Cloud services provide infrastructure and software more or less at the click of a button, with scalability to match your ever-changing business needs. In short, what organizations get is flexibility. But there’s a price to be paid. At the outset, the seamless, worry-free flexibility that cloud service vendors and their easy-to-use web portals offer might seem like good value. But without visibility, control and awareness of ever-changing pricing and licensing models, your business is likely already overspending.
I’m going to uncover some of the hidden costs of cloud services. And while the examples that follow are specific to Azure services provided by Microsoft, it really doesn’t matter which solution you have adopted. The principles, issues and endgame – the payment plans that best suit your business needs – are the same.
CLOUD IS A GAME CHANGER
Cloud and virtualization services are changing the way companies build their infrastructure and sell their services. Today, it is a fairly straightforward process to build an entire infrastructure with computational resources, storage capacity, networking, backup and failover through the web portal of a cloud service provider. Virtualization relieves the IT department of many headaches and the constant concern that something might fail and cause damage to the business.
The days of ordering the right hardware, waiting for it to be delivered, installing it, protecting it, adding backup, and then laying software over the top are disappearing. But these legacy systems will continue to exist as long as their perceived value doesn’t override their overhead, which leaves many organizations with hybrid solutions: some services residing in on-premises servers and some in the cloud, often with the need for these two models to cooperate.
CLOUD HELPS WITH SCALABILITY
In my opinion, scalability is the number one benefit of the cloud. If an organization suddenly needs a massive number of SQL servers at month end, then their cloud services provider can scale up infrastructure as demand escalates, and importantly scale back when needs drop. Organizations no longer need to provision hardware and software to cater for peaks in the business cycle. Staff get the performance they need according to the payment plan and users don’t even notice what is going on in the background.
So, where’s the catch?
Cost! Is your business on the right payment plan? To answer this question, SAM and IT managers need to be able to supply CFOs and business leaders with trend information on billing and usage. To provide this information, they in turn need visibility and control over cloud services.
To build a clear view of the cost of cloud services, SAM and IT managers need to be able to answer a few questions: what services have been ordered, which ones are being used, does usage match the business need, and who within the organization is going to foot the bill? The CFO wants to plan spend, which requires trend information, and the avoidance of cost spikes and unplanned expenditure is key. Without the proper tools in place, cloud services can rapidly run amok, servers can be left running, feedback loops can cause repetitive downloading and expensive software can be left idling on forgotten machines.
So where can SAM and IT managers retrieve such invaluable trend information? When it comes to Azure, the information provided on an invoice is just not granular enough. For example, the line item Virtual Machines of type Standard_D3 VM (Windows) reveals nothing about how many machines have been created, or if the type is appropriate for the running applications.
And what about planning spend? My CFO wants to be able to forecast expenditure for cloud services. To do this, SAM and IT need to be able to provide the actual month-on-month spend, and be able to attribute the cost to different departments.
It sounds like a lot is missing, but remember cloud services are a maturing industry, and so how we get insight, how vendors sell or bundle cloud services will naturally change substantially over the coming years. The key for SAM and IT managers is managing change. And not surprisingly, we are going to need some good tools.
CONTROLLING VIRTUAL SPRAWL
The second issue when it comes to cloud services is virtualization sprawl. Cloud provider portals, enable users to spin up a VM in a couple of clicks, upload some software to it, use it and then move on. Unfortunately, those VMs will continue to run – and cost you money – until you have properly decommissioned them. And that’s bad enough if you are just paying for the infrastructure, but if there is software installed on these zombie VMs, you’ll end up paying for those licenses as well!
The ability to spin up VMs so readily often leads to over-dimensioning. The click-ease of modern portals and the lack of control over the ordering process make it all too simple to order VMs that are too powerful, have too much storage and too much bandwidth for your application.
And it’s not just the ease of ordering resources that leads to over-dimensioning. Lack of understanding of what resources are actually needed to run an application efficiently is also a root cause. Even with the best-laid plans, circumstances change and you’ll end up paying for more machines, more storage and more networking services than you are using.
COMPLICATED PAYMENT PLANS
I believe the final hurdle when it comes to cloud services is evaluating payment options. Enterprise Agreement (EA) customers can add Azure services to existing contracts by making an upfront financial commitment at any point in their three-year term, except during the last two months.
The pain point for the CFO is how to calculate the right level of upfront commitment and how to plan for reconciliation at the end of the year.
Let’s look at how the billing process works.
If you believe that your Azure spend will be somewhere around USD 300,000 for the year, you can make an upfront commitment of USD 200,000, as Microsoft allows you to reconcile up to 50% of the upfront figure on the same payment plan. If you’ve under-estimated your Azure need, and spin up resources for more than USD 300,000, your billing switches from annual to quarterly, which may be good for your financial planning needs, but the payment plan may not be the same.
If you over-estimate your upfront commitment, any unused amount is forfeited.So, getting that upfront commitment right is key to procuring the best deal. And to help distribute costs, my advice would be to negotiate quarterly Azure billing with your reseller or Microsoft at the outset, instead of under-estimating usage to enforce it.
Server and Cloud Enrollment (SCE) is yet another way to procure Azure services, which are automatically included in this payment plan. This option, which effectively provides you with a pay-as-you-go/monthly-billing model, is for highly committed customers that require other non-Azure services, such as core infrastructure and developer platforms.
The annual renegotiation of the EA is a critical point in time at which you need to know your current and predicted levels of consumption of Azure services to procure the best deal.
OVERCOMING THE CLOUD CHALLENGES
As I mentioned earlier, to overcome the challenges of visibility, virtualization sprawl and complicated payment plans, you will need some good tools. And that’s where Snow comes into play.
Our platform, including Snow Inventory and Snow License Manager, provides the insight you need on the resources you consume today. In the context of Azure, Snow Automation Platform enables process automation and visibility, putting you in the driver’s seat to end sprawl and significantly reduce your Azure expenditure – budgeted or otherwise. Snow Automation Platform includes out-of-the-box functionality for Azure optimization to automate the process of spinning up virtual resources, providing users with the freedom they are accustomed to, but with the vital addition of control.
By ensuring that users order resources with a decommissioning date, which users can optionally extend when the time comes, zombie VMs will become extinct. By including approval steps, or automatic budget limits for example, the risks of overspend and over-dimensioning drop dramatically. In addition, Azure optimization enables SAM and IT managers to retrieve usage information from Azure, which can be used for planning. And significantly, by including cost information, spend over a period of time can be accurately estimated, giving your business the insight to select the right payment plan.
For more information about the Snow Automation Platform and its Azure capabilities why not speak to a Snow expert today?