In theory, one of the benefits of moving IT functions to the cloud is simplifying operations. In practice, however, it means choosing a vendor has become more complex.
In a recent webcast, Owen Rogers, 451 Research’s lead analyst for digital economics, said the shift to cloud has meant the onus of resolving complexity is no longer on the supplier. In a traditional IT model, an enterprise would reach out to a vendor or service provider and they would come back with a custom-designed offer for the particular circumstances. “It was the supplier who resolved the complexity.”
Now it’s easy to find cloud providers and gather pricing and information from online sources – there’s every price and metric you can image, said Rogers – but it’s up to the enterprise looking for a cloud service to understand all of the minutiae. “The complexity has been taken away from the supply side and put on the demand side,” he said. “This has created a confusing world.”
Owen said the challenge for enterprises is to sift through a great deal of biased information such as vendor web sites and expert blogs to figure out what cloud service meets their requirements and understand if the pricing for these services translate into value for their money, said Rogers. “It’s very easy to be swayed by one or the other without really knowing what’s going on.”
Surveys by 451 Research find enterprises do place a high importance on price, but it isn’t everything. Rogers said if a cloud provider appears underpriced, then organizations are likely not going to be confident in their ability to meet requirements. They will pay a premium for some features, such as security, he said, but they also want to understand the value for money profile.
451 Research has developed a Cloud Price Index that covers 70% of the major cloud providers and what a typical application, such as a virtual machine or a SQL database, would cost. The average cost was $1.68 per-app hour, the research firm found. Rogers said it is interesting to see how prices have changed over time. In the past few years, there are have been price wars as high profile providers such as Amazon and Google have looked to gain market share and gain media awareness.
However, since October, prices have only dropped 2.25 per cent, said Rogers, although the drop in cost for organizations who opt for committed pricing – long-term relationships with providers – has gone down 12 per cent in six months, he said. “Service providers are keen to gain contracts and longer term relationships.”
That doesn’t make it easier to choose a cloud provider, said Rogers. The market is constantly changing, and there can be huge variations in prices to deliver the same service – in some cases, the most expensive price is two-and-a-half times the cheapest, so it’s difficult to understand the price performance and what you are going to get, he said. “It’s an ongoing challenge and it’s not going to get easier over time.”
There are tools that can help IT staff understand what they require from cloud providers. CloudGenera followed Rogers’ presentation with an overview of its offerings as well as specific use cases.
Rogers said these tools significantly reduce the legwork of performing cloud service provider comparisons, and that 451 Research’s Cloud Price Index is a good starting point for understanding prices. The old school approach of doing an RFP and balanced scorecard can help enterprises assess their options, but it’s time consuming if done manually.
It’s not only important to understand what is needed now; scalability should be factored into the decision, said Rogers, bearing in mind demand that goes or up or down and both the worst case and best case scenario. “How does that impact price?”
Making a long-term commitment can reduce expenditures, he added, but organizations need an exit plan right from the start so they know what the implications are for migrating, and its cost.
