In the relationship between customer and business, expectations are everything. In a lot of ways, the shift to cloud computing has evened the playing field for what is expected in terms of cost, responsibilities, and the services exchanged between IT customers and providers. With cloud services, customers can experience far more of a service before buying it, see a clear unit price from the outset and understand the constraints of the service-level agreements. However, uncertainty still lingers in the exact specifications for many solutions, as the complexity of the design and variability of the actual utilization continue to make accurately predicting real-world cost for cloud solutions difficult for many customers.
While there is still typically a difference in cost between on-premises IT deployments and cloud, the unexpectedly higher cost of cloud projects impacts the market in several ways. Highly efficient and mature IT organizations can often use their own internal resources to compete with the price points delivered through public cloud options. For those customers, cost overruns make cloud deployments more expensive, rather than slightly more cost-effective, when compared with utilizing internal resources. Beyond those marginal customers, however, cost overruns universally wreak havoc on internal budgeting processes, which depend on predictable cost structures. Particularly compared with more stable internal IT funding, variability on a monthly basis puts serious stress on the finance function. Lastly, cost overruns impact other IT project decisions, serving as a deterrent to new and expanded cloud projects. In this respect, this unpredictability is bad for all cloud vendors, providing motivation for these providers collectively to further clarify the customer’s financial expectations.
For cloud infrastructure market leader Amazon Web Services (AWS), the problem seems particularly relevant, coming up in a number of discussions with customers. For a vendor that is far ahead of nearest competitor Microsoft, cost overruns are on one of the biggest flaws in the current AWS customer experience. The struggle of customers starts with matching the vast catalog of services available from AWS to the actual IT solution needed. Many customers noted their initial designs, once implemented, lack the performance needed to meet their performance requirements. Whether it’s the tier of storage or the amount of data transfer, customers are forced to change the configuration to more expensive options or incur usage charges above their original expectations.
In speaking with decision makers about their experience, the need for more assistance in both the design and operational optimization are needed to close this gap in the initial expectations and actual costs of cloud implementations. These budget overages may be positive for AWS in the short term, contributing to some of its continued strong revenue growth, but in the long term, they could be the most profound threat. If second-tier public cloud vendors such as IBM, Microsoft and Google can develop and deliver streamlined design and pricing calculators that address these unexpected cost overruns, it could very well help carve out a market niche that certainly adds value for customers. AWS may not have as much incentive to close these expectation gaps, but for competing vendors, any advantage is critical and this could be one that makes a difference long term.
Note: This blog is the first in a series driven by TBR’s Cloud Customer Research reports, which focus on applications and infrastructure workloads. More than 50 interviews and 200 surveys are being conducted. Blog posts like this one will highlight the key trends and topics impacting the cloud industry.