How Budget Friendly Is the Public Cloud?

The rapid provisioning, infinite scalability and technology refresh merits of the public cloud have been firmly established. But mounting evidence indicates that early assumptions about blanket cost savings with cloud-first initiatives were premature. 

Industry analysts report that a growing number of enterprises are moving applications and workloads off public infrastructure and back on-premises.. One reason for the about-face is that cloud savings are falling short of expectations.   

While it’s possible to reduce costs by using the public cloud, experts agree, savings are dependent on the type of workloads IT shops choose to run there. 

Cost-cutting is also contingent on businesses’ ability to match each application to the appropriate cloud service and pricing tier – and to remain diligent about regularly reviewing service plans and fees, which change frequently. 

Cloud-First Rewind

IT shops coming to this conclusion are dismantling some of their cloud-first applications and bringing them back into their data centers after “mistakenly jumping into public cloud with two feet,” Craig Manahan, practice manager of data center infrastructure for Cincinnati-based RoundTower Technologies, told CRN last summer. 

A 2018 IDC report based on a survey of 400 organizations quantified the cloud-reversal trend. The research firm found that 80% of organizations in its study had moved at least some applications out of the public cloud back on-premises, and it expects that 50% of all public cloud applications installed today will move back on-premises over the next two years. 

Cost isn’t the only reason some companies are pulling their workloads off the public cloud. IDC’s study revealed that security worries and disappointing performance were also top factors. 

However, another reason, Manahan told CRN, is that “businesses are becoming smarter about what workloads belong in the public cloud and which ones don't,” and that relates directly to cost. 

Which Workloads Go Where?

Applications with unpredictable usage are the prime candidates for the public cloud, according to Steve Kaplan, Vice President of Customer Success Finance, at Nutanix. Examples of cloud-friendly workloads include seasonal and temporary retail promotions and new customer-facing Web servers, for which usage levels have yet to be determined, he said.

Kaplan is also the author of The ROI Story: A Guide for IT Leaders. The book outlines the highly nuanced financial homework that organizations should do before deciding where to run their workloads. It also includes a 10-step process for conducting a thorough total cost of ownership (TCO) assessment of monthly public cloud costs. 

“If you put up a public Web server with no idea how many hits you’re going to get, it’s silly to buy your own infrastructure. That’s a good workload to put in the public cloud,” Kaplan said. 

However, for workloads that are highly predictable, “on-premises approaches can be half or even a third the cost of a public cloud solution, and cost is easy to forecast and budget,” according to Kaplan. 

[Related: Cloud-Ready Enterprises or True-Up Surprises] 

Moving an on-prem app to the cloud expecting to save money leaves many sorely disappointed, according to Manahan. It requires upfront preparation in order to make the app run efficiently in the cloud. 

"If you can refactor an application to take advantage of what the public cloud provides, it's a great use case. But if you don’t take the time to do that and you go into public cloud, it can become very expensive, very quickly." 

Budget Troubles

Indeed, multiyear cloud usage studies by companies like Nutanix and RightScale (now Flexera) consistently have shown that IT shops are substantially over budget with their public cloud services and much of their spend is going to waste. Nutanix’s 2018 Enterprise Cloud Index study of 2300 global IT professionals, for example, revealed that participating companies spent an average of 26% of their IT budgets on cloud services and that 35% of those companies were running over-budget. Only 6% stayed under budget. 

Multiyear RightScale studies, including its 2019 State of the Cloud report, pegs the amount of wasted public cloud spend to be between 27% to 35%, or about a third of all enterprise cloud expenditures – a substantial and sobering number. RightScale chalks up some of that waste to resources becoming abandoned, often by shadow IT, or otherwise sitting idle while they continue to rack up monthly charges. 

And the company says some is due to pricing complexity and the difficulty in determining what a cloud service is actually costing until the bill comes in. Kaplan said cloud billing can be like the healthcare system, where patients really have little or no idea what they’re “spending” until after the fact. 

Kaplan added that some of the unexpected overspending has to do with limitations of public clouds.  Among them are “the inability to customize your cloud solutions, the cost and complexity of pulling workloads out of the cloud, and a lack of control on the part of your IT staff, to name a few,” he said.

He also noted that there’s the transition cost of moving to the public cloud and that using the public cloud “doesn’t absolve IT of all responsibility.” In other words, even though an application moves to the cloud, enterprises still require some IT expertise –and budget – to manage it.

“Migrating to public cloud requires expertise for security, redundancy, backup, specific tool sets, and so on,” wrote David Linthicum, chief cloud strategy officer at Deloitte Consulting,in, an InfoWorld article titled Cloud Security: The Skills Gap is Delaying Cloud Migration. 

“Organizations must either hire specialized staff or contract with consultants. And they must pay for overlapping expertise for both the on-premises and public cloud architectures during the lengthy migration process.” 

Don’t Do it for the Money

“We find that for the majority of workloads, a financial analysis shows that while public cloud offers myriad advantages, saving money isn’t among them,” said Kaplan. 

“Public cloud is a powerful and disruptive software-defined infrastructure alternative. But rushing to public cloud without first doing extensive technical, operational, organizational and financial due diligence is as foolhardy as maintaining legacy infrastructure – or, for that matter, blindly going all in with any other new technology.”

Joanie Wexler is a contributing writer and editor with more than 20 years experience covering IT and computer networking technologies.

Feature photo by Pixabay from Pexels.

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