Why Cloud Computing Is Like Gas And Electricity

(cjohnson7 – Flickr)

I happened to tweet a link to an article from The Register the other day regarding the price of cloud based resources in Microsoft Azure going up, which detailed price rises of 11% in the Eurozone countries and worse than that, 26% in Australia. As a result, I ended up having a brief but interesting Twitter conversation with a follower about pricing and “locked in” charges like energy companies offer here in the UK.

The over-reaching point being that cloud computing has an awful lot of variables that dictate the overall pricing. Perhaps we were all a little naive at first in the industry, thinking that Moore’s Law and such would mean a doubling of compute power at half the price at regular intervals and the pricing to continuously fall. Hell, Amazon even tell you (or they did) that the more cloud resources people buy (storage, compute, networking) then the cheaper it will get because of the economies of scale and their bulk purchasing power.

What we never really seemed to factor in back in those days was the volatility of global currencies. I think it’s a reasonable statement to say that most IT pricing is inextricably linked to the value of the US Dollar, and when this goes up and down, pricing around the world for licencing and components tends to change too. As I write this post, Greece’s economy is in the toilet with no sure way to know what will happen next. It may even be possible that other Eurozone countries are close behind, and although I have strong opinions on the Euro, let’s park those for now and concentrate on the topic in hand.

Back to the original point, gas and electricity prices are governed by the free market principles of supply and demand. As the market gets saturated, prices fall. As the market resources becomes more scarce, prices rise. Prices also rise depending on the volatility of exchange rates. Stick with me here, I will get to the point.

When cloud computing is pitched, it’s pitched as being “OK” because it’s now operational expense (OpEx) rather than a large up front capital expense (CapEx), the implication being that this will result in smaller, more predictable bite sized chunks of expenditure over a period of time. This news about Azure pricing going up 26% in the worst case means that any forward budgeting you made on prices remaining stable just got blown out of the water. 26% of anything is a lot of unbudgeted costs to find.

Where does that leave you then? Well it all depends on your business needs, but spreading the risk by using hybrid cloud solutions is one answer. Keep the “Crown Jewels” in your own DC if you can, farming off the less needy systems to cloud provider bit barns. What else can you do? Well if you’re going all in with a cloud provider, whether that’s VMware, Microsoft, Google, Amazon or anyone else, check what your escape route is. What does it cost to move your workloads? How long will it take to get out of the contract? How much time will I need to replicate workloads into the “new” cloud? Do I even have an escape clause?

I don’t profess to have the answers, and in many ways, I’m just thinking out loud. However, seeing this news has made me realise that there was a bigger picture about cloud computing I hadn’t seen before. Had you?