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Opportunity Lost: Enterprises Could Slash Cloud Costs by 36 Percent

By Paul Rubens (Send Email)
Posted April 10, 2018

Companies that move their operations to the public cloud are failing to realize many of the possible benefits and are missing key opportunities to save significant amounts of money.

That's the finding of a study carried out by TSO Logic, a company that makes software solutions for optimizing application delivery in data center environments. The study reveals that when companies move their operations to the public cloud, many either don't save money at all or fail to save nearly as much as they could. In fact, the study found that as much as 35% of the average cloud service provider's customer's bill is for public cloud resources that are unnecessary. Virtually Speaking

The Cost of 'Over-Overprovisioning' Workloads

How come? There are a variety of reasons for this sorry state of affairs. One is that most companies over-provision their workloads when they run them in their own data centers.

That's probably sensible, because they need extra resources to allow their workloads to grow without having to buy new hardware too often, and to accommodate periods when resources are in peak demand. But the study suggests that most companies "over-overprovision" — just 16% of OS instances it examined for the report were sized appropriately for their workloads. 84% could run on a smaller footprint.

And when these companies perform a like-for-like migration from their data centers to the cloud, they continue to "over-overprovision" their workloads. But in the cloud, overprovisioning is not sensible, and "over-overprovisioning" is doubly so. That's because the whole premise of virtualization technology and cloud computing is that it is supremely flexible — you can easily scale the resources needed to run your workloads up (and down), and pay only for what you need.

"Some workloads may be in use 100% of the time, some may be in use just 10% of the time. Some may reflect 5% utilization for 29 days per month, but 100% peak utilization at month's end. Organizations need to understand how they are truly utilizing each workload to accurately evaluate public cloud options," the report points out.

Another Missed Opportunity for Public Cloud Cost Savings

There's another way that enterprises are missing out on cost savings when they move to the public cloud. Most computer resources in data centers are not state-of-the-art: they are only refreshed every few years, and older hardware may be repurposed rather than disposed of. But cloud service providers typically run much more powerful, modern equipment that they are able to acquire relatively inexpensively thanks to significant economies of scale.

These resources can be made available to customers at low cost — but customers can only take advantage of them if they are willing to be flexible. If they aim to replicate their data center configurations in the public cloud, they don't get the benefit of the powerful, low-cost cloud resources. But if they see moving to the public cloud as a total hardware refresh at someone else's expense, then the benefits can be significant.

"Considering that large public cloud providers use the latest-generation hardware, and receive bulk pricing for that hardware at massive scales, cloud providers are inherently positioned to deliver superior price/performance than most organizations can achieve on their own," the report said. "To realize those savings, however, organizations must be able to map current workloads to future cloud offerings."

Just How Significant Are These Untapped Savings?

How big are the untapped savings? As you might expect, the older the hardware in the current environment, the more economical cloud operations become in comparison. Migrating from five-year-old servers to modern hardware in the cloud could result in cost savings of about 50%, according to the study, while this figure rises to 70% for equipment purchased eight years ago.

"To realize those savings, however, organizations must be able to map current workloads to future cloud offerings," the report points out.

Of course, not all companies have such old hardware. But the study shows that many companies are still failing to squeeze all the benefits that are on offer from a move to the public cloud, concludes Aaron Rallo, TSO Logic's CEO. "Once you factor in modern compute capabilities, new service offerings and underused resources, organizations can slash their estimated cloud bill by a whopping 36 percent."

Or to quote the lyrics from a famous song that dates back to 1939, "It ain't what you do, it's the way that you do it. And that's what gets results."


Paul Rubens is a technology journalist and contributor to ServerWatch, EnterpriseNetworkingPlanet and EnterpriseMobileToday. He has also covered technology for international newspapers and magazines including The Economist and The Financial Times since 1991.

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