Virtustream Blog

Cloud Files Episode 4: Consider the Economics

in Business, µVM, Cloud

When considering your cloud migration strategy, the economics of running workloads in the cloud are as important as the performance.

That’s one of the key takeaways from our latest episode of Cloud Files – an interview series where I sit down with top cloud industry experts to talk about the big questions and challenges surrounding cloud migration. This time, I’m joined by two of the world’s leading experts on cloud economics – Owen Rogers, Research Director at 451 Research and head of the firm's Digital Economics Unit, and James Mitchell, CEO and co-founder of financial cloud broker Strategic Blue – for a discussion on cloud pricing, the optimization process, how to price risk and more.

Here are a few of the top takeaways for organizations looking to improve their cloud economics: 

Invest in optimization from day-one

A lack of optimization when planning cloud migration is a significant issue we see enterprises face on a daily basis. Often, enterprise IT teams start their venture into cloud computing by making ad-hoc decisions rather than creating a deliberate cloud strategy. The result is a patchwork of services and integrations that becomes more difficult to optimize by the day.

For many years, organizations first integrated different cloud platforms by making specific commitments when buying Reserved Instances to save on price. Organizations with large teams of developers – each with an account and choice of their availability zones, operating systems, and so on – would end up with a huge cloud sprawl.

“It’s been a complicated exercise to work out the most economical way to reduce the number of resources that you need to forecast in order to make sensible commitments that get you down to a lower price,” explained James.

Owen provided an example to illustrate the complexity of this issue: “’Hyper-scalers’ have around 500,000 individual line items for sale between them. So to optimize that manually without any experience, I would argue, is an impossible task,” he said. “I think enterprises need clever algorithms and clever people to guide them through that world and to show them how they can optimize on an ongoing basis.” 

Communicate effectively to management teams

When discussing the importance of investing in an optimization process, James explained that the biggest issue is how it is communicated to management.

“The self-service tools we have seen so far – unless you’re really, really on the ball – are actually still quite hard to use in order to get the appropriate sign offs at CFO-level and sometimes even at board- level,” he said. “There seems to be a habit among people of promising 100 percent of the savings, rather than an acknowledgment that there will be some under-utilization of commitments.” 

By helping your executives wrap their heads around cloud economics, you ensure they understand that the benefits – including flexibility, low cost, and the on-demand model – come from sharing IT infrastructure with other customers of the cloud service provider.

James recommended that organizations begin with a model that employs the most sharing — ie. hyper-scale public cloud providers — “...and then work backwards from there as you realize that there are aspects that need to be shared less. If you work from the assumption that sharing is the default, you should be able to optimize the economics pretty well.” 

Consider the risk and make a plan

Hiring cloud providers comes with two implicit risks: (1) investing in the wrong cloud environment for your highest-priority workloads, and (2) the environment failing to meet the performance demands of those workloads. These risks can be remedied by enterprises paying attention to more than just the sticker price when selecting a cloud provider. They must also consider what happens if things don’t go as planned; for instance, if demand is far greater than anticipated or performance is far worse.

“I don’t think there’s enough scenario planning really going on to anticipate and protect against that risk,” Owen said.

While on-demand economics allows you to respond to risk in real-time, it also exposes you to greater uncertainty over the long term. Successfully managing this risk comes down to understanding your business. There are many enterprise workloads and data sets that require much longer planning cycles – one size doesn’t fit all. In these cases, leveraging specialized clouds that are purpose-built for specific workloads can greatly simplify the optimization process and help you drive better business outcomes.

To learn more about the Virtustream Enterprise Cloud, and how our unique MicroVM based consumption economics help address many of these challenges, connect with one of our cloud experts today