What is the Cost of a Hybrid Cloud Computing Model?

Blog 27th January, 2020

Public cloud hardware is a competitive market where the world’s largest IT companies target the requirements of complete data centre outsourcing for enterprise corporations, government institutions, and other complex organisations. The cost basis for comparison includes the price of data centre facility operations with multiple high-speed fibre optic providers, rack hardware, routing equipment, trained staff, on-site security, backup power, utility fees, and 24/7/365 maintenance. Private data centre resources are combined with public cloud hardware and PaaS products in hybrid cloud architecture. The primary choice in public cloud service providers involves the selection of a hyper-scale data centre vendor on established cost management and pricing models. Cloud hardware pricing can be further optimised through spot bidding and the regional location of data centre facilities by a public cloud service provider internationally.

Hybrid cloud pricing models: Understanding the costs

In order to safeguard your business data and run cloud software workloads, you first need to understand the associated costs of public cloud services vs. in-house, private data centre management. In recent years, research has found that some IT architects are discouraged from executing a hybrid cloud strategy due to uncertainties about the cost of migration and implementation. Business owners need to perform an IT resource audit in order to prepare in advance for hybrid cloud orchestration and migration to public cloud hardware. While there are many overall factors to consider, the hybrid cloud is proven to reduce Enterprise IT expenditures in the long-term and offers the best options for reliability and performance in corporate data centre management currently available for organisations at scale. 

  • Hardware: Public cloud vs. private cloud resources

    Public cloud vendors offer data centre hardware in hyper-scale facilities under a “pay as you go” billing system related to the use of CPUs, RAM, bandwidth, and storage facilities. Elastic web server platforms are one of the main ways that Enterprise IT departments cut costs with public cloud service providers over in-house data centre management requirements with continual hardware upgrades, multiple fibre connections, backup facilities, and physical security issues on-premises. AWS, Google, and Microsoft all maintain a system of preferential pricing for clients depending on the volume of services required in data centre operations, billing less for long-term reserved hardware instances. The companies have further pricing variability based on data centre location, platform services provided, service mesh products included, and quality of hardware. AWS offers maximum billing flexibility with reserved resource pricing and competitive bidding on spot instances which are allocated on demand according to the requirements for user traffic support on public cloud hardware.

  • Building infrastructure on PaaS & SaaS products

    Many Fortune 500 companies are paying cloud vendors for innovation to access Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS) products that give them a competitive advantage through the development of new hybrid cloud architecture. Others are paying for High-Availability (HA) data centre services and the use of automated, elastic web server frameworks that scale to meet any user traffic demands. Companies outsourcing public-facing web and mobile services have different cloud requirements than groups remote hosting internal business processes. Some companies pay extra for PaaS/SaaS products that speed up programming collaboration in the development process or optimise web server environments through custom configurations that can be automated. The use of PaaS/SaaS saves huge amounts of money to enterprise corporations over the costs of developing each required solution internally with dedicated teams for programming, networking, hardware upgrades, and product support.

  • Data centre maintenance & web security management

    The outsourcing of on-premise data centre operations to public cloud hardware eliminates the need for managing multiple fibre or telco providers, backup power, cooling, physical security, and continual hardware upgrades for Enterprise IT. Some companies also use colocation facilities to reduce these costs in private cloud resource management. Enterprise IT has traditionally been dominated by planned obsolescence and the need for continual hardware, software, and networking equipment upgrades. Support for in-house data centres is one of the highest costs for staffing and maintaining 24/7/365 security of operations. By outsourcing data centre management, web server maintenance, platform security, and hardware upgrades to a hyper-scale cloud provider, Enterprise companies can implement a 40% to 50% reduction in IT operating costs across all departments, brands, and services in the largest multinational organisations.

The cost advantages of cloud pricing models

The most common cloud pricing model is the cost for “bare metal” or commodity hardware, usually measured in available CPU cores, RAM, storage allocation, and bandwidth. Public cloud vendors charge different prices depending on the total client service volume. Value-added products like elastic server frameworks and enterprise database support are priced in various ranges for use. There is a vast ecosystem for public cloud software from third-party companies that work at every level of the service mesh and software development lifecycle. Adding these products should be considered in the cloud pricing model to evaluate open source against proprietary licensed solutions when completing an initial IT audit for public cloud migration. 

