Break Down the Elements of Cloud Cost Control

By Rich Staas

Director of Client Services, NPI

March 19, 2015

Interested in learning more about NPI’s services?

Contact Us

As enterprise applications and infrastructure services move to the cloud, it’s important that companies take a different view of the IT purchase. Many of the traditional sourcing considerations that apply to on-premise solutions change with the cloud. Before entering an agreement with a vendor, companies need to understand and analyze potential hurdles to realizing the cost benefits that the cloud offers:

  • 1. Integration —You need to clearly define the integration points and architecture as you integrate cloud services with in-house applications, data stores, and other services.
  • 2. Customization—Similar to on-premise solutions, the more you can use the cloud service as it was designed the lower your costs will be. Customizations can be costly to build and maintain, and hard to budget (and are also a major factor leading to vendor lock-in – strategic best practice is to position yourself to avoid lock-in).
  • 3. Scaling – Plan out the potential usage for the product in advance and consider the costs of rolling it out to the full enterprise. For example, a SaaS solution that seemed cost effective at $99 per user in a rollout to 25 employees can become very costly when rolling it out to a large enterprise. Calculate a 5-year TCO.
  • 4. Usage patterns – Within pay-per-use models, enterprises see a large benefit as the cost can scale slowly as the usage increases over time. Make sure to proactively monitor usage to make sure you turn off resources that are no longer needed.
  • 5. Storage and added modules– Anticipate your potential storage needs prior to entering into an agreement (and factor into the 5-year TCO calculation). Actively manage your storage consumption and work toward archiving older things to less costly services or removing what you no longer need. Storage needs are always growing and the cost impact can be substantial. Also consider all potential add-on functionality and the associated costs prior to entering into an agreement.