According to the latest forecast from Gartner, spend on public cloud services is forecast to grow by over 20% worldwide in 2024, rising to a total of $678.8 billion. But as cloud adoption accelerates many businesses are finding it harder to identify and keep track of their cloud costs.
The trouble is that it’s not as straightforward as it may seem, and many businesses may find themselves on the hook for higher cloud costs than they anticipated. Some cloud providers have fee structures baked into their contracts that can hide the true cost of storing and managing data.
Acknowledging ‘Hidden Fees’
When businesses transfer data from the cloud, they incur fees known as egress charges. These “hidden fees” are assessed when data is moved to different networks.
It can cost $6 to $24 per GB to transfer data from the cloud to a private data center or on-site location. Exactly how much the charge is can vary based on the cloud services provider and their policies. Other factors can include location, geography and the type of data being moved. Higher volumes of data being transferred from different regions can translate into higher charges.
These assessments can complicate things for businesses looking to change cloud providers or move their data from the cloud. Users may find that the costs are high enough to restrict their ability to move data and change cloud providers.
This year, these pricing practices prompted an investigation by the UK regulator Ofcom. Noting how important cloud computing has become to businesses in all sectors of the UK economy, Ofcom raised concerns about aspects and attributes of the market that make it hard for users to change their cloud provider or use numerous providers.
Hyperscalers entice users with attractive pricing options and exciting new offerings to secure direct data transfers from users. They also levy much higher egress charges than other cloud providers, Ofcom found, and users also faced stiff price hikes to continue using their services.
This has sometimes been called the “Hotel California” effect, wherein customers find themselves unable to leave a cloud provider because of the costs associated with doing so and are stuck in an undesirable situation.
The investigation in the UK puts a spotlight on a much wider issue facing business worldwide around how to understand, track and control their cloud expenditures.
How Businesses Can Reduce Egress Charges
Businesses can reduce egress charges through various methods such as optimising data transfer and analysing data usage to assess and estimate how much they might be charged. Although, this can become quite technical and time-consuming because the fees are not typically fixed.
Another way to reduce egress charges would be to leverage direct connect cloud services, such as AWS Direct Connect, Azure ExpressRoute and Google Cloud Interconnect.
These services, which are available directly from cloud providers or third party providers, use a direct physical connection from the provider’s network to an on-site network, eschewing the public internet. Utilizing a private connection reduces egress charges, safeguards data more effectively and provides a more reliable network experience.
And although they may appear more expensive than using the public internet, in some instances, an internet bypass solution can save up to 30% on egress charges.
And here’s where it gets more interesting. According to recent research, there is a breakeven point for businesses in adopting an internet bypass solution that occurs at approximately the 25Mbps mark for each of the three major cloud providers.
Essentially this means if your company is exchanging more than 25Mbps with your cloud presences, or in price terms, spending more than $700 per month on internet egress fees, then the move to a private network starts to pay for itself.
The Power of Network Automation
Some businesses may be put off by the additional network management and complexity that comes with adopting a direct cloud connect service, especially if you are reliant on multiple cloud providers.
Software Defined Cloud Interconnects (SDCI) platforms offer a more flexible way for businesses to privately connect their on-premises network to a cloud provider. As the name implies, these platforms leverage Software Defined Networking (SDN) technology to give businesses the ability to create their own private network connections to the cloud.
Because SDCI platforms are pre-integrated with public cloud providers, a lot of the heavy lifting with network configuration and management has already been taken care of. This means that businesses can manage multiple private connections to cloud providers through a self-service portal, turning connections up and down as they need to meet the needs of their workloads.
By moving to this PAYG model for their cloud connectivity, businesses can take further control over their cloud costs by only paying for the bandwidth and services they use.