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Pricing IaaS: When a Price in More than Just a Price

by Scott Feuless

Even though popular infrastructure-as-a-service (IaaS) pricing is available in on-line calculators, it’s hard to know what a public IaaS service will actually cost until you’ve tried it out or carefully modeled it. Let’s say you’ve decided how many and what type of instances you need, how much and what type of storage, how much bandwidth, and you have a good estimate for things like disk I/O for which you will also be charged. Using the published rates, you can estimate what the service should cost per month. But before you decide that Provider X gives you the lowest price and is, therefore, the best financial choice, consider these ISG Top 5 points that will help you paint a fuller picture of IaaS pricing.

1. Think about the future. Though you may have a good idea of what the service will cost in the first month, do you know the cost for the 20th month? If the needs of the application change substantially, then your monthly payments will change as well. Get some assurance that the IaaS provider you choose will drop its prices if its own unit costs decrease. Ask the provider if you will benefit from price drops if you reserve infrastructure for a longer term.

2. Look at the scope. If Provider X has a lower price but you have to do twice as much management with your own people than you would with Provider Y, then the less expensive choice may actually be Provider Y. Make sure your net present value (NPV) analysis includes all the costs and not just the provider’s charges.

3. Think about control. IaaS providers typically want to bill you for usage of the service, similar to the way phone companies sometimes bill.  For long distance you might pay by the minute for the minutes you actually use. Ever hear of the family teenager who talked all week and ran up an astronomical bill? That was because the family couldn’t manage their demand. The same goes for cloud. If you can’t manage your demand, then you can’t predict your invoices, and you may need to avoid usage-based pricing.

4. Consider elasticity.  Consider what happens when you release infrastructure at the end of a project or a seasonal low point in your business. Does the amount you pay scale down just as rapidly as your consumption? Look at the limits on how far you can go in the cloud services you are evaluating.

5. Plan for flexibility. The way you are charged for services today may not be the way you would like to be charged tomorrow. Plan alternatives in case the option chosen turns out not to be right for you. Look at the invoices themselves. Can they be broken down in a way that facilitates your internal chargeback? Make sure you can easily verify them against the resources you actually consume.

ISG can help you choose the optimal IaaS for your needs. Contact Scott Feuless to discuss further. 

About the author

Scott Feuless is a Principal Consultant with ISG, based in Texas. Scott benefits from 25 years of senior management experience, with a strong background in leading performance improvement initiatives, developing strategy and pricing outsourced services, together with knowledge of many areas of computer technology developed over some thirty years. For ISG Scott provides expertise on infrastructure performance and benchmarking, as well as strategic sourcing advisory. Scott is also a primary contributor to the development of industry standards for cloud computing. His expertise covers multiple architectures and sourcing arrangements, with major studies completed for mainframe, midrange server, storage, desktop and networking environments over his 13+ years with the firm.