Why cloud economics matter

Increasingly, businesses have been accelerating their adoption of cloud infrastructure to reduce operating costs, boost innovation and enhance productivity; with Japan, Australia, India, South Korea and China leading the way. Unsurprisingly, this layer of cloud is set to be the fastest-growing segment of cloud during 2019-2024 across Asia Pacific according to new forecasts from GlobalData1, with a revenue growth rate of 11.2% by 2024.

With the current global business disruption organisations are facing, the pace is stepping up even more, as they look to cloud to support them with their business resiliency. However, it is becoming increasingly apparent that not all clouds are equal, especially in the area of cloud economics.  

Take 8X82, one of the leading cloud communications platforms in the world, as an example. With the explosive growth in demand for video communications, 8X8 needed to hyper-scale quickly to cater to its millions of users and astronomical surge in demand. 

As a result, the company moved its video-meeting services from AWS to Oracle Cloud Infrastructure (OCI), a second-generation enterprise cloud with powerful compute and networking performance, gaining more than a 25% increase in performance per-node on OCI when compared with the previous cloud provider— as well as global reach, higher levels of security and savings of more than 80%3 in-network outbound costs.

Cloud economics – what is it?

But even as companies, both large and small, consider moving from on-premises to break free of legacy architectures, practices and their financial constraints, organisations need to be sure they fully understand cloud economics. 

In the simplest term, cloud economics deal with the knowledge concerning the principles, costs and benefits of cloud computing. To achieve the greatest value, the business must first determine how cloud services can affect its IT budget, security and infrastructure. This means evaluating costs as they relate to differing aspects, including infrastructure, research and development, security and support, to determine if moving to the cloud would be the next logical step forward.

When plans are afoot to move into the cloud, an organisations needs to consider four key factors. 

It is not only about cost

For most customers, storage, networking, and compute (CPUs) are the three major elements that make up a cloud bill. So, it is important for organisations to carefully assess their business needs across these areas. In addition, businesses need to pay attention to things like outbound data transfer costs if they are looking to move a lot of data into and out of the cloud as egress charges—costs that organisations pay to move data from the cloud to another area—can have a considerable impact; just see what happened to NASA4.  

Know your data

While all types of corporate data are moving into the cloud, due to regulatory limitations and issues like latency, more sensitive data is likely to remain behind the firewall. However, there still needs to be smooth operations between internal and external sources. As such, the ideal situation is to have the two architectures mirror each other and work in tandem. Often this is not the case, with the on-premises cloud being a poor relative of a vendor’s full offering. 

Speed is essential

Given that you pay for both the amount of data that it is processed in the cloud and processing time, price/performance is a key metric for consideration. In simple terms, you basically want the cloud that will process the same amount of data faster, as significantly lower usage times result in much lower costs. This is particularly important when it comes to high-performance compute (HPC) workloads and online transaction processing scenarios, where data needs to be fed into and out of computing nodes fast. 

Location plays a big role

Even in the same location, it takes time to transfer data between two CPUs and when there are significant distances between two locations, latency comes into play even if they are both run by the same provider. Keeping data close to where it will be processed or used, saves time and money. Ideally, you want a cloud provider that has facilities in all regions5 where your business is present and that makes operating across different regions as easy as possible by having consistent and transparent pricing structures and can meet the data sovereignty requirements that match the location needs.

Changing times, new opportunities

While we can’t predict the future, it is clear that we will continue to exist in a disrupted business environment, where each of us will need to pivot and turn as things change. As such, it is essential when considering cloud that you select those services that are most relevant to your business and in particular, make sure you closely analyse the pricing for the key building blocks — computing, storage, and especially networking, because that is typically where large unexpected expenses accrue.

[The writer is Regional Managing Director & VP – ASEAN & South Asian Growing Economies (SAGE).]

Footnotes

 https://channellife.com.au/story/iaas-revenue-to-reach-39-billion-across-apac 

2 https://www.oracle.com/corporate/pressrelease/8x8-selects-oracle-for-secure-video-solutions-051220.html 

3 https://www.oracle.com/cloud/economics/ 

4 https://www.computing.co.uk/news/4012760/nasa-egress-costs-aws 

5 https://www.forbes.com/sites/janakirammsv/2020/06/29/oracle-cloud-expands-footprint-in-india-by-launching-hyderabad-region/#53ff221f43a3