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5 Things To Know About Cloud Pricing

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Pricing in the cloud is a bit, well, cloudy.

So, you’ve decided to transition your business to the cloud. It’s a big step for many businesses, but it’s only a conceptual one. Once the decision is made, many still have a big question in the way: Now what? While there are many options for conversion and hosting, it’s the pricing behind these different models that often really helps make the decision. And when it comes to the cloud, pricing is a bit, well, cloudy.

Not only do cloud providers specialize in certain aspects of virtualization, some specialize in small to mid-sized businesses, while others specialize in corporations. These factors can have a big impact on what companies pay. If companies don’t investigate these implications early, they may find their first bill to be an unpleasant surprise. So, if you’re looking to move your company to the cloud, here are five things you should know about cloud pricing first. (For some background reading, check out A Beginner’s Guide to the Cloud: What It Means for Small Business.)

Cloud Vendors Specialize in Different Things

It is important to realize that many providers specialize in different areas of cloud technology. With each specialization, it is up to the client to pick the best solution. For example, if your company is seeking storage, you may want a vendor that specializes in this area, rather than in, say, data processing.

The first thing to do is sit down and ask yourself what your company needs from the cloud. Do you need a development environment? Do you need more storage with less hardware? These questions will lead to the proper provider, and keep you from overspending on your purchase.

There Is No Standard Measurement

The reason cloud computing prices are hard to compare to one another is because there is no standard of measurement. While some companies can provide better RAM over CPU strength, the standard model is to measure how much processing power a provider can grant your company.
That being said, providers measure their CPU output differently. While Amazon uses EC2 Compute Units (ECUs), which are based off a CPU running at 1 GHz to 1.2GHz, Microsoft measures its standard benchmark at 1.6 GHz, meaning Microsoft’s unit of measurement offers more processing power per unit.

In the end, it is best practice to realize what each company’s standard of measurement is and compare them accurately. This will provide a better idea of what you will be getting and help you make sense of any price differences based on these units of measurement.


There Are Different Pricing Models

Along with any other service, there are various models cloud providers use to monetize their service. The three main cloud computing models are:

  • The Resource-Based Model
    This model is based on the resources a company needs. So, a company pays for each server provisioned along with an extra fee for all the components that go into a server, such as storage, memory and network requests.
  • The Feature-Based Model
    This model is based on which features developers need to use. Some of these features include push notifications, API calls and API versions. These features each cost an additional fee, which contributes to the company’s final rate.
  • The Tier-Based Model
    This model is very similar to the tiered plans used for cellphones. With this model, companies can select from a list of service tiers at various price points based on use. Companies can then adjust the plan if they end up needing more or less service than they expected.

Finding the Right Fit Means Asking Lots of Questions

Along with getting to know the different models and service provider specializations, it is important to ask some important questions about pricing. These questions help businesses ensure they’re protected from unexpected – and often expensive – surprises.

  • Do you provide long-term price protection?
    If the answer is "yes," it can help a company avoid vendor lock-in and ever-changing prices.
  • Do you allow roll-over rates for peak months?
    If yes, this means that instead of paying an overcharge, the cloud provider will compensate by allowing clients to spread their use around to account for spikes in use.
  • Do you have service-level-agreements (SLAs)?
    SLAs are important to clearly set expectations for the service levels between the cloud consumer and the cloud provider. A good SLA developed cooperatively between the consumer and the provider should help ensure that both parties are protected and stand to benefit from the agreement.
  • Can services be configured to meet specific needs?
    If the answer is "yes," this means that a company can implement the product into their environment without the service provider’s help. The service they provide should be that easy and efficient.
  • Is there a free trial period?
    A free trial period allows a company to test out services to see if they’re a fit before signing into a longer term contract.

Only Fools Rush In

While cloud computing has gained a lot of traction in the enterprise world, it isn’t something a company can just jump into. Companies need to research how cloud computing can make them more efficient, and which models will best contribute to that aim – both in terms of what they can do and what they cost.

For many companies, cloud computing can mean more computing power, less hardware and lower costs. But as with any major business decision, it’s easier said than done. In order to make it work, companies need to take the right steps and ask the right questions. (To learn about some of the drawbacks to cloud computing, check out The Dark Side of the Cloud.)


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Josh Wolanin
Josh Wolanin

Josh Wolanin is a freelance writer and IT professional based out of Minneapolis. His main areas of interest include startups, entrepreneurs, venture capital, enterprise IT, cloud computing and gadgets. He is an internationally published journalist who has been writing and working in the IT industry for more than two years.