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How to Predict Elastic Cloud Computing Costs for Your Organization

March 6th, 2012 by - 7,044 views

Every day I talk with customers about the benefits of cloud computing—everything from faster provisioning of resources, to reduced management overhead, to flexible workload management. The benefits are becoming well-known; however, when it comes to managing an IT budget, these benefits can also present a challenge. Unlike virtual compute, network, and storage resources, budgets aren’t elastic. Your company’s CFO doesn’t want to see that your nimble IT organization is spending $100 today and $1,000 tomorrow. He doesn’t care that you’ve matched IT resources to your customer’s demand curve. No my friend, what your CFO wants is predictability. Fortunately for you, that’s a challenge we’ve solved with our improved plan pricing for cloud servers.

To demonstrate how this new plan works, let’s build a simple model where your usage changes from one month to the next. In month 1, you need three servers for 400 hours, one server for 80 hours, and two servers for the entire month. For simplicity’s sake, we’ll assume all servers are 1 GB and 1 core. Using Pay-As-You-Go pricing, this configuration of servers on GoGrid would cost you $0.12 for each hour an individual server is running. The math for the first month’s configuration looks like this:

3 X 1 GB server x 400 hours = 1,200 hours used
1 x 1 GB server x 80 hours = 80 hours used
2 x 1 GB server x 730 hours = 1,460 hours used

The total hours used for all servers = 2,740 hours at a rate of $.12 per hour.

Total Pay-As-You-Go cost for month 1 = $328.80.

PayAsYouGo-Cloud

Now imagine that in month 2, you only need three 1 GB servers for the entire month. The math for that configuration looks like this:

3 x 1 GB server x 730 hours = 2,190 hours used

Total Pay-As-You-Go costs for month 2 = $262.80.

PayAsYouGo-Cloud-2

In a perfect elastic cloud computing world, it’s rare for any two month’s costs to match up exactly. You’re probably fine with this flexibility, but I can assure you that your CFO hates it. So the challenge becomes how to make the costs predictable. The answer is simple, and it’s something we’re are all used to: a payment plan that works like a mobile phone plan that includes an estimate of the number of hours you’re going to use and features a substantial savings in return for your commitment over what you’d pay on a pure minute-by-minute basis. Even with the ups and downs inherent in compute usage, most organizations have a general idea how much compute they need in a given month—even if they don’t know the exact number and configuration of servers they’ll have deployed.

In month 1 in the above scenario, the company knows it needs about 2,740 hours of capacity. In month 2, it needs about 2,190 hours of capacity. Assuming that month over month its capacity floats between 2,000 and 2,800 hours of capacity, the company would simply look at our cloud server pricing plans and determine the best fit:

Plan Cost Per Month Server RAM Hours
Professional Cloud $199 2,900
Professional Plus Cloud $399 6,550
Business Cloud $999 17,500
Business Plus Cloud $1,999 37,200
Corporate Cloud $3,999 75,900
Enterprise Cloud $4,999 100,000
Enterprise Plus Cloud $9,999 205,100
Global Cloud $15,999 350,000
Global Plus Cloud $19,999 500,000

Based on the table above, the Professional Cloud Plan seems like the best fit for this company. For $199 per month, the company can consume up to 2,900 RAM Hours. So for each 1 GB server deployed for 1 hour, the company consumes 1 RAM Hour.

In the above scenario using Pay-As-You-Go rates, you were paying:

$328.80 – month 1 costs

$262.80 – month 2 costs

And simply by selecting the right pricing plan, you’re now paying:

$199 – month 1 costs

$199 – month 2 costs

So, by moving from Pay-As-You-Go pricing to the Professional Cloud Plan, you’re saving $193.60 ($591.60 – $398.00) over the 2 months in the example above. Plus, you have “spare RAM Hours” to use: month 1 = 160 hours and month 2 = 710 hours.

Professional-cloud

By choosing the right plan, you get all the flexibility and predictability you need. Month 1 and 2 resource configurations are the same; you can match IT resources to the needs of your org, only now you have a stable, predictable bill and a significant cost savings. Which means you can create a budget at $199 per month—and your CFO will no longer hate you.

Want to test out other scenarios? We have just the tool for you. Visit our **updated** cloud hosting pricing calculator (used in the screenshots above)to estimate your costs and find a plan that will keep you and your CFO happy!

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Kole Hicks

Senior Director of Product Management at GoGrid
Kole Hicks is the Senior Director of Product Management for GoGrid, the leader in Open Data Services (ODS) and committed to delivering purpose-built, non-opinionated Big Data solutions and services for the management and integration of open source, commercial, and proprietary technologies across multiple platforms..

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