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Claranet's research suggests organisations value the flexibility of cloud, but when extended to pricing it could be to their detriment in some situations

Claranet’s research suggests organisations value the flexibility of cloud, but when extended to pricing it could be to their detriment in some situations

The perceived flexibility of the pay-as-you-go (PAYG) cloud services consumption model is often hailed by CIOs as one of the leading reasons for their adoption. But research published by UK cloud service provider Claranet suggests organisations are often overpaying service providers by putting more predictable workloads on cloud platforms.

Claranet’s annual cloud adoption survey, which polled 300 IT decision makers from a range of small, medium-sized businesses and enterprises, found that 34 per cent of large organisations that are using cloud-based services are buying these services from more than one provider and are tied to more than one payment model, including flat-rate subscriptions and a variety of PAYG options.

“Flexibility has always been one of the key selling points of cloud computing and outsourced IT, and this extends to the models available when it comes to paying for services,” said Michel Robert, managing director of Claranet UK.

“Just as they need to ensure the service they take is suited to their needs, organisations must make sure the payment model they choose is appropriate to the way in which they will use their cloud services,” he said.

Robert explained that based on what the company’s seeing in terms of uptake today, many firms are overpaying for their cloud needs because they often prioritise flexibility of resource usage and billing, sometimes resulting in a higher total cost of ownership.

87 per cent of organisations surveyed said flexibility of compute resources (ability to scale up or down) and access to applications as a key objective when migrating to the cloud. But 75 per cent said that their compute usage was predictable, which means most may not necessarily require the PAYG model that often favours cloud bursting over persistent usage.

“A PAYG model may provide value for money if you are frequently using the ‘burst’ facility of your cloud service. However, if a company’s particular workload is largely predictable it may end up paying more than it needs to,” Robert said.

“In most circumstances, it should be possible to anticipate your requirements and put in place a payment model that reflects this level of productivity and delivers genuine value,” he added.

The research results put some of the larger public cloud service providers – Amazon, Microsoft and Google – in an interesting position. It has been clear for some time that there is much less scope to negotiate on pricing for persistent workloads in the cloud with these players, which has opened up a big market for traditional bare-metal hosting providers and IT outsourcers (i.e. those used to bargaining) to pivot into.

Until now it seemed as though in the long term the only two options for the big providers were to race one another to the bottom on pricing, or become more flexible on SLAs and persistent workloads. But with Google’s most recent cloud updates in mind, which among other things aim to incentivise persistent workload migration to the cloud with steep discounts, it will be interesting to see whether there is indeed a middle path emerging.

@BizCloud
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