Cloud cost management with CapEx isn’t working

Published on August 7, 2018
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In this article let’s look at some research statistics on how cloud customers go about cost management and also whom they look to for cloud cost management. Also, let us look at satisfaction levels in this industry and the overall market forces at why there is a sudden rise in DevOps talent globally. So much so that DevOps professionals can demand higher pay than a data scientist.

graph from statista on cloud

Saving money, improving availability, resiliency, agility and shifting CapEx expense to OpEx remain some of the main reasons why cloud technology adoption is rising globally.

Moreover, if the cloud didn’t deliver on this promise of cost reduction, resilience, security cloud adoption would decline, not increase.

Drivers for the cloud research

To facilitate this migration to the cloud-managed service providers (MSPs) manage the migration. Until recently for a myriad of reasons small and medium-sized business have continued to leverage MSPs to handle cloud complexities with focus on business drivers and core products. Adoption of MSPs to handle cloud hosting worldwide is to help with a range of services – backup & recovery, archiving, infrastructure monitoring, disaster recovery, application management, incident management, remediation, mobility, development and capacity planning.

Adoption rate for MSPs for cloud

Innovation in the cloud is happening at a rapid pace. Systems and capabilities of what was possible a year ago are becoming outdated in a year many a time. Some of the advancements in the area of storage, the memory may put the current solid state drives and memory to a real test! Cloud customers are aware of this, and irrespective of the source of research used the cost of the cloud is usually in one of the top three concern areas.

Worldwide stats on cloud concerns

Though moving to the cloud delivers on cost savings in the top three areas of concern is costs due to decreasing cost of computing and cloud innovation.

The research from one of an MSP owned companies puts the cost of managing cloud spend on top of security, compliance, performance and rest of things customers seek from cloud computing. The reason for this constant recurring area of concern of cost among cloud users comes from the way they approach capacity planning – the traditional way of estimating application usage and then estimating peak server utilization.

cloud cost management a concern among MSPs
Recall how one of the reasons why customers move to the cloud is to take advantage of software-based provisioning on demand, as much capacity on an OpEx basis. This part of this story gets lost as MSPs and cloud vendors sell CapEx as the way to find savings. With traditional a CapEx purchase at the end of the depreciation cycle, these servers would be available for many “crash and burn tests”, that IT departments would encourage innovation in the team.

Not so with the cloud. You can reserve a compute instance for three years with a cash upfront payment and receive discounts of 66% range on OpEx spend. It does not matter if during that period the resource is utilized at 10%, 5% or 0%. What the cloud customer isn’t told or fails to realize is that in the cloud you can shift the resource type down in few minutes and realize far more savings on the spot and scale up as the workload starts to approach peak capacity of the resource type.

Spare capacity in the cloud in dollars

When carrying a 90 percent spare capacity downshifting can give you more savings than reservations. In the cloud, you can scale up and down in minutes, sometimes near real-time for example between t2 and t2 unlimited.

There is a sense of security cloud vendors, and MSPs get when they know customers are locked in one to three years on a set solution. However, when they realize the rate at which technologies have shifted in three years, the dissatisfaction with the cloud costs kicks in. This reversal back to CapEx when OpEx style costing is preferred is a crucial factor that cloud users have to understand. Capacity planning for the cloud needs new thinking and paradigm!

These factors along with Agile development and the continuous integration / continuous development (CI/CD) benefits have given rise to a new breed of in-house talent called DevOps. While the former system administration type talent got centralized at MSPs, Infrastructure shops, cloud vendors and a new breed of talent called DevOps started skyrocketing with CI/CD skillsets around specific development stacks.

DevOps adoption among developers worldwide

Salaries of DevOps globally research

A DevOps specialist can have a pay higher than a machine learning expert or a data scientist.

If the security from a locked in contracts – ‘reservations’ or CapEx remains the approach for cloud cost management as customers look at MSPs for capacity planning, cloud cost concern is here to stay. However as DevOps talents start to shift decisions internally at organizations toward greater savings from provisioning what is needed when it’s needed, they start cutting down the $62B wasted in the cloud from underutilized systems.

Download the whitepaper that explains why cloud capacity planning needs a different thought process from traditional on-premise infrastructure.

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