'Sticker Shock' Could Threaten Cloud's Value Proposition

One of the biggest selling points of cloud is that it’s a more cost-effective way to deploy IT compared with on-premises technologies. However, in reality, post-deployment, organizations may encounter unexpected expenses that potentially could pose a threat to the cloud’s main value proposition.

Such hidden costs could arrive in the form of a marketing team reserving dozens of new servers to run an ad campaign, or a development team that uses hundreds of servers for load testing and forgot the switch off, a recent Information Week article pointed out.

Whatever the veiled costs, C-level executives are being given reason to further question cloud’s long-term value proposition and its viability as a cost-effective platform, according to Sharon Wagner, CEO of Cloudyn, a provider of an automated cost management solution for analyzing cloud spending.

“It’s the shocking bill problem – that’s when the pain first gets raised,” Wagner told Information Week.

Total cost of ownership is the big component organizations are confronting as they evaluate the benefits of cloud, yet the visibility problem is bringing to light some unforeseen cost issues.

“Too many companies, until recently, only deal with the problem when they run into overages,” Mat Ellis, CEO of Cloudability, told Information Week. “TCO is the new security for the cloud. People are starting to take this seriously because they are now starting to spend serious amounts of money on the cloud.”

While Cloudyn and Cloudability, among a handful of other vendors, are facing the cloud cost-management problem, “they are in the early stages of adoption, and most companies have yet to confront the cost issue head on,” the report said.

According to Ellis and other cloud experts, four scenarios in particular are cloud’s most common hidden costs:

1. Runaway virtual machines: One of the key tenets of the cloud is self-service, making it easy for users to gain access to compute power wherever and whenever they need it. Often what happens, though, is users are so empowered to spin up compute resources that they overprovision or go over budget because there are no guidelines or caps in place to limit their usage.
2. Zombie VMs: To use a “living dead” analogy, “think back to the group of developers who spun up a bunch of clouds for load testing, which they never brought down, or even a handful of licenses for a software-as-a-service (SaaS (News - Alert)) application purchased on credit cards by a lone business group, which after a period of brief usage lies dormant,” the report said. Cumulatively these expenses can add up.
3. The wrong pricing model: Cloud providers price their services differently and often, the costs are a moving target. Many organizations will opt for more expensive on-demand pricing because they don't want to make a long-term commitment to the provider, but they do so without having the proper context.
4. Maintenance costs: Although the idea of moving to the cloud is supposed to mean that support and maintenance no longer belong to IT, that’s not the reality. “People think a move to the cloud cuts maintenance costs by 50 percent, but they’re wrong because you still have some servers and resources that need to be supported,” Wagner said.