So you think it is cheaper

24 Feb 2025

The True Cost of Cloud Services: Not as Cheap as You Think.

Cloud computing has revolutionised the way businesses operate, offering flexibility, scalability, and operational efficiency. However, many organisations jump into cloud adoption under the assumption that it will be significantly cheaper than on-premises infrastructure. While cloud services can provide cost savings in certain areas, they also introduce hidden costs that can quickly escalate if not managed properly.

The Misconception of Low Costs

One of the biggest misconceptions about cloud computing is that it is always cheaper than traditional infrastructure. Cloud providers market their services with attractive pay-as-you-go pricing models, but there are several factors that can drive costs up:

Traditional Compute: Virtual Machines running in cloud services are often more expensive that an equivalent service running on-premises.
Underutilised Resources: Many organisations over-provision cloud resources, paying for computing power they do not use.
Storage Costs: While storing data in the cloud may seem inexpensive, accumulated storage costs over time, especially for inactive or rarely accessed data, can become substantial.
Data Egress Fees: Transferring data out of the cloud often incurs charges, which can add up quickly for businesses with high outbound traffic.
Licensing and Additional Features: Many cloud services require additional licenses for enterprise features, compliance, and security, further increasing the total cost.
Unexpected Scaling Costs: While auto-scaling is a major benefit of cloud computing, it can lead to unpredictable and rapidly growing costs if not monitored properly.

In addition to the costs associated with Cloud services, leveraging a hybrid or multi cloud service adds the following factors into the mix:

Data Transfer: Inter-cloud data transfers can incur data egress costs from both service providers.
Networking Costs: Additional investments may be required to help optimise the connectivity between clouds. For example, a multi-cloud configuration with Azure and AWS could result in charges for an Azure ExpressRoute, AWS Direct Connect and a third party brokering service.
Integration and Middleware: Organisations may require custom development or middleware tools to help bridge on-premises and cloud services, or between cloud services.
Security and Compliance: On-Premises and Cloud security is implemented and managed using different tooling. Ensuring standard security and compliance across platforms often requires additional, third party tooling to provide Cloud Security Posture Management (CSPM) or Cloud Access Security Brokers (CASB).
Licencing and Subscription: Some software vendors charge extra for multi-cloud deployments or require specific licences per cloud. Some cloud services may require adaption when moving between services. For example Azure Functions and AWS Lambda provide serverless compute capabilities but support different frameworks.
Management and Monitoring: Standardised management and monitoring across different cloud providers can be difficult and require third party tooling, with associated licencing.
Skills and Training: IT teams need additional skills and training to manage multiple cloud platforms, increasing workforce costs. Highly trained multi-cloud specialists can demand a higher salary and consultancy fees.

Mitigating Cloud Cost Increases

Despite these hidden expenses, businesses can still optimise their cloud spending and make the most out of their investments. Here are some key strategies:

Rightsizing and Resource Optimisation: Regularly reviewing and adjusting cloud resources ensures that you are not overpaying for underutilised instances. Many cloud providers offer cost analysis tools to identify and recommend appropriate instance sizes based on actual usage.
Leverage Reserved and Spot Instances: For workloads with predictable usage patterns, using reserved instances (committing to usage for 1-3 years) can significantly reduce costs. Spot instances (unused capacity sold at lower prices) are another way to save, particularly for flexible workloads.
Monitor and Automate Cost Management: Using cost management tools like AWS Cost Explorer, Azure Cost Management, or Google Cloud Billing can help track spending in real-time. Automation solutions can shut down idle resources, scale services dynamically, and notify teams of unusual cost spikes.
Optimise Data Storage and Transfers: Implement data lifecycle policies to move infrequently accessed data to lower-cost storage tiers such as AWS S3 Glacier or Azure Blob Archive. Also, minimise data egress costs by keeping services and databases within the same cloud region where possible.
Consider Multi-Cloud and Hybrid Strategies: Using a combination of on-premises and cloud infrastructure (hybrid cloud) or multiple cloud providers can help businesses avoid vendor lock-in and take advantage of competitive pricing across different services.
Train Teams on Cloud Cost Awareness: Many cost overruns occur due to a lack of understanding of cloud pricing models. Training teams on cost implications and best practices for cloud usage can prevent unnecessary spending.

Conclusion

Cloud computing offers tremendous benefits, but it is not always the cost-saving solution that businesses expect. Understanding the hidden costs and implementing proactive cost management strategies can help organisations optimise their cloud investment without overspending. By rightsizing resources, leveraging cost-saving models, and using automation tools, businesses can strike the right balance between performance and cost efficiency in the cloud.

While hybrid and multi-cloud architectures offer additional flexibility, resilience, vendor diversification and can offer cost efficiencies, they also come with increased operational complexity and costs. Careful cost optimisation, strategic workload placement, and proactive monitoring are necessary to avoid unexpected expenses.

That said, organisations should not be scared of moving to the cloud as the benefits often far outweight the costs, particularly when combined with some of the mitigation strategies highlighted above. It is also worth highlighting that Cloud services are far cheaper than building or renovating an on-premises datacentre.