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Do You Know How Much You Are Spending On Cloud? Hidden Costs of Public Cloud Can be 4-8 Times Higher than Visible Costs

- January 20, 2015 - 0 Comments

Reducing costs remains amongst the top reasons why organizations use public cloud services. However, when calculating the costs of public cloud services organizations need to look well beyond the license fees and billed costs.

With Cisco Cloud Consumption Services, we have worked with numerous customers to discover their public cloud usage and analyze cloud spend. At Cisco Live Milan, taking place January 26-30, we are sharing public cloud spending trends with our customers. We have found that the hidden or soft costs of public cloud services can be four to eight times higher than visible costs. These soft costs fall in three areas and include business risk, network and security costs, as well as cloud operations and integration.

Hidden_Costs2

#1: Cost of Avoiding Business Risk– 4-5X Higher

Of the soft costs, managing business risk carries the largest price tag. We have discovered that organizations can spend four to five times more than visible public cloud costs to avoid business risk.

This number is high because organizations have not put in place vital controls to manage the business risks of cloud. To adequately manage risks, business needs to establish:

  • Ways to recover from service outage or a vendor going out of business
  • Automated monitoring and alerts to guard against data breaches
  • Periodic assessments of cloud provider’s security
  • Processes to assess vendor’s compliance with industry standards or local laws and on-going business viability

#2: Incremental Network & Security Costs – 1X Higher

Network and security spending costs are also impacted by public cloud usage — typically equaling the cost of the service. Simply, with increased public cloud service usage, investments need to be made in network and security infrastructure to ensure adequate service continuity to avoid business impact. These investments could include:

  • Additional routing capacity to ensure WAN performance
  • Network investments to ensure quality of service for voice and video
  • Additional layers of security to protect against network vulnerabilities and malware

#3 Cloud Operations & Integration – 2X Higher

Spending on operations and integration is typically two times higher than visible cost of a public cloud service. These costs result from:

  • Headcount required to govern providers and oversee vendor contracts
  • Service customization and integration with existing on-premise applications and other cloud applications
  • Back-up and recovery for public infrastructure services

Using public cloud services can dramatically improve the way organizations work and collaborate. However, when considering the way in which the service will be implemented and funded, IT organizations need to look beyond the cost of the service and include many soft costs to help support a line of business to make the best decisions for the applications and services to drive top and bottom line outcomes. By establishing IT as a cloud service brokerage or a strategic sourcing hub for an organization, they can put in place operations and management to help address and potentially reduce these soft costs.

Cisco Cloud Consumption Services Can Help Manage Cloud Risks, Costs, Operations

Cisco Cloud Consumption Services can help organizations discover both the actual and hidden costs of cloud and establish ways to better manage the risk, costs, and operations of cloud services by helping IT teams evolve to become a enterprise cloud service broker.

How you can learn more:

  1. Visit us at our Cisco Live Milan booth in the Data Center Transformation Zone, Jan 26-30
  2. Read about how Cisco Cloud Consumption Services can help you evolve into cloud brokerage, and manage cloud usage, risks, and costs.
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