Organisations may be over-paying for cloud with inappropriate payment models

Over a third of large enterprises that are using cloud services have adopted multiple payment models for these services, particularly when supplied by more than one provider, according to research by Claranet. Michel Robert, Managing Director of Claranet UK, says that while this as a sign that organisations are adopting an incremental approach to cloud adoption, they are also inviting unnecessary complexity and may be leaving themselves open to paying over the odds.

Claranet’s third annual cloud adoption survey, which polled 300 IT decision-makers from a range of small and medium-sized businesses, and enterprises, found that 34 per cent of large organisations (those with more than 3,000 employees) that are using cloud-based services are taking these services from more than one provider and are tied to more than one payment model as a result. Payment models cited included flat-rate subscriptions and a variety of scalable and “Pay-As-You-Go” (PAYG) options.

The apparent flexibility offered by PAYG payment models may give the impression of value for money, but Robert counsels caution: “Flexibility has always been one of the key selling points of cloud computing and outsourced IT, and this extends to the models available when it comes to paying for services. Just as they need to ensure the service they take is suited to their needs, organisations must make sure the payment model they choose is appropriate to the way in which they will use their cloud services,” he said.

“Our research revealed that 87 per cent of organisations surveyed cited flexibility of compute resources (ability to scale up or down) and access to applications as a key objective when migrating to the cloud. Yet 75 per cent said that their compute usage was predictable. A Pay-As-You-Go (PAYG) model may provide value for money if you are frequently using the ‘burst’ facility of your cloud service. However, if a company’s particular workload is largely predictable it may end up paying more than it needs to. Yet in most circumstances, it should be possible to anticipate your requirements and put in place a payment model that reflects this level of productivity and delivers genuine value,” Robert continued.

Robert recommends an incremental approach to cloud adoption: “Many organisations and their IT chiefs face increased demand from the business to provide applications with high availability on a 24/7 basis. This high level of dependence on these applications, coupled with increased complexity, is a key driver to partner with proven outsourcing companies. In most cases, these organisations can leverage their scale and provide services to companies at a lower cost than the companies doing it in-house. This is especially true for mid-sized organisations. Against this backdrop, cloud computing can be an ideal option for those organisations looking to take a more agile and iterative approach to reduce the business risks associated with IT change,” he said.

“An incremental approach to cloud adoption does, however, increase the potential for complexity and over-payment, particularly when different services are procured from different providers,” Robert concluded.