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Why the cloud is probably more expensive long term
For many organizations cloud is likely more expensive than expected before migration. At least it will be if you do nothing to stop it.
The cloud is no magic bullet for IT problems. Many companies had to find that out the hard way. Why are so many migrations performed as a lift & shift when everybody really knows this is a bad idea? Maybe because not everybody is really convinced yet.
We’ll optimize once we’re in the cloud. But when the cloud migration is done everyone wipes the sweat from their brow and continues with business as usual. Optimization? It’s working, ain't it?
Why is cloud more expensive than on premise with equal usage?
Cloud providers buy the same hardware companies do for their on-premise environments, but of course they want to make a very solid profit. And honestly, there’s nothing wrong with that. Sure, they get a volume discount, but nowhere near the fat profit margins they pursue. On top of that they want to cash in on the maintenance of all that hardware. Their people usually earn more than the average IT people, a cloud environment is much more complicated than your own server cabinet.
But don’t think your off the hook for management. Nope. You’re still responsible for managing your operating systems, like Windows, and your databases. And surprise, surprise, that only gets more expensive as your now in a more complex environment.
Oh, and lets talk network traffic. Egress traffic costs money now. You want a copy of production in your acceptance environment that’s still on premisse? That will cost you €80 per terabyte now. You’re reading this right, what used to be free now costs a fortune.
Fact: Efficiency is MUCH worse in the cloud
Lets be honest, Cloud providers have a very different view of efficiency than their customers. Efficient is having a lot of rentable hardware in the same rack space.That means they buy CPU’s with many cores and putting hard disks and SSD’s that are as large as they can get in their storage. But high density lowers efficiency. 8 SSD’s of 1TB a piece provide 8 times the bandwidth of a single 8TB SSD even though the storage space is the same. Sometimes you can get the premium versions, but only at a premium price. Food for thought, don’t you think?
On premise is sometimes more flexible than the cloud
Cloud is often chosen for it’s perceived flexibility. But this perception is sometimes deception. Cloud offers you a wide range of hardware, on premise you’re often limited to 1 or 2. But in the cloud you’re bound to certain ratio’s between e.g. number of CPU’s and the amount of memory. If you want faster storage you sometimes need a more expensive VM that you don’t really need. And there are limits to what’s available, mostly they don’t carry the superfast hardware and networks. The flexibility you gain in the cloud is offset by flexibility you have now and will lose in the cloud. That’s something you should consider, but that consideration is often not on the agenda when a cloud migration is in the picture ...
Nice those License-structures
Licensesin de cloud are often only available on a monthly basis. At first glance that looks flexible and cheap, but over a 60 month period the purchased licenses are often much cheaper. And licenses you buy can be sold again if you don’t need them anymore, at least in Europe. If you don’t want the newest of the newest, but one step previous, you can often buy secondhand licenses at a bargain. We even see companies moving out of the cloud, back to on premise, mainly due to license cost. The text of that blog is in Dutch, but Google translate is your friend.
So how do you keep your clod cost within budget
Realize that the cloud is not just a data center where you rent hardware. If you buy an electric bicycle and you keep pedaling by yourself, you just get tired much sooner because you now need to propel the weight of the battery and the motor on top of the bike. It takes more energy to cover the same distance than on a regular bike. You don’t get any advantage until you turn on the motor.
In the cloud it works exactly the same. You get an advantage from the cloud, and cost savings, only when you start using the cloud as cloud and not as a relocated data center. With most migrations we see applications and services moved as is to a cloud environment without using the extra facilities the cloud offers.
We have already established that cloud resources are more expensive than the same resources on premise. So you’ll need to use your cloud resources more efficiently. And use the extra resources the cloud offers. Or you can just pay top dollar. Despite the fact I can’t look in your wallet, I assume you prefer to spend your budget differently.
Sizing – not with cloud provider tooling
The sizing tools cloud providers offer calculate what you need to run your current workload at peak moments. Often they just manage to filter out your backup, but if you have a server that peaks a half hour a day they will size it for full throttle. They don’t consider consolidation, so two servers that peak a half hour at different times of day are not merged. They don’t consider optimization, most workloads can run on much smaller hardware if they’re optimized first. And they don’t really consider smart hardware choices. For some workloads it makes a big difference choosing an Intel or AMD CPU.
An optimal sizing takes more work than just targeting the exact same performance in the cloud. You can halve your cloud cost, or better, with a truly good sizing. Sound like a fairy tale? Unfortunately it’s the truth. We’ve seen inefficient cloud use countless times.
Our own situation: 30x as expensive
Of course it’s easier said than done. And I’m still writing from practical experience. Because … Our own approach? This year we’ll be replacing our SAAS server stack. We compared buying hardware and the cloud. A cloud solution has a monthly fee as high as the hardware purchase price. And the hardware lasts us at least 60 months. Of course that’s not the whole story. With a long term contract we’ll undoubtedly get a discount. But I doubt they’ll give us 60 months for the price of 1 month.
Of course we also have data center and energy cost. But if we factor that in the cloud is still 30 times as expensive as running our own stack. And even that is comparing apples to oranges, the hardware we buy is is much fatster than what cloud providers deliver at that price point.
Of course we’ve already consolidated and optimized. And made smart hardware choices.
To cloud or not to cloud, that's the question
Whether or not you migrate to the cloud depends on many factors. Make an informed decision before you put a migration in motion. And if you go make sure you adapt to the cloud, because the cloud will only adapt so far to you.
I’m not advocating that cloud should be avoided, but please don’t try to force a square peg in a round hole. Something many organizations do – pressured by suppliers or driven by trends. If the peg doesn’t fit find another hole or buy another peg.
Get help – Invest 15 minutes for a guaranteed ROI of at least 200%
For a migration to the cloud you need expertise in many fields. Expertise you probably don’t have on board, at least not yet. Sizing, optimizing consolidation and hardware choices are expertise fields that cloud management suppliers don’t master.