Like a migrating herd of Wildebeest across the Serengeti, companies around the globe continue its rush toward that shimmering lake of Cloud Compute that promises lowers costs, increased flexibility and scalability (and more according to the brochures). As with any panacea, the dream usually falls short of the reality. Cloud compute for many has hit that ‘middle ground’ where actual benefits and unexpected problems meet. As the body of problem evidence mounts for Cloud Compute, there are some clear myths that have arisen that need to be ‘debunked’. Only when these myths are fully understood can organizations minimize the risks and still attain full realization of the dream.
Managing Cloud Costs is Easy
Cloud waste expected to hit $17.6B in 2020.
There is A LOT more work to managing cloud costs than almost anyone originally expected when embarking on this path. To use a cliché term, “you don’t know, what you don’t know.” This is an industry challenge, but even the savvier Azure and AWS customers are still surprised when they learn they are overspending by 30% or more, due primarily to unknowingly poorly mismanaging the consumption and costs of their cloud environment; sometimes even the most basic rightsizing and right buying. For those customers that are less savvy, the costs can be 60% or more higher than they should be.
Financial Operations teams are not always fully equipped to manage this end to end and need help to understand the complexities of supplier agreements in the context of their own deployments and usage.
Moving On-Premise to Cloud Always Saves Money
No, it doesn’t always save money. In fact, the reality is many companies end up paying considerably more! Unfortunately, we have many examples of this which we have worked through with clients where the intended spend on cloud is exponentially higher. Part of the problem arises out of the fact that there is no single issue that causes the escalation. In many cases there can literally be hundreds of reasons which is why it’s difficult to realize the savings anticipated with the move away from on-premise.
One additional point to be made here, is that you should proceed with caution when using only the tools a supplier makes available to plan a migration from on-premise. Let’s just say those tools may not always be optimized to save you money in our opinion.
As we have outlined in previous articles and eBooks – the real answer lies with hybrid or multi-cloud which incorporates benefits of on-premise with the promise of cloud. You can check out our eBook: Multicloud Strategy here.
‘Lift and Shift’ as the Preferred Approach
Preferred by who? The supplier certainly prefers this and will typically recommend it as a course of action. When you have a cloud first strategy, this method is very popular. IT is often under pressure to move to the cloud because of upcoming investment imperatives for the on-premise environment (e.g. hardware refresh, data center leases, etc.) and often move before they can optimize the cloud footprint. Consequently, IT often duplicates the same footprint used for on-premise in the cloud without any formal modeling for what is optimized for the cloud, leading to significant waste and high costs. There are literally dozen of cost savings techniques to improve on ‘lift’ and before ‘shift’. Things like refactoring applications and engaging help to add a layer of more sophisticated cost modeling…like NET(net). You may be going through this once or maybe have already gone through and are trying to ‘right the ship’ through iterative efforts of configuration changes and cost reductions. In either case, NET(net) has addressed this situation MANY times with Azure and AWS – across several industries. Suffice it to say that we can help you.
Pricing is Commoditized and Fair
You would think that given the transparency of AWS and others publishing there prices online, the costs would be straight forward. However, there are literally hundreds or permutations of deployments that can exist between thousands of companies, so it’s impossible to dispense fair pricing across everyone. Pricing that works for one customer may be totally inefficient and inequitable for another, even when the list prices are the same. There also exists, particularly with AWS, a misnomer that reserved instances are always the path to savings.
To close this article, we leave you with a few salient points that mostly apply to AWS:
- AWS revenue represents about 13% of Amazon’s overall revenue. However, AWS represents over 70% of Amazon’s overall operating profit
- Amazon’s net income in 2019 was $11.5B USD
- AWS claims 33% of the market share, followed by Azure 18% and Google at 8%.
Do any of the above points give you reason to think that there isn’t room for improvement in how you are spending on Cloud Compute with AWS or others? Is there any reason to think AWS, Azure, or Google have your best interests in mind when recommending ‘Lift and Shift’ or offer their own tools to help you plan a migration?
What you really need are qualified and trusted resources to help ensure that your spend does not spiral out of control and considers all the thousands of permutations that can impact your bottom line. Contact us to see how we can help you as we have thousands of others.
Founded in 2002, NET(net) is the world’s leading IT Investment Optimization firm, helping clients find, get and keep more economic and strategic value. With over 2,500 clients around the world in nearly all industries and geographies, and with the experience of over 25,000 field engagements with over 250 technology suppliers in XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, Telecommunications, and other areas of IT spend, resulting in incremental client captured value in excess of $250 billion since 2002. NET(net) has the expertise you need, the experience you want, and the performance you demand. Contact us today at firstname.lastname@example.org, visit us online at www.netnetweb.com, or call us at +1-866-2-NET-net to see if we can help you capture more value in your IT investments, agreements, and relationships.
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