Costs up in the sky, cut from the cloud

There’s a silent shift being made away from cloud services, a trend which 12 months ago had the world convinced of an outsourced future.

There’s a silent shift being made away from cloud services, a trend which 12 months ago had the world convinced of an outsourced future.

As tech evaluations continue to plummet and capital becomes scarce, what was once a big push to host everything in the cloud is being flipped on its head, and offshore services are being increasingly scrutinised and cut to save costs.

The realisation that cloud-hosted services are often too expensive to manage has given birth to new businesses in recent months. Among them is CloudMonitor, a service from tech company Data-Driven, which was built to analyse a customer’s cloud use, said managing director Rodney Joyce.

The firm began as a niche consultancy around three years ago and began to focus on Microsoft Azure products, focusing on data AI analytics.

“During the last three years working with really big customers, we realised that everyone had a cost optics problem. During the build phase, the cost and the running cost of the system was not being considered,” he said.

“Like any financial account that you have, it‘s really important that you monitor what you’re spending. Just like budgeting, you have to make sure that you stick to your budget.”

Mr Joyce said many of DataDriven’s customers were purchasing cloud services from vendors including Microsoft, AWS and Google. “Basically, our customers are moving their businesses to the cloud, buying services from the cloud vendors and it’s very, very difficult to understand if you’re getting business value from monetary spending on the cloud.”

Why it’s so hard to monitor value in the cloud boiled down to several reasons, but “the biggest problem is that cost visibility is very, very obscure in the cloud,” he said.

“In the old days, you’d buy a computer and you would depreciate the computer the next year, but the amount you paid was the max paid,” he said. “Whereas with opex (operational expenses), your costs for the cloud are constantly varying and increasing because every time an engineer is buying something, that cost is going up and no one’s governing that spend.”

The larger the company, the harder it is to justify on-the-ground costs, Mr Joyce said.

“The problem is that in these big organisations, especially if its government, the project teams are making different systems and programs for their customers, but the bill or the invoice goes up to the CFO at the top. There’s no match between this massive list of spend down to the project teams and the business units.”

Nutanix APJ’s chief technology officer Justin Hurst is another cloud skeptic who says Australia had always been “very cloud forward, very bullish on cloud”.

“The rest of the world and more or less pulled back from that kind of thinking but Australia is still very bullish,” he said.

Following a recent visit to Sydney, Mr Hurst said it was interesting to see the line of thinking in Australia was beginning to catch up with the rest of the world.

“People are now saying, ‘look, we’ve tried the public cloud, we found the benefits and we found the downsides, and we’ve really realized that it’s a tool and not a destination’,” he said.

Use of the cloud is much like booking a hotel room, Mr Hurst said.

“If I’m taking a trip, I’m not going to buy a house because I’m visiting for the week. The cost of that doesn’t make sense,” he said. “(But in a place I wish to live) it makes much more sense to buy a house to build something to be bespoke in a way that meets my needs. And so business is no different.

“What I see is a sort of a mental model not aligning when people decide to use the public cloud as if it were outsourcing and getting out of the data centre business which is effectively saying, ‘look, I want to move into a hotel, I’m gonna live the rest of my life in a hotel and I’m willing to pay that premium’.”

Likening it to real world application, Mr Hurst said once a start-up was up and running, they should reconsider their cloud services and whether it would be most cost efficient to set up their own software.

“Once you get to a steady state of operation the cloud becomes a drag on revenue,” he said.