Some of the most common pricing models and billing costs associated with hybrid cloud architecture can be found in the following areas:

  • Multi-platform management

    One of the challenges of a hybrid cloud is that you’re not managing just one cloud or data centre. Instead, you must manage multiple accounts. This includes on-premise, private cloud facilities, and/or multiple public clouds. Finding personnel, processes, and software can help with management, but they all require additional costs. Most public cloud platforms now support “bring your own license” for custom software installations like SD-WAN, firewalls, and VPNs. Use an IT audit to compare the prices between public cloud service providers.

  • Data transfer rates

    The cost of bandwidth per month or per MB/GB of data transfer can be a major variable between public cloud service providers. Fees are involved when you transfer data in a public cloud to other servers locally or internationally. Depending on your cloud vendor, you can even incur networking fees when moving data between virtual machines within the same cloud. Bandwidth charges are normally billed according to monthly volume allocations, with differing costs for overruns. It’s important to optimise I/O transfers for bandwidth concerns at every level of the service mesh. Real-time monitoring of packet transfers can be used to locate problems on a hybrid cloud network. An IT audit should include past rates of network bandwidth usage to compare to vendor service plan prices.

  • Auditing & compliance costs

    Complying with data protection regulations can be expensive, and can incur an increased cost when using the cloud. A hybrid cloud adds a further challenge to traditional regulatory guidelines, since data and processes move fluidly between on-premise and cloud platforms. Coordinating compliance in your hybrid cloud by establishing which data must remain in your internal infrastructure or hosted regionally, interviewing prospective vendors, and opting for vendors that use the same platforms as you can help manage the costs of complying with regulations. Many SaaS/PaaS products have built-in auditing and compliance software for regulatory requirements that can save a lot of time when producing reports.

  • Customisation costs

    Migrating an application that was on-premise to the public cloud can incur costs if the application requires customisation to work on the hybrid cloud environment. Additionally, integration costs may be a factor when using a hybrid cloud. It’s difficult to estimate the amount saved in programming and development resources when building a model for cloud billing. SaaS/PaaS products save businesses huge amounts of time when compared to internal software development, and are often available on cheap monthly subscriptions. It’s important to compare the cost of cloud software platforms with the investment required to develop a custom, in-house solution with similar functionality. Evaluate the cost of competing integrator companies and consultants when building an initial plan for a public cloud migration or hybrid cloud conversion.

  • Consumption-based pricing

    A consumption-based pricing model holds the core belief that customers pay according to the number of services they use or consume. This is the main principle behind “pay as you go” billing, which is one of the most prominent pricing models found in cloud computing. One of the many challenges businesses face with hybrid cloud infrastructure is overspending on reserved hardware allocations. This is largely due to the lack of automation and tools that enhance the ability of the cloud to continuously monitor compliance and cost. Elastic web server frameworks solve this problem for enterprise data centre requirements. The biggest savings come from the use of competitive bidding strategies for on-demand hardw
    are using lower cost spot instances for resources over reserved hardware, but this must be optimized for every organisation or Enterprise IT department uniquely in order to be effective.

Managed consumption for hybrid cloud lets businesses consume only the cloud resources they need. Vendors will quantify the services they charge customers based on what they use. This improves performance, security, compliance, and cost. Some consumption models also eliminate the need for staff to manage the hybrid cloud each day, reducing human error and improving employee productivity. This model clearly outlines and tracks data usage, costs, and whether policies are followed, monitoring compliance and security. 

Optimising costs and pricing variables for enterprise

There are several other costs associated with the hybrid cloud, including storage costs, platform costs, server costs, software maintenance costs, and more. Managing these costs is part of the business service plan at the project level. There are also several common factors that cause cost overruns in a hybrid cloud environment. 

Typically, cost overruns occur because:

  • Capacity planning didn’t allow for uncertainty in production operations.
  • Cloud infrastructure utilisation was lower than planned, leading to waste.
  • The smaller costs (such as server costs and data transfers) were not accounted for by staff, leading to over-expenditure on public cloud billing.
  • Microservices were improperly configured, leading to excessive resource utilisation on hardware that can be identified and optimised.
  • The costs of trained staff to launch, debug, and manage operations weren’t included in the initial estimate for platform services.

