Cloud and in-house data center costs: Cloud pricing models
If you are reading this text, we definitely do not need to explain to you the benefits and the opportunities that cloud computing can offer businesses to you. However, we can understand your position if you feel lost and confused looking at the cloud pricing models. Yes, we know this pain and will be happy to guide you.
Cost of cloud computing: different approaches
One of the main advantages that the cloud platforms provide to its clients is flexibility of payments. This flexibility and different approaches to pricing help to significantly reduce cloud costs.
Of course, each services provider has its own offerings that may attract potential customers. However, there are common tendencies that can be observed in price formation.
And the two main categories that we’d like to highlight are:
- and dynamic pricing.
As you may have already guessed from the names that we’ve used for these categories, in the first case you pay the amount set beforehand (or at least it will be calculated based on the set rates). And the second approach can make the prices changeable on a regular basis. However, with it you can achieve good cloud computing cost savings if the situation allows you to do that.
Below you can find the most important information of the cloud pricing models that boast the highest popularity today.
Fixed pricing models (or they can be also known as static models) are quite popular and they have been applied for quite a long time. If you take the major cloud platforms that exist today like AWS, Azure, IBM and others, you will see that they all offer such models.
The main benefit of this approach is that you will always know the exact amount that you should allocate for these services.
On the other hand, there is always a risk that in some cases you will still overpay for the services that you do not really use. With the wrongly chosen model, you can pay for something that can be really avoided.
Examples of fixed pricing models:
- Pay-as-you-go is a very popular model which presupposes that customers pay only for what they really use. The amount can be calculated either based on the time that a specific service has been used or on the quantity of resources consumed. However, the rate/tariff that is used for calculations is fixed.
- Subscription is another highly demanded form. In this case a user pays for a preselected combination of services in a particular volume (or amount) that is received in a fixed period of time. For example, it can be a monthly or yearly subscription.
- A hybrid model is a quite interesting variant which represents itself a mix of pay-as-you-go and subscription models. The prices for the services are set in accordance with the subscription model but if a user exceeds the set limitations, a pay-as-you-go model is applied.
- A price list model is probably not the most popular one but at the same time, it’s rather convenient. You have something like a “menu” of services with their prices and ordering them in different combinations, you get a final calculation of the sum that should be paid.
The prices differ. For example, let’s take the prices on the major platforms.
Usually, cloud services providers offer full lists with prices on their official sites. Moreover, you should know that the majority of cloud platforms offer pricing calculators that allow users to calculate the potential costs of the services you want to get. You can use such calculators on the websites AWS, Azure, Google CloudIBM and others.
Dynamic (or real-time) pricing is extremely flexible. There are different models that can be referred to this category. In this case, the price is formed based on a row of parameters including such parameters as time, location, value for users and others.
In these models, to calculate the cost, a special pricing mechanism is applied upon the request. Unlike the fixed pricing, this approach reflects the real supply and demand ratio and depending on the ongoing situation, it can help either a customer to save money or the cloud provider to get higher gains.
The prices can be changed with different periodicity based on the strategy chosen by the provider.
As we’ve already mentioned, there are different dynamic pricing models, for example:
- value -based;
- customer’s location-based, etc.
Though a huge advantage of these models is a reflection of the real situation on the market, it is quite a complicated approach. It requires more advanced technologies for analysis and calculations and may seem quite difficult for a customer.
Cloud cost vs traditional IT infrastructure cost
One of many reasons why so many businesses today prefer cloud services to on-premises data centers is the possibility to save money. If we compare the costs of cloud services and traditional IT infrastructure, we will see that the first option is much more cost-efficient than the second one.
When it comes to the traditional IT infrastructure, a company has to buy special equipment, serve it and maintain. As a result, there is also a necessity to hire and to pay specialists who will work with it. And moreover, you shouldn’t forget that the value of physical servers is getting lower within its lifecycle. It means that even if you make a decision to sell the equipment that has become unnecessary, you won’t be able to return all the money you paid for it earlier.
In the case of cloud services, you do not need to think about equipment and other technical issues, all these things are a responsibility of your cloud provider. And in your turn, you pay only for the resources and services that you’ve chosen.
What factors may have influence on the cloud services price?
As in the case with any other product or service, there are a lot of factors that can affect the cost set by a seller:
- the contract period between a customer and a provider (there is a tendency of offering cost reductions for those clients who stay with the company for a longer period, so, it can become one of the hints that will help you to cut down your expenses);
- the quality of resources and services (the higher the quality is, the higher the price can be. However, we do not recommend you to choose the options with the lower quality just because you want to save your funds);
- the expenses on maintenance that a provider has to bear.
How not to overpay for cloud services?
Many of our customers praise cloud services for the possibility of finding ways to cut down the expenses on tem. We’ve prepared a list of tips that will help you to spend your money wisely.
- Prepaid options. Some cloud providers offer special prepaid plans which presuppose good discounts for their services.
- Pay-as-you-go instead of subscription. If you are not sure about the exact volume/quantity of services/resources you will need, you can choose the model that will allow you to pay only for what you’ve used.
- Regular monitoring. Even if you have chosen the subscription model it doesn’t mean that you should stay with this variant forever. You should regularly analyze your real consumption and look through the list of offerings from your provider in case there are any updates and more suitable options for you.
- Trial periods. Do not ignore them. If you’ve chosen a new platform and it offers such a period, it can be a good idea not to skip it.
Of course, that’s only a couple of ideas and when it comes to real cases, there can be many more solutions.
If you are interested in using cloud services but you are not sure which platform you should opt for in order not to overpay, contact us! At Softacom, we have an excellent understanding of the specificity of this industry and will be happy to help you find the most feasible option. Before providing you with the most appropriate variant, we will deeply analyze your case and will offer you the variants based on your individual case. Sounds interesting? Then, what are you waiting for? It’s time to start your cloud journey right now.