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Cloud computing platforms have been marketed for years as a cheaper option. However, despite the popularity that the cloud has gained, the truth is that organizations still face challenges as they try to manage costs. According to a study by Flexera, a company that offers IT management software, 84 percent of companies find optimization of cloud costs a challenge, while a survey in 2019 also revealed that organizations underestimate their wastage when it comes to cloud computing. This shows that the advantages of using cloud are not always clear, and the cost ends up being more than what companies anticipate.

Migrating from on-site storage to the cloud is one of the top aspects that make cloud expensive. As companies look for cloud applications and infrastructure during their migration, they may find themselves incurring high costs. When organizations are analyzing the cost of cloud platforms, some often assume that the cloud is the same as on-premise deployments. The reality, however, is that cloud platforms provide enterprise-grade applications, networks and servers that mean high upfront costs. They also enable organizations to deploy in minutes with little expertise that would otherwise be required in case of in-house servers.

Bigger gets better

The issue of cost control comes from the ability of organizations to exploit the standard pricing structures of prominent cloud vendors. Doing so helps them get value for their money and gives them the capability to negotiate their own deals with cloud vendors out of the existing standard pricing strictures. Mature organizations have an advantage when it comes to getting better bargains for their money, according to KPMG. Cloud computing service providers such as AWS seem to favor such organizations if they commit to a specific level of compute with incremental discounts. However, companies that have limited resources and cannot commit to high computing power will not get these discounts and end up spending more.

While mature companies have experience and tools to help them plan better, small organizations on the other hand may encounter various challenges mainly due to poor planning. Better planning may translate to better deals depending on how companies reserve their computing power. Proper planning means that a company can understand what they need, when, how and in the process make a good bargain that is devoid of wastage. Large companies can also offer creative deals to cloud service providers. An example of a good deal is between BP, an energy company and AWS, who reached an agreement where BP can offer 170 MW of renewable energy in exchange for cloud computing services.

Making the deal

Although creativity can be critical in such negotiations, companies in need of cloud services must prepare adequately. How they manage cloud consumption is a challenge in getting value for the investment. Identifying what your company needs and what it does not require for its operations is crucial to maintaining the operational costs and ensuring there is value out of services that you get from service providers. You have to look at early adopters and learn from their mistakes since going to the market with enough knowledge gives your company room to negotiate. Similarly, companies must forecast demand to ensure that cloud applications and databases are configured to meet any possible event in the market and minimize consumption. Leaving everything to the service provider is also not worth it.

The bottom line is, if properly managed, cloud can offer capabilities that would otherwise be too expensive and highly labor intensive when done in-house. However, the ability to scale up and down is an aspect that many organizations fail to capitalize on that leaves cloud expensive for some. Using this flexibility of the cloud as required will make it economical and equally effective.

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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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