage than on-prem storage. Bundled offerings can work in where prices are stable or going up, but can work against you if prices are going down. Amazon has reduced prices 43 different times for its various services since launching AWS in 2006. The S3 storage service started out at $0.15 per GB/month, and is now available for $0.015 — a 90 per cent decrease!

 When buying cloud from a third-party, here are some things to be wary of:

  • Locked-in pricing
  • Fixed upfront capacity
  • Charging for logical capacity rather than actual usage
  • Marked up prices
  • No cloud provider choice
  • Data ownership  

Lose the Lock-in

Of the things to watch for, price lock-in is one of the most common and easy to miss. There are good reasons to pay ahead if you are expecting to use compute and storage capacity, but it’s just as easy to fall into the trap of overpaying for cloud infrastructure – both storage and compute.

Here are 4 things to consider:

  • Know how much you expect to use: Even if with paying for on-demand cloud resources, forecast usage and the associated monthly costs. There are a number of calculators available, from the likes of Amazon, Microsoft and Google.
  • Invest in reserved capacity if you’ll use it: But - make sure the savings are more than enough to offset price decreases. For example, AWS offers Reserved Instances where you get a discount by committing 1 or 3 year terms. There are several options that save you from 25 to 75 per cent vs. on-demand pricing, but you have to use the compute instances enough to make it worthwhile.
  • Buy through resellers when they help with pricing or services: There are often volume discounts and valuable support, management and training through resellers.   

Think of cloud computing as a cell phone plan. It’s easy to fall into the trap of buying more minutes and bandwidth than you’ll ever use, so figure out how much you will use and buy just the right amount. And don’t fall for the bundle that includes a great deal cable or satellite TV, but when it expires in 6 months, doubles your cost.

You should choose your cloud provider and get the full benefit of cloud economics as prices drop. When your find the right cloud infrastructure and storage provider, the cloud should be a seamless and cost effective solution.

Barry Phillips, Chief Marketing Officer, Panzura

Image Credit: Chaiyapop Bhumiwat / Shutterstock