Cloud computing technology has fundamentally transformed the way companies deploy and manage their IT infrastructure. Where organizations once relied upon inefficient and expensive on-premises solutions, they are increasingly making the decision to migrate their essential data and applications to cloud environments that offer far more flexibility.
The retail industry has undergone a monumental digital transformation in recent decades, with eCommerce becoming more central to business strategy with each passing year. The ability to deploy flexible and scalable retail services is essential to delivering the sort of customer experience consumers are looking for. Cloud storage services play an important role in this process because they provide organizations with the ability to adapt quickly and deploy new services to capitalize on opportunities in the market. When making the decision to migrate to cloud-based infrastructure, however, retail companies need to evaluate cloud storage pricing models very carefully.
Cloud Storage Pricing Models
For all the emphasis on IT capabilities, many technology decisions ultimately come down to cost. Migrating essential data and systems to a cloud environment often makes sense financially because it allows organizations to shift away from burdensome capital expenses (CAPEX) that come from owning and operating IT equipment, to far more flexible operating expenses (OPEX).
Of course, cloud storage pricing isn’t a one-size-fits-all proposition. Different providers use different billing methods, which can have a major impact on how OPEX costs are calculated in the aftermath of any cloud migration. Understanding these differences is crucial for a retail company hoping to optimize its technology expenditures.
The typical cloud storage provider uses a billing model that focuses on actual resource consumption. While cloud computing power and storage is scalable, any one provider’s capacity is ultimately finite, with each customer using a portion of those resources each month. In the same way a power company issues a monthly bill based on a meter rating, providers utilizing consumption-based billing evaluate how much computing resources a client used and bills them accordingly. This system can translate into significant savings if a company knows exactly how much capacity they expect to use, a sudden spike in resource usage could translate into a huge rate increase.
More importantly, many organizations overestimate their computing needs when they migrate from an on-premises solution. That’s because most on-prem infrastructure is horribly inefficient thanks to poorly optimized hardware deployments that waste processing power and storage space. This situation usually develops over time, with companies trying to solve their capacity problems by adding more hardware without taking the time to re-optimize its infrastructure. Workloads end up being spread across the system, with multiple servers running far below their actual processing capacity but still demanding a great deal of power.
The problem doesn’t go away when a company migrates to the cloud, because it typically bases capacity needs on existing infrastructure. This wouldn’t be a problem if that capacity was being used efficiently, but if an inefficient deployment is only able to harness a fraction of that capacity, the organization could end up severely overestimating how much cloud capacity it needs. Given this situation, it’s no wonder that companies waste more than $60 billion on cloud capacity they don’t even need.
Inefficient deployments can lead to huge month-to-month cost variations in a consumption-based billing model. This makes it very difficult to budget for cloud computing costs over time, which defeats the purpose of shifting infrastructure to an OPEX cost. For a retail company, it means less strategic flexibility. When cloud costs could fluctuate wildly, it can be daunting to consider rolling out a new product line or customer portal.
Level billing (sometimes called dedicated billing) is an alternative pricing model that calculates costs in advance based on estimated need. Adjustments can be made on an annual basis, which typically coincides with other budgetary decisions. If the company used less capacity than it anticipated, it can get a better deal on pricing the following year. Conversely, if it ends up using more capacity, it will likely end up paying the difference and paying higher rates the next year.
This dynamic is especially valuable for a volatile industry like retail, where sudden changes in consumer trends can have a massive impact on IT infrastructure. If a company uses far less capacity than it expected, that’s usually a sign that sales were down, which would necessitate cutting back on underutilized cloud resources. Conversely, if it used far more resources than expected, that probably indicates that profits are up and the revenue is available to afford the increased capacity.
Other Cloud Storage Pricing Considerations for Retail
Migrating to the cloud has never been a simple decision, but for today’s retail companies, identifying the best cloud storage solution is even more complex. Here are just a few key considerations they must take into account when evaluating cloud providers:
How Many Clouds Do You Need?
The average business today leverages five different cloud platforms, with some companies using even more. That’s because cloud computing services have become increasingly specialized in a competitive marketplace. A customer portal may be hosted in one cloud environment while marketing, sales, and accounting each use entirely separate cloud platforms that are custom-built for their needs. Assessing organizational needs and identifying cloud storage providers capable of delivering hybrid environments from multiple vendors is one of the key steps in securing long term retail flexibility.
What Are Your Security Requirements?
Concern over cloud security remains the biggest reason why more companies are turning to hybrid clouds that incorporate private cloud and public cloud storage services. This is especially important for retail companies that handle customer data. If the proper controls are not put in place to govern access to that data and how it is managed, retailers could be exposed to substantial risk and liability. Virtual private clouds (VPCs) provide far greater visibility and control over a virtualized environment, which is why many companies have elected to host their essential data and applications in these more secure environments and then connect them to public cloud platforms as needed.
What Are Your Compliance Needs?
Since retailers accumulate so much consumer data and work with a complex network of third-party vendors to deliver products and services, any technology solution they deploy must be able to meet a variety of compliance requirements. That means being able to demonstrate to an auditing authority that the proper controls and processes are in place to keep sensitive data secure. For a retailer, that usually means PCI DSS compliance for protecting credit card information at the very least. Understanding what compliance standards a cloud provider needs to meet is one of the most important steps in planning and executing a technology migration.
Find Out Why DSM is Florida’s Preferred Cloud Provider
With years of experience meeting the cloud storage and computing needs of retail companies, DSM has the infrastructure and knowledge needed to help retailers begin their journey to the cloud. Our team of cloud specialists can help your business implement a fully managed and compliant VPC, or migrate your existing hardware into a colocation environment complete with secure on-ramps to your preferred cloud platform.
If you’re ready to begin your journey, contact us today to learn more about our cloud storage billing and managed hosting services.