The variance between reserved hardware and spot instance utilisation on AWS EC2 has led to a vibrant marketplace that involves competitive billing for hardware resources at lower rates according to immediate demand. Creating an automated strategy for billing on spot instances with AWS EC2 can help large businesses trim additional costs. Similarly, the costs for High-Availability (HA) requirements and “5 Nine” uptime are higher. There’s also variance in public cloud hosts between regional data centre facility costs. It’s recommended to build a cloud billing model for IT planning purposes.

  • Optimising cloud discounting

    The biggest cloud providers are Google, Azure, and AWS, and they all publicly offer discounts in exchange for committing to usage on the cloud provider for a one- to three-year period. In this case, you can decide on how much usage to commit to reserved instances, and how much to leave as on-demand. Often referred to as commitment-based discounts, reserved hardware instances can offer a flexible way of managing the costs of your hybrid cloud. Each vendor provides their own unique options, such as flexible payment plans and the ability to cancel or switch services. Microsoft’s Azure, for example, has a broad portfolio of cloud products that matches its competitors ‘one for one’: Kubernetes, Machine Learning, Hybrid Cloud with Hyper-V, Azure Stack, Cosmos DB, and others. The discounts available at public cloud hosts include free accounts and customer credit for development, non-profit, and academic work. 

  • Cost-effective implementation 

    While use of the hybrid cloud environment at scale can incur a high billing cost, when designed and implemented correctly, a SDDC can pay off in the long run. In fact, statistics have shown that businesses using the hybrid cloud are 38% more likely to see a reduction in their overall IT expenditures. To better reap the benefits and implement a cost-effective cloud model, businesses must have a realistic idea of their data needs and requirements, as well as ensure that their preferred vendors integrate well with their hybrid cloud strategy. Upfront costs of the hybrid cloud are just one part of the story, as once a solution is implemented, fees can begin to mount in unexpected ways. Businesses are encouraged to implement a cloud management platform for monitoring costs and utilisation challenges, as well as developing a comprehensive strategy for managing both on and off-premise infrastructure.

  • Add a Managed Service Provider

    Just as outsourcing the platform maintenance and security costs of an in-house data centre to a public cloud host can save money for enterprise corporations, it is also important to consider the choice of an integrator or consultant company that can set-up and install a hybrid cloud system more cheaply than recruiting new employees. DevOps and Microservice support can be managed by software development teams in Agile, where full-stack engineers are becoming more common. Enterprise companies save money through managed service providers specialising in the implementation of new solutions who are experienced and offer a complete package of cloud orchestration options for data centres.

Harbour IT Cloud Metro and Azure Stack Solutions

At Harbour IT, we are ready to assist your enterprise organisation with hybrid cloud solutions through our Cloud Metro and Azure Stack deployment platforms. Our engineers can help your organisation to build innovative IT solutions with private cloud security and public cloud resource integration on Microsoft Azure Cloud to support any industry need or project requirements. We choose Microsoft Azure because:

  • Microsoft Azure has one of the most extensive service product availability lines for C++, ASP.NET, Java, PHP, Python, Go, JavaScript, and Node.js solutions for software support. 
  • Microsoft Azure supports enterprise databases such as MySQL, MSSQL, MongoDB, and Cosmos DB at scale, as well as new machine learning platforms for AI/ML/DL. 
  • Windows security protection at all levels of the workstation, web server, and data centre.

Using Azure Stack and Metro Cloud, we help businesses build unique private and public cloud architecture. Whether you are in manufacturing, heavy industry, retail sales, government, education, or the service sector, we have experienced IT professionals ready to perform a cloud service audit to improve your operational efficiency through hybrid cloud solutions. We specialise in software lifecycle management support and legacy app modernisation.

Navigate the costs of hybrid cloud

If you’re frustrated or feeling daunted by the high costs associated with the hybrid cloud environment, we can help. We have experts available that can prepare an IT audit for your business according to established cloud billing models. Learn the difference in public cloud service pricing between Microsoft Azure, Google, and AWS. Our IT experts can help you manage your hybrid cloud costs by including trained integrator and customisation support with products. Contact us at Harbour IT through our online form.

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