Why The Average Cost Of Cloud Computing Is Artificially High

CloudHealth Tech Staff
Nov. 12, 2019
5 minute read

If you want to know how your business’s cloud bills compare with the average cost of cloud computing, you are unlikely to find a definitive answer. Not only is the cost of cloud computing different for every business, but the average cost of cloud computing is artificially high due to some businesses overspending in the cloud.

In 2018, the WSJ published an article claiming businesses across all industries are overspending on cloud computing by an average of 42%. Although the claim was based on a relatively small-scale survey compiled by a cloud optimization firm (which only had its overspending database of customers to use as research subjects).

The WSJ article claims all businesses overspend on cloud computing and including all businesses make the difference between the average cost of cloud computing being artificially high by 42% verse only being inflated by a few percentage points - hence the difficulty in finding a definitive answer.

Why Businesses Overspend in the Cloud

Although a small-scale survey of overspending customers is hardly a reliable guide to how much businesses spend on cloud computing, there is no doubt some businesses spend more than they should. The primary reason for this is the misconception that you only pay for what you use in the cloud, whereas the reality is you pay for what you provision whether you use it or not.

For example, if you provision a Virtual Machine with 4 vCPUs of compute power and 32 GiB of memory, that is what you will pay for even if you only use half the Virtual Machine´s capacity. In fact, because of the way in which most Cloud Service Providers price Virtual Machines, if you only use half the Virtual Machine´s capacity, you are paying 100 percent more than you should rather than 42 percent.

Other ways in which businesses pay more than they should for cloud computing include provisioning premium disk storage when standard disk storage will suffice, failing to release unused IP addresses, and neglecting to terminate unused “zombie assets” such as unattached disk storage, idle load balancers, and obsolete snapshots. Individually, these unused services don´t cost very much, but collectively they can artificially increase the average cost of cloud computing significantly.

How to Reduce Your Business´s Average Cost of Cloud Computing

Most Cloud Service Providers supply cost management tools that can identify overprovisioned Virtual Machines and make “rightsizing recommendations”. The recommendations are not perfect in every case because they are based on a fixed period of utilization and, if your business´s Virtual Machines experience irregular or seasonal spikes in demands (in which case it may be better to take advantage of burstable Virtual Machines), the recommendations may be impractical.

With regards to over-provisioned and unattached disk storage, reducing the average cost of cloud computing for these resources can be complicated by a lack of visibility. Ideally you should take advantage of a cloud management platform such as CloudHealth to get total visibility over your business´s cloud environment and make it easier to find cost-saving opportunities. The same applies to unused “zombie assets” and any unsanctioned shadow IT services used within your business.

Further ways to reduce your business´s average costs of cloud computing include taking full advantage of committed use discounts such as Reserved Instances. The management of discounts has become more complex since AWS introduced its Convertible Reserved Instances, but by using CloudHealth´s RI Optimizer, you can be sure of cost-efficient Reserved Instance lifecycle management whether your business operates on the AWS Cloud, Azure Cloud, Google Cloud, or a combination of all three.

Further Capabilities of the CloudHealth Platform

CloudHealth not only helps businesses reduce the average cost of cloud computing but ensure it stays below average via a capability called “policy-driven automation”. This capability enables you to create a policy (say “notify me of any disk storage volumes that have been unattached for two weeks”) and CloudHealth will monitor your cloud environment looking for unattached disk storage volumes. When the platform finds one that matches the policy, it will send a notification.

This capability not only has benefits for keeping a business´s cloud bills below the average cost of cloud computing, but also has uses for performance, security, and governance. To find out more about CloudHealth´s capabilities, do not hesitate to get in touch. Our team of cloud experts can explain more about how you can optimize your cloud environment using our platform and organize a free demonstration of CloudHealth so you can visualize policy-driven automation in action.