Demystifying Cloud Service Models: Cost and RoI
We have reached the final leg of this exciting blog series. Though it is cliched to say it, this is the last but in no way the least. This blog will provide the information that would help you decide by making you aware of the hidden and actual costs involved in your cloud migration journey.
The breakdown presented in this blog of the visible and invisible costs involved with cloud services will help you choose the right cloud service model and align it with a suitable cloud management tool. Previously in the first part, we saw: the trending cloud service models and who generally use these services, and how an organization should choose the most efficient cloud model that will best suit their needs.
And in the second part, we saw a few of the critical cloud management tools provided by cloud service providers like Microsoft Azure, Amazon Web services, and Google.
At the end of this blog, you would have all the necessary tools to plan for and adopt a viable cloud strategy for your organization based on the costs involved.
Quick Tip: The longer the tenure of cloud usage, the more you can save your money. Mostly all cloud service providers give discounts for committed usage of the cloud. Cloud not only has invisible costs but invisible cost savings too :)
Let’s explore the concept of visible and invisible costs with a chart of data.
Visible and Invisible Costs
This chart illustrates the visible and invisible costs involved with every service model, split by specific areas of impact. It provides a clear idea of what service model might work for you based on the costs you would want to take on – yes, it is a choice.
What do we mean by Visible and Invisible Costs?
You might be wondering what we mean by invisible costs when we know how much we are spending.
Here the term, “invisible costs” actually means you only know the total costs. Still, you do not have information about the expense type contributing to specific percentages of the total costs.
The visible and invisible Infrastructure As A Service(IAAS) costs is clearly elucidated in the chart. It is clear that server hardware, storage hardware and the rest of the categories come under the visible price in IAAS. In other words, when we pay for IAAS service, we now know how much goes towards each expense type when procuring the cloud service. Operating System license and Application license are the only two categories that can be termed as invisible costs. The rest is crystal clear as visible cost.
When we take Platform As A Service(PAAS), we pay an amount to procure PAAS services. When we look at the split up, we see that the total is divided among three categories: Security Team, Application Development Team (for 3rd party integrations or customizations) and Application Management Team.
It doesn’t mean PAAS charges only for these categories, but the rest are under invisible costs that we will not know while opting for the service.
The same goes for SAAS(Software As A Service), where all the costs come under the invisible category, and only three to four are listed in the visible cost category.
You might wonder, does all this even matter? Should I think so much about every cost while applying for service? Cloud is already a readymade on-the-go solution - why should I waste so much time thinking about this?
It does matter.
You really should consider all these costs while choosing any of the cloud services.
Let us look at this in detail, with the help of an example.
Suppose, just like the example above, the total cost to procure IAAS is $5000 and SAAS is $7000 - What would be the obvious choice? Most people would choose the service that costs lesser.
But does that mean IAAS is the ultimate option for every need?
Definitely not! Let us analyze this in detail:
- IAAS service, which is billed for $10500, has costs divided among the 11 components of the service.
- A company that opts for IAAS has all the costs visible under each category.
- A company that opts for SAAS only pays $7000 as visible costs - security, application management, application development.
- The rest of the costs for SAAS comes under the invisible category.
So what is the difference? With SAAS, we require teams for security, application development and application management. The rest of the services are taken care of by the SAAS service provider. So apart from $7000, money is spent on the SAAS platform expense itself ($5000).
- But when we look at IAAS, the organization has to set up a team for every service.
- For example, to use the security-related services from the IAAS service provider, we spend $500 out of the total $5000. So now we need a team in place to take care of and monitor these services every day.
- So for all the 11 components or services, we need a team to monitor and ensure the process keeps running without any hiccups, though we get the service from the service provider.
- The cost required for setting up a security team is in addition to the $500. Based on the company size and requirements, the team size may be small or large.
When we looked at just the total cost, we might think IAAS should be the obvious choice. But that does not always need to be the case; With the above illustration, we have seen that this obvious choice is actually not the smartest option for that organization. Let me explain:
There is an additional cost factor other than the expense types mentioned above for setting up every team. In addition, there are various other expenses such as space, administration, network, productivity tools, etc. So, even for organizations of the same size and industry, the decision between IAAS and SAAS need not necessarily be the same.
With the above example, you can visibly see the TCO factor that every organization needs to know. What is TCO? TCO is the Total Cost Of Ownership, and it talks about the financial estimate that might help the buyers and owners while buying a cloud product or service.
Every company has different goals and different products. The size of the company, the needs of the company, the vision and mission, the economic classification, existing software and hardware, and existing teams all need to be considered. In addition, there are a lot of indirect factors that heavily contribute to the decision.
This is where expert guidance matters. This is where Impiger can be of help. There is a chance that you may not be aware of all the direct and indirect costs involved while making your cloud transformation journey.
As discussed in part 1 and part 2, we will bring to the table our expertise and empathy right from the beginning by our guide for choosing the right cloud service and cloud management tool for your organization. In addition, we will help you select a suitable model, cut down your expenditure, and promise to be a partner in your cloud transformation success.
We have provided some of the best possible information concerning cloud transformation in this three-part blog. Beyond this, Our experts can talk to you in detail about your options and show you the right path for your cloud journey.
Contact us if you have any queries. With several years of experience in the cloud industry, we have gained extensive expertise in kickstarting this transformational journey for global clients.
Looking forward to travelling with you!