Learn how to cut down cloud costs on a strategic level. Deleting unused instances is fine, but here are 3 organizational-level strategies to start saving cloud costs.
From our customers - large multi-cloud enterprises - we learned the top 3 strategies to save on cloud costs:
- They predict and commit to cloud usage to save cloud costs.
- They use multiple cloud platforms to leverage the competitiveness of the cloud market in negotiations
- They use Enterprise Contracts to crack down on cloud spending
If you are an executive or manager responsible for cloud cost management at your business this blog post is for you.
Let’s kick things off with strategy #1
1. Commit to cloud usage to save cloud costs
Why cloud consumption prediction results in discounts
You are familiar with cloud computing and have heard of something called reserved instances:
You, the customer, promise the vendor that you will use a certain service for a given amount of time. Let's say a small virtual machine for an entire year.
The cloud provider is thrilled! Your commitment helps them predict the demand for cloud computing for the upcoming year.
In return for this prediction, you receive a discount from the cloud provider and can save cloud costs.
Predicting cloud consumption is a win-win for both you and the cloud provider.
Commiting to cloud usage on an organizational level
This same concept applies on an organizational level:
If an enterprise knows they will spend ~1 million euros a month on cloud computing, the provider is much better aware of what demand is coming. This also results in a significant discount.
The risk of such a commitment is that your organization will pay that amount of money - regardless of what the actual consumption is in the end.
The more accurate your cloud consumption prediction is as an organization, the more costs you will save. Anything below the ~1 million euros can be considered "wasted", and anything above that is charged with a (usually higher) on-demand fee.
2. Go multi-cloud to apply negotiation pressure
Be aware that the cloud providers want you!
Even though cloud computing is a new development, cloud providers know they will keep your business for years. This is why they're eager to onboard you on their cloud platform.
Once your business-critical applications are on their cloud, they know it is very tough to reverse that decision and they have locked you into their platform.
Show you (can) run on multiple clouds
By showing that you are capable of running your cloud business on one of the other platforms you strengthen your position as a potential client. Let them know you can move your business-critical applications to one of the competitors. They will include even more benefits or discounts to get you to sign as a client. By adopting a multi-cloud strategy, you show that you do not need that particular cloud provider and that you can switch to one of the others if needed.
3. Get Started with Enterprise Contracts
What is an enterprise contract and why do I need one?
When starting with one of the clouds, it will be straightforward to get going and book your first services. While doing so, you will pay the so-called on-demand fee.
When trying out a cloud platform and evaluating whether you want to build here, the on-demand fee is a great option. Not so great when you want to take it to the next level.
When building or migrating business-critical applications you will most likely need an enterprise contract with the provider.
An enterprise contract gives you the possibility for a volume discount and opens the door for negotiations. They are also easier to process for your financial department.
We will provide concrete steps you can take for the "big three": Microsoft Azure, Amazon Web Services, and Google Cloud.
Azure Enterprise Agreement
It is possible to create an Enterprise Agreement (EA) with Microsoft for the sole purpose of using Azure. But you most likely already have an EA in place for other services such as Windows or Office.
If this is the case, add Azure to the existing EA by making an upfront monetary commitment for a minimum three-year period.
This monetary commitment is quite low: it starts at $100 per month.
Be aware though as this is intentional. Microsoft knows that once your enterprise is on their cloud platform, they have their foot in the door and you're likely to grow a lot more from there.
The EA offers built-in savings ranging from 15 percent to 45 percent, based on the committed spend. The more you buy - the better the discount.
Lastly, be aware that there is a minimum user requirement for Azure. You will need at least 500 or more users committed to using the EA. The only exception is the public sector, which has a requirement of 250 users.
If you want, you can also talk directly with an Azure Sales representative here.
AWS: Enterprise Discount Program
AWS does not state it anywhere, but when searching for it online, you will find it: The AWS Enterprise Discount Program (EDP). This is the enterprise contract of AWS that allows you to get volume discounts by doing annual prepayment commitments.
As an EDP comes with an NDA, there is no information known on what the smallest size is nor the estimated discount you can receive with it.
But it is always better to use than paying the on-demand fee, especially if you're an enterprise that (plans to) operate at a large scale. You can get started by contacting AWS sales.
Google Cloud: contact sales
As of writing, Google does not advertise for an enterprise contract. There is also no information online to be found on them having some kind of enterprise contract and discount program.
Yet, there is a good chance that you're able to have an enterprise contract with them anyway.
The best thing you can do is get in contact with their sales team and discuss potential options.
There is no need to pay for the regular on-demand pricing that cloud providers offer. There are multiple levers you can pull to improve your enterprise's negotiation position. Do this by either committing to scale and receiving a "scale discount" using one of the enterprise agreements and/or adapting to a multi-cloud strategy. The cloud market is highly competitive and cloud providers would love to do business with you: Use this to your advantage.