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Why am I Paying More than I Expected in the Public Cloud?

Posted by Jason McDaniel on Nov 16, 2020 12:13:00 PM

Whether you’re just getting started with your journey into the cloud or if you’re a cloud expert, you’ve probably read or heard this: “I’m paying more for cloud services than I expected”. One study suggests that “Organizations are over budget for cloud spend by an average of 23 percent…” (1)

First, let’s talk about the why - organizations have exceeded their expected spend. We have to take a step back in time in order to understand this.

Traditionally, IT cost centers would make up-front purchases of hardware and software that involved several key stakeholders as well as time to procure. These are considered Capital Expenses (CapEx) governed by the finite use of these resources/investments. For example, if you have budgeted and purchased 1,000 servers for the year, you can only use those 1,000 servers. In other words, you are constrained by the physical resources you have. Once those resources are consumed, you’re either going to have to make it work or ask for more money for additional resources -- the latter being considerably more difficult.

With the advent of public cloud, organizations do not commonly pay up-front (CapEx). Instead, a pay-as-you-go model is used, which is debited under Operating Expense (OpEx). In this newer model, organizations sign up for a subscription to create and use resources such as virtual machines and only pay for what they use on an hourly basis. Here’s the rub: in the public cloud nowadays, IT cost centers aren’t governed by the number of finite resources that they traditionally had. In the public cloud they have the ability to create a theoretically infinite number of resources – in seconds rather than the months a procurement cycle usually takes, often with no checks and balances. This is typically referred to (in the public cloud) as “resource sprawl” or “cost sprawl.”  

By now you should have an idea of how costs get out of control at a high level. In my next blog I will provide you with some simple steps you can take to regain control of your costs and stay in or below budget in the public cloud. Stay tuned!

Learn more about cloud options and education at https://www.fastlaneus.com/ .

Topics: Cloud, Cloud Storage, OpEx, CapEx

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