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Many companies are applying multi sound strategy, which means they need to compare the costs and commitments they make from the three main providers and service options. Except, that’s close Impossible. Google, Amazon, and Microsoft bill so differently that many companies cannot reap the benefits of the multi-cloud approach. They simply don’t know which provider is best for their requirements and usage.
Gartner has forecast that end-user spending on public cloud services will reach $482 billion this year, a considerable amount for something so opaque. Andreessen Horowitz Investment Company (aka ) a16z) complained about how the cost of the cloud reduced the value of public software companies by hundreds of billions of dollars. And some tech companies are saving a lot by repatriating operations from the cloud.
Paying comparisons are nearly impossible, cost allocation elusive
No one questions the value of cloud service but everyone understands their payment methods are a nightmare to untangle. There is too much at stake and the numbers are too large for this to continue. Standardized billing on cloud service providers is long overdue. Here’s why.
Non-standardized payments create three sets of problems. The first is to manage different types of engagements between cloud service providers, where terms and implementations vary widely. The second issue is tracking costs with different savings allocation schemes and cost metric definitions like net allocation, unlinked, etc., being used between suppliers. The third is the growing use of cloud platforms and the services managed within them, each with their own tagging conventions. For many people, it is almost impossible to allocate costs internally even when using a single cloud platform.
The net result is that customers cannot compare suppliers with each other. To understand the scope and complexity of this, let’s compare three major cloud service providers: Amazon Web Service (AWS), Microsoft Azure (Azure), and Google Cloud Platform (GCP).
Big 3: Mature payment or not, it’s all confusing
Out of the three, AWS has most mature payment model. Here we define maturity as the number of discount commitments available to customers as alternatives to on-demand purchases. In 2019, AWS introduced Economy Plans to offer customers another discounted purchasing model beyond Dedicated Instances. This maturity has also allowed AWS to develop the most granular pricing options for each SKU. Incremental optionality helps to select the best commitments to cover your infrastructure. But with so many choices, customers encounter confusion. For example, there are many outdated payment structures such as Convertible Reserved Instances available that customers may mistakenly purchase in lieu of more efficient alternatives.
Compared to AWS, Azure is less mature in their payment model. But they are more forgiving of things like allowing resale by offering guaranteed resale with a 12% penalty fee. For AWS users, it’s likely they’re stuck with Dedicated Instances that they can’t sell and don’t need. They also offer the added option of a deeply discounted 5-year commitment on certain resources, offering a price that can really compete with owning your own server. Other providers have commitments of up to three years.
GCP is also less complete than AWS but offers two discounted purchasing options. Commitment use discount offers discounts in exchange for a one- or three-year commitment, like RIs and Savings Plans. GCP has also innovated the discount model by creating an Continuous Use Discount, which automatically applies the discount when the compute engine virtual machine is used for a significant portion of the month. Discount thresholds vary by resource type.
The independent evolution of each vendor’s payment model has resulted in differences in how things are priced. Each “primitive” or component like machine, managed service (like Lambda or Dynamo), bandwidth, and memory has different underlying pricing models, which can be further complicated by discounting long-term commitments as well as top-level corporate discounts.
The benefits of having access to a wider range of services and options are negated when you can’t compare services and be confident it’s accurate. That’s why standardized payments are important to nearly all cloud users.
How to fix this: Develop an open payment standard
Our team is currently working with finops platform and cloud customers to develop an open payment standard that can be used to compare projects using different vendors.
The first area to address is creating a common standard to define parameters for usage-based pricing of different components. This way you don’t have to deal with the comparison of hourly billed services with volume-of-usage services. The next step is to develop a common language to describe the discount committed between suppliers and the degree of flexibility that the discount allows. This helps customers weigh the tradeoffs in using a discount that requires a longer commitment period or provides some additional flexibility, especially in situations where different usage levels may be possible. together.
Enabling comparisons between SKUs will help customers choose the services that suit their needs across providers. Customers should not feel limited to using the provider they are most familiar with. They can also rest assured that they are investing in the right resources to run their business optimally.
Aran Khanna is the CEO of Archera.
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