Private clouds, whether hosted onsite or through a third-party data center, have limitations. In fact, they don’t even fit the definition of a “true” cloud in the way most people think of it. A true cloud is a virtual infrastructure that is reliable, elastic, and scalable. You only pay for resources consumed, and more storage can be added instantly, without needing to acquire new hardware. The ability to scale up (or down) in an instant is one reason many organizations are moving to the cloud and taking advantage of metered billing.
What is Metered Billing?
From power usage to network traffic, there are a lot of moving parts in the cloud, necessitating tools that capture and measure this activity in order to record and report various aspects of system performance. Organizations using cloud services typically receive daily emails that provide alerts for spending data, usage spikes, sudden and unexpected changes, and more. This is called “metering.”
The value of metering is that it provides organizations with the ability to attribute various usages to their specific business needs. Many measuring tools report on a single metric, but without a holistic view of system performance, the true picture cannot be gleaned, and informed decisions cannot be made.
Overpaying in the Cloud
Many cloud providers bill by usage, aka consumption-based billing. Like a utility, their clients only pay for what they use. However, when the performance isn’t appropriately metered and reporting tools aren’t properly used by providers, bills have been known to quickly get out of hand.
Here is a look at a few provisioning situations in which organizations may get a raw deal on cloud spending.
Overprovisioning. IT teams will often work with a cloud provider based on on-premise standards, which necessitates capacity planning for 3-5 years out, rather than current usage. However, a major benefit of the cloud is that resources can be added as needed at any time. So, organizations wind up paying for unnecessary and unused capacity.
Unnecessary provisioning. Organizations often house massive amounts of useless data. When migrating to the cloud, these junk files also make the move, taking up valuable space on virtual machines. Left undeleted, this data consumes capacity, and adds an unnecessary expense to your bill in the form of data storage costs and data storage transaction charges. Simply put, more data means a higher cost.
Errors in provisioning. Internal IT teams may not always have experience in provisioning and may select the wrong capacity package when onboarding with a cloud provider.
Benefits of Metered Billing
Metered billing allows organizations to see where their money is being spent by:
Automating workloads, ensuring money isn’t being spent when workloads aren’t in use
Creating alerts that notify when spending limits have been reached, storage costs have gone past a certain point, instances go unused, or use of an instance may require a change in pricing structure
Determining areas where a lot of data is housed (which is where junk files may be lurking, and ripe for deletion)
Of course, a reputable provider should help an organization rightsize; that is, identify poorly-provisioned resources and reconfigure them to optimum levels. The provider will conduct a thorough investigation into your resources, analyze them, and provide recommendations.
Another Billing Model: Level Billing
Despite the advantages of metered billing, many organizations don’t have the ability, skills, or desire to constantly monitor data usage, reevaluate spending, and renegotiate with their provider. For these organizations, level billing is the ideal solution. Sometimes called dedicated billing, level billing is a monthly set cost that is determined and agreed upon with a provider in advance so that there is never a surprise at the end of the month.
Additionally, level billing often offers committed services, meaning that even if an issue arises that the provider needs to take care of, there will be no additional charges. Another benefit of level billing? Most reputable providers will offer a 12-month SLA review and reconciliation period; if you’re using much less capacity than you’re paying for, you have the ability to lower it and receive lowered pricing throughout the next year.
Determining Your Pricing Plan
What pricing model is best for your business? Perhaps you already know, or perhaps you’d like advice from an expert. DSM, Florida’s preferred cloud provider, offers both consumption-based billing and level billing, and we’re happy to speak with you about which may suit your needs best. Ready to get started? Contact the experts at DSM today.