As customers embark on their cloud adoption journey, they need to take into account a number of considerations. This paper highlights the following items that should be thought of in a cloud adoption journey with customer guidance as follows:
- Become familiar with terminology around cloud pricing and offers.
- Consider your current environment, including whether you operate in a hybrid cloud environment and current software license ownership.
- Consider factors other than price as you adopt cloud computing.
Microsoft’s portfolio has grown dramatically in recent years, and today the company offers solutions that generally match those of its competitors on price for commodity services. However, leveraging customers’ on-premises installed base of Windows Server licenses and SQL Server licenses can make it possible to utilize a hybrid cloud solution that provides significant cost advantages. The ability to provide a smooth transition from classic on-premises deployment to cloud consumption models is important to organizations that are making a digital transformation.
In summary, price is an important consideration, and a cloud service provider without a compelling story on base costs will lose ground to competitors in many market segments. We believe Microsoft is well positioned to compete in this dimension. However, most customers need to take a larger view and consider cost as one dimension and consider the value-added services they would consume, the full range of cloud capabilities, and the ability to operate a hybrid environment for a years-long transition while leveraging existing investments throughout this transition period.
Cloud Economics and Pricing Models
Multiple cloud pricing models are available in the market today. Within each category of offerings detailed in this section, most cloud service providers offer a multiplex of offerings that consider the currency of the underlying CPU, the number of virtual cores or virtual CPUs, the amount of RAM and storage required, and the associated payment terms. Customers must first select the general approach they want to use and then drill down deeply into the exact configuration that will meet their requirements.
Challenges and Opportunities for Cloud Customers
With technical change come both challenges and opportunities for customers. Most customers will review the cloud computing portfolio of more than one major vendor as they decide on a given provider for a given workload. Customers need to pay attention to the following areas:
- On-premises/cloud hybrid mix. Most enterprise customers today will have a mix of on-premises and off-premises computing needs. Determining the right combination will help define costs and subscription needs for off-premises offerings. Further, organizations should recognize that these are likely to be targets rather than firm delineation points. The ability to adjust the mix of on-premises/off-premises computing provides considerable flexibility for an organization’s agility needs. Finally, customers should look for a solution that offers them a relatively consistent experience with on-premises and off-premises computing resources, which helps reduce the friction associated with dialing up or down either compute resource as needed.
- Architecture. Customers evaluating cloud environments must consider the benefits and the challenges they will see from each vendor’s architectural model. Challenges may include lack of a hybrid cloud component to ease a transition and pricing models that penalize customers that have made investments in on-premises software licenses. Benefits may include tighter architectural integration, ability to extend existing business relationships at a lower cost, and interconnection of existing infrastructure with cloud solutions.
- Pricing models. Although cloud computing has been available for a decade, it remains a relatively nascent industry, where each vendor is defining its own value proposition, and there is still variation on the core services and contract terms incorporated into a service offering. As a result, it is difficult to create a precise service-versus-service comparison across cloud vendors. Further, for most customers, a subscription will require basic compute resources (either IaaS or PaaS) and will include value-added services such as database services, management or security services, or possibly consumption of PaaS extensions such as artificial intelligence, machine learning, IoT, anomaly detection, and identity and access management services. Those services are usually priced in addition to basic PaaS or IaaS services and likely have varying degrees of compatibility with existing customer solutions.
- Software licensing. For better or for worse, software licensing costs continue to be a key consideration when looking at cloud computing. In some cases, customers may find their existing licenses are tied to on-premises computing deployments and offer no cloud deployment rights. In other cases, the pricing model may be unattractive for deployment on a given cloud environment but may be more favorable on another cloud computing environment. Finally, having the ability or flexibility to deploy infrastructure software, databases, and applications on-premises or off-premises without any penalties is a desirable scenario for most customers and may result in lower opex costs over the longer term.
As customer adoption of cloud resources to meet their IT computing needs increases, cost is becoming an increasingly important factor when choosing cloud vendors. The availability of emerging cloud technologies such as containers and serverless computing also affects pricing and is becoming a differentiating aspect for vendors and for customers. For many organizations, the challenge today is no longer about whether to embrace cloud or not; rather, it is about how to get the most economic benefit from their shift to a cloud computing consumption model.
Read this IDC white paper to get guidance on how to:
- Evaluate price in the context of different cloud adoption considerations like agility and ease of transition.
- Discover additional cost savings through value-added services.
- Choose the right cloud for your business based on your current technology environment and licensing.