Cloud costs are unmanageable: It’s time we standardize billing

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More companies are adopting a multicloud strategy, which means they need to compare costs and commitments from the three major providers and select services. Except, it’s almost Impossible, Google, Amazon and Microsoft Bill are so different that many companies cannot reap the benefits of the multicloud approach. They just don’t know which provider is best for their needs and uses.

Gartner predicts that end-user spending on public cloud services will reach $ 482 billion this year, a significant amount due to a lack of transparency. Investment firm Andreessen Horowitz (aka a16z) has lamented how cloud costs bring down the value of public software companies by hundreds of billions of dollars. And some tech companies are saving a lot by returning operations from the cloud.

Billing comparisons are almost impossible, cost attribution is elusive

No one questions the value of cloud services themselves, but everyone understands that their billing methods are a nightmare to confuse. There is a lot at stake to keep this going, and the numbers are huge. Standardized billing on cloud providers is long overdue. Here’s why.

Non-standard billing creates three sets of problems. The first manages a variety of commitments across cloud providers where terms and implementations vary greatly. Another problem is tracking costs with various savings attribution schemes and cost metric definitions such as net amortized, unblinded etc. Used in providers. The third is the increasing use of multiple cloud platforms and the services they operate within, each with its own tagging conventions. For many, even when using the same cloud platform, it is virtually impossible to attribute the cost internally.

The net result is that consumers cannot compare apples to apples in providers. To understand the scope and complexity of this issue, let’s compare the three main cloud service providers: Amazon Web Service (AWS), Microsoft Azure (Azure) and Google Cloud Platform (GCP).

The Big 3: Adult billing or not, everyone is confused

Of the three, AWS has the most mature billing model. Here we define maturity as the number of discounted commitments available to customers as an on-demand purchase option. In 2019, AWS introduced savings plans to give customers another discounted purchase model outside of reserved instances. This maturity has also allowed AWS to develop the most granular pricing options per SKU. Increasing the opt-in helps you choose the best commitments to cover your infrastructure. But with so many choices, consumers are confused. For example, there are numerous obsolete billing formats available such as convertible reserved instances that consumers may mistakenly purchase instead of more efficient alternatives.

Compared to AWS, Azure is less mature in their billing model. But they offer more waivers on things like enabling resale by providing a guaranteed resale with a 12% penalty fee. For AWS users, there is a chance that they are stuck with reserved patterns that they can’t sell and don’t need. They also offer an additional option of in-depth discounts on a five-year commitment to specific resources, providing a price point that can actually compete with ownership of your own server. The maximum commitment of other providers is three years.

GCP is also less mature than AWS but it offers two discounted purchase options. Committed use discounts offer discounts in return for a one- or three-year commitment, such as RIs and savings plans. GCP has also innovated the discount model by creating a standalone use discount, which automatically applies discounts when the computer engine VM is used for a significant part of the month. Thresholds for discounts vary by resource type.

The independent development of the billing model of each provider has led to differences in the price of items. Each “primitive” or component such as a machine, managed service (such as Lambda or Dynamo), bandwidth and storage all have different base pricing models that can be further complicated by long-term commitment discounts as well as high-level enterprise discounts.

The benefits of being able to access and select a wide range of services can be denied when you cannot compare and trust the services. That’s why certified billing is important for almost all cloud users.

How to fix this: Develop an open billing standard

Our team is currently working with the Phenops Foundation and Cloud Customers to develop an open billing standard that can be used to compare projects using a variety of vendors.

The first area to define parameters for consumption-based pricing of different components is to create a general standard. That way you don’t have to compare hourly charges with services charged by usage amount. Next is to develop a common language to indicate the level of flexibility that the commitment between sellers allows through discounts and discounts. This helps customers weigh the tradeoff in using discounts that require longer commitments, or offering some additional flexibility, especially in cases where variable usage may occur.

Allowing SKU’s apple-to-apple comparison will help customers choose the right services for their needs among vendors. Customers will not feel limited to using the seller they are most familiar with. They can also rest assured that they are investing in the right resources to run their business optimally.

Aran Khanna is the CEO of Archera,


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