Senior management does not like surprises; especially budget overruns. That is why colocation is so appealing to CIO’s and CTO’s at small and medium sized businesses. Recognition that the Public Cloud can be more expensive than colocation is causing some organizations to repatriate workloads. The inability to accurately predict monthly expenses is another reason companies are choosing colocation over the Public Cloud.

Public Cloud Cost Overruns Are Common

A recent survey of 750 IT professionals by Pepperdata reported one third had Public Cloud budget overages. In some cases actual monthly costs exceeded budget by as much as 40%. In 2019, NASA spent 53% more on Public Cloud expenses than budget. Much of the $30 million dollar overrun was due to unexpected data egress fees. Though going way over budget at a large federal agency may not be a career buster, the consequences are likely to be more severe for IT professionals at a small or medium sized company.

The inability to accurately predict monthly expenses is due to the pricing methodology used by Public Cloud vendors. Cloud services are billed based upon actual resource utilization. While this sounds good (you only pay for what you use) this approach can wreak havoc with budgets. Pricing algorithms are complex and monthly charges can vary a lot based on when services are used and where data flows.

Colocation Monthly Prices Are Fixed

Most colocation providers charge a fixed price for internet bandwidth services. The rate for an internet circuit with automatic failover to a backup circuit will be a fixed monthly fee based on the bandwidth (Mbps) of the circuit. Colocation customers know their internet charges will be the same from one month to the next. This is also true for monthly power and environmental charges.

Public Cloud providers typically price internet services based on the amount of data transferred during the month. Though there is often no charge for inbound data, the cost for outbound data transfer (egress) can be high. Public Cloud data transfer charges also may vary based on when data is sent and which data centers are involved in the transmission. Though pricing is based on actual network utilization, it can be very difficult to forecast Public Cloud internet costs for a given month.

Public Cloud charges for compute and storage services also can vary based on when they are utilized. Sophisticated pricing models reward off peak hour usage. In theory users can save money by accessing services during slack times. However, many clients are not willing or able to adapt to take advantage of lower rate periods. The result is higher expenses and higher variability from one month to the next.

Cost Management is an Ongoing Requirement for Public Cloud

Ongoing cost management is a requirement for Public Cloud users that colocation customers do not have to worry about. Unlike colocation, where monthly fees are the same from one month to the next, the variability of Public Cloud expenses creates an ongoing management responsibility. Many organizations assign someone the task of monitoring Public Cloud expenses each month to determine the cause of cost increases and to modify usage patterns if needed.

To address the Public Cloud cost management challenge there are a growing number of cost management and cost optimization tools. Though each of the Public Cloud providers offer free tools such as AWS Cost Explorer, Azure Cost Management, and GCP Billing these tools require trained personnel to use them effectively. Other third party tools like Harness Cloud Cost Management have more capabilities than the free Public Cloud tools. However, these advanced solutions can be expensive and also require a commitment to have a trained employee oversee their use.

There are use cases where the Public Cloud is the best IT infrastructure choice. However, just as there is a growing realization that Public Cloud may be more expensive for certain workloads, the unpredictable nature of Public Cloud monthly expenses often makes colocation the better choice.

For IT managers in Connecticut who would like to avoid the need to explain a big budget overrun to management, CAPS is pleased to offer colocation services with predictable monthly pricing from our secure data center in Shelton.