How much does cloud service cost?2022 10 27
Companies more often choose to adopt cloud solutions. It is forecasted that by 2025, companies will run more than 95% of their digital business processes on public cloud platforms.
Moving digital solutions to the public cloud not only offers technological advantages but also financial benefits, such as a removed need for recurring one-off significant investments or costs for purchasing and administering IT infrastructure. Also, reduced software costs or additional incentives can be obtained from the vendors to implement the changes.
Yet, the most important question for companies remains — how much does cloud service actually cost?
In this blog post, our cloud expert Robertas Skardžius discloses three cloud service cases with specific money investments as well as clarifying what the price depends on.
What are the main pricing elements of cloud services?
The cost of cloud services is not homogeneous and consists of several elements. First, it is essential to assess the installation costs, for example, how much it will cost for the initial environments’ configuration, installation or migration. Next, the future monthly costs are assessed, consisting of charges for resources used and infrastructure maintenance.
Sometimes cloud service providers spread the one-off set-up fees equally and add them to the monthly cost of the service. In this case, companies cannot pay the installation fees upfront and can pay for the migration services in stages. These costs are inevitable in each cloud project. Also, it is advisable to evaluate other possible costs that may arise under certain circumstances. For example, how much would it cost to change a cloud vendor? What is the impact of human error cost-wise? Finally, other project risks can have a financial impact, such as poor planning and forecasting of resource utilisation.
Similar risks can be avoided if you follow the best practices and vendor evaluation tools as technical safeguards before the migration of IT workloads and during operation. In addition, by foreseeing the potential risks, you will be able to assess more accurately how much protection is worth investing in.
Estimated cloud service costs based on different customer cases
To better understand what it might cost, we present a few examples with approximately estimated cloud service costs based on an individual customer case, giving you a better understanding of how much it might cost:
- First case. A company operating in Nordic Europe wants to modernise its existing data analytics solution, which is used by 3 representatives responsible for preparing management reports. The company uses 9 different data types and 3 different data sources. The amount of data available is about 100 GB, and the largest table contains about 20 million records. The data is updated daily for reporting, and the solution uses various Microsoft Azure services. In this case, the infrastructure set-up fees could be around €5,000-7,000. In addition, the cost of the used cloud resources would be around €250-500/month, and the ongoing maintenance of the infrastructure — €200-400/month;
- Second case. An e-shop based in North America sells car accessories. They have around 50 different products (SKUs). The business objective is to ensure that the system in place can serve up to 100 users at the same time. Therefore, solution architecture needs to be highly available and resilient. It is estimated that infrastructure installation fees could reach €3,000-4,000, resources would cost around €500-700/month, and ongoing infrastructure maintenance another €400-600/month;
- Third case. A company develops a cloud-based application that collects, analyses, and provides private European investors with financial data on businesses in a particular region. The specific data can be used to make stock trading decisions. The infrastructure for such an application would cost between €10,000 and €15,000 to set up, the resources needed for it — around €4,000-6,000/month, and the ongoing infrastructure maintenance — between €1,500-2,500/month.
5 key elements to consider before choosing cloud services
Robertas notes that even at the initial stage, it is possible to estimate the approximate cost of cloud services: “Typically, after discussing the company’s needs and the solution’s vision, we can broadly estimate how much financial investment it might require.” However, conducting an in-depth analysis involving the company’s representatives is advisable to determine the exact cost of a specific cloud service.
When evaluating the preliminary costs of your solution in the cloud, you should discuss the following:
- The product you plan to develop. Cloud service providers offer unlimited possibilities to implement any digital solution. Usually, it varies from a company website and accounting software to an e-shop processing thousands of orders simultaneously or a customer self-service portal where services are managed and paid for. Knowing which solution, you want to implement in the public cloud gives you the first pricing guidelines.
- Geographical region. Cloud service rates vary between data centres in different countries. Do you want to ensure a great user experience? Then, it is ideal to physically store systems in data centres as close to the users as possible. It may be appropriate to geographically disaggregate some systems if your users are spread across different regions. The geographical spread of your systems also determines the cost levels of cloud services.
- Data volumes. The traffic between distant data centres usually is a paid service. You need to consider how much data you plan to keep and how it will be used. Likewise, evaluate whether the data will be stored only in a specific data centre or spread among different regions. The cloud service cost can also depend on the data type (text, numbers, illustrations, photos, audio files, etc.).
- Solution availability level. Every cloud-based service has an availability parameter, i.e., a commitment by the cloud provider as to how long (usually a month) the service needs to be available at a particular time. Typically, the availability is no less than 99.95%. Yet, it still means that an individual service can be down for up to about 22 minutes per month. For longer outages, the cloud service provider applies discounts. However, sometimes even one minute of downtime can cost a business more than the cost of the entire cloud solution. Of course, high-availability solutions generate increased costs. Therefore, it is recommended to discuss which risks are acceptable and which need to be mitigated by investing more in infrastructure improvements.
- Public cloud type. Cloud solution providers currently offer three service types: Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS). The choice of the type of cloud service may depend on the business objectives, the technological features of the solution, and the resources that will operate and maintain the solution. Usually, a couple of alternative cloud service types may be suitable for a specific solution. Thus, it is critical to have or consult with a technology partner who can advise you on the most convenient cloud service(s).
Concluding, each cloud service case is individual, and all situations vary widely. Global public cloud providers have already developed specific spreadsheets that can help you understand the basic pricing principles. Explore these options from Microsoft Azure and Amazon Web Services.
Although, if you seek a specific estimate for your project, then directly consult with your technology partner. You can do that by easily contacting the Baltic Amadeus team, who is always ready to advise on the best-possible decisions for cloud solutions.
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