A buyer’s guide to assessing the real price of cloud providers

Bill Mew Profile picture for user Bill Mew July 4, 2017
Scale and knocked down list prices shouldn’t be the only things that buyers look out for when purchasing IaaS for technology projects. Bill Mew, cloud strategist at UKCloud, offers tips on the red flags of cloud contracts.

money down the drain
In Lady Windermere’s Fan, Oscar Wilde had Lord Darlington quip that a cynic was 'a man who knows the price of everything and the value of nothing'. In cloud computing we might all be judged as cynics, as pricing is often presented to us by cloud providers, in a way that almost obscures any understanding of the underlying value.

It’s tempting to look at the low list price offered by one of the US-based IaaS providers - such as AWS - and assume that that’s all you end up paying, and that’s all that matters. However, customers should be sceptical and consider all factors that make up a valuable technology project.

This guide hopes to serve as a useful tool to help buyers question their IaaS partners on what is important to them - beyond a knocked down list price. If you want to derive value from your cloud projects, then you need to be thinking about the objectives, the use cases, a potential exit strategy, as well as security and usability. Price is one factor, but it’s not the only factor.

Buyers should consider the following four points when assessing a potential IaaS provider.

1) Contractual lock-in

The whole point of cloud is meant to be that buyers can now consume the technology they need, when they need it. And yet, some vendors have taken their on-premise contract tactics and put them in the cloud, making it harder for buyers to have the flexibility they desire. Once a customer finds it contractually difficult to leave, a vendor doesn’t have to try has hard to deliver value on an ongoing basis.

Ask about the exit requirements. Some global IaaS providers will hold your data hostage until you have paid all ‘post termination costs’, and any other amounts due. They may also set a minimum cool-off term of 1 year, with early termination, making you liable for a full year’s charge. In addition, they may explicitly state that termination charges will apply, but are often not particularly transparent about what those charges might be.

Buyers should be looking at providers that allow them to terminate at will, without any form of penalty. Buyers should simply be able to stop consuming when they want to and should have the expectation that the bills will then stop coming.

Tip: Even if you don’t think you’ll need an exit strategy, you need to think about one in case of unexpected regulatory changes, strategic imperatives or dissatisfaction with your provider.

2) Technological lock-in

Again, old habits appear to die hard for technology vendors. On-premise providers not only had a tendency to use contracts to keep buyers locked in, but they also liked to make it very hard for buyers to switch technologies out - even if the contract wasn’t an issue. Some global IaaS providers are using this tactic too and buyers should consider how they will be using the cloud service beyond compute and storage and what that could mean down the line.

Some IaaS providers attract you with low entry costs for compute and storage, but as soon as you start to integrate to their APIs or develop to their proprietary feature sets then you will find that you are becoming locked-in, and that applications cannot be migrated to other providers without considerable application re-writes.

Open source and open standards should be a priority for the IaaS provider and for the buyer, as this gives both the flexibility they need to build true cloud projects, without getting locked-in. Back in February we wrote here on diginomica that lock-in was starting to surpass security as the main cloud concern for clients. This has since been born out in the authoritative Kleiner Perkins Caufield & Byers 2017 Internet Trends report which highlighted that concerns over cloud vendor lock-in are soaring.

Tip: The government’s Open Standards Principles, first published in 2012, which underlined its commitment to the wider use of open standards across government, were designed to specifically address technological lock-in. With such concern about lock-in now soaring, this policy is even more important today.

3) Add-on pricing

If it’s too good to be true, that may well be the case - even in the cloud. Entry level pricing on basic IaaS services may be attractive, but buyers are often stung by unanticipated extras, or the need to upgrade to more expensive options to get what they really need.

‘Hidden’ costs can include charges for bandwidth, IO requests, VPC/VPN gateways, production-grade support and currency hedging. Buyers may not be aware of these additional charges when buying the basic compute and storage, and if they’ve not been careful about the lock-in concerns mentioned above, they could then get stung with additional fees they weren’t anticipating.

Then there are the indirect costs of support (where you are left to navigate complex integrations and options) and accreditation (where it can take far longer to achieve assurance for sensitive workloads).

Buyers should ask if they’re being allocated a Technical Account Manager for free as part of their support package and they should ask for clear and transparent pricing - otherwise you could end up paying over the odds.

Tip: Be smart here and ask up front if technical account managers, bandwidth, I/O etc. are included in the price, because if they are no then you can be fairly sure that they’ll appear as add on costs later down the line.

4) Do you want a generalist or a specialist?

I’ve written previously on diginomica/government about the need for cloud providers to ‘get big, get focused or get out’. Not all cloud buyers have the same needs and requirements and not all cloud providers are created equal. Do you want a commodity cloud purchase or do you have additional needs because of the sector you operate in? Price is important, but buyers need to think about the value they need their service provider to deliver, within the context of their market.

At one end of the market are the generalists that make a volume play, catering for the whole market with a commoditised offering, and at the other end of the market are the specialists with a focused play, catering for niche markets with a differentiated offering. You either want to be in one of these groups or the other.

For example, does your cloud provider understand the needs of your market? Is data sovereignty important to your business? Would it be beneficial to be with an IaaS provider that is mostly serving clients of a similar nature? Does the IaaS provider partner with a network of specialists that caters to the same market you operate in, which may be valuable to you down the line? Or do you just want stack it high, sell it cheap, compute?

Tip: The G-Cloud framework has not only provided public sector bodies with a chance to buy services easily and at low cost, but it has also provided a level playing field on which specialist players can compete with the global generalists. Make the most of this opportunity to select a dream team of best of breed specialists that best understand your requirements and best fit your needs.

Extra Tip: the global generalists are quick to dismiss data sovereignty and extraterritorial legal intrusion (such as with Rule 41) as it is in their interests to do so. However as diginomica has reported, with Privacy Shield in peril and with GDPR on the horizon, ask yourself if in dismissing these issues, the global generalists are putting your interests first or their own. If Privacy Shield does collapse (as expected) or you do fall foul of GDPR, you may find that not taking these issue more seriously could rebound on you in an expensive manner.

Only a buyer will know what’s important to them, but don’t assume that price is the only important factor.

Don’t make any assumptions

Once you focus on real world requirements and include the ‘add-ons’ that aren’t always made obvious by others, a competitive pricing analysis shows that it is important to look beyond the obvious global generalists, such as AWS and Azure. The basic entry price may not be what you end up paying. Use this list to tips and question your IaaS provider about the value that the will be bringing - thinking about what’s important to you as a buyer and how you want your cloud environment to be different to the way you did things on-premise. And of course, there are better options!

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