The cloud is an increasingly critical part of businesses’ operations, but how hyper scalers charge users to move data isn’t always clear, leading to high costs. A Software Defined Interconnects platform can help businesses get control of their cloud spend, explains Neil Templeton, senior vice president of marketing at Console Connect.
Cloud computing has become prominent across industries over the past several years, from small- and medium-sized businesses to multinational enterprises. The reasons it has become a crucial part of businesses’ IT strategy are many, from cutting capital expenses to delivering scalability to increasing accessibility and more.
While its recent rise to prominence was fast and widespread, it’s worth noting that demand for cloud solutions is hardly plateauing. If anything, it will accelerate with emerging technologies such as artificial intelligence, machine learning, and the Internet of Things. Gartner forecasts cloud spending will grow 20% this year. As the analyst firm noted, the cloud is the most significant chunk of IT spending. Given its cost and the critical and complex role that it plays, it’s incumbent upon businesses to identify and track 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 hide the true cost of storing and managing data.
Acknowledging the ‘Hidden Fees’
When businesses transfer data to and from the cloud, they incur fees known as egress charges. Sometimes called the “hidden fees,” these 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’s policies. Other factors can include location, geography, and the data type being moved. Higher volumes of data being transferred from different regions can translate into higher charges.
These assessments 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, limiting their flexibility and causing them to get locked into a provider. These and other pricing practices have prompted regulators in the United Kingdom to recommend the UK cloud market for investigation.
Ofcom Investigation Raises Egress Charge Concerns
The UK’s Ofcom began reviewing cloud services infrastructure in October 2022 to determine how it is functioning. Noting how important cloud computing has become to businesses in all sectors of the economy, regulators raised concerns about aspects and attributes of the market that make it hard for users to change their cloud provider or use numerous providers. Egress charges, in particular, place restraints on users that disincentivize them from moving their data.
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 cannot leave a cloud provider because of the costs associated with doing so and are stuck in an undesirable situation. Ofcom has accused AWS and Microsoft of anti-competitive behavior for employing these tactics and recommended further investigation into the cloud computing market in the United Kingdom.
Whether anything comes of this investigation remains to be seen, but regardless, the situation highlights an issue relevant to businesses worldwide, not just those in the UK. Businesses must understand, track, and control their cloud expenditures.
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How Businesses Can Reduce Egress Charges
One way of reducing egress charges is through optimizing data transfer and analyzing usage to assess and estimate costs. Another way would be to leverage direct connect cloud services, such as AWS Direct Connect, Azure ExpressRoute, and Google Cloud Interconnect. These services use a direct physical connection from the provider’s network to an on-site network, eschewing the public internet. A private connection reduces egress charges, safeguards data more effectively, and provides a more reliable network experience.
Both options can help lower egress costs, but they also come with challenges that may mitigate the benefits. Data optimization and usage analysis can get complex, technical, and time-consuming because the fees usually aren’t fixed. Direct connect services can take time and resources to manage and maintain, especially for companies with multiple cloud providers. However, there is a way to obtain results similar to direct connect cloud services without the hassle involved.
The Power of Network Automation
Businesses will find the most effective way to manage their cloud costs is by leveraging automation through Software Defined Cloud Interconnects (SDCI) platforms. SDCI platforms offer private connections from on-site networks to cloud providers, a more flexible alternative that unlocks the power of Software Defined Networking. With this technology, users can establish a private connection to the cloud themselves.
SDCI platforms are pre-integrated with public cloud providers, which means arduous tasks associated with network configuration and network management have already been taken care of. As a result, businesses can use a self-service portal to manage multiple private connections to cloud providers easily and efficiently, allowing them to scale connections up or down depending on their workload demands.
Implementing this PAYG model of cloud connectivity can help businesses more substantially reduce their cloud costs. Egress charges can be cut by up to 30% using an SDCI platform.
Creating a Better Path Forward
The ever-growing reliance on the cloud, coupled with its expanding price tag, means businesses must be cognizant of all the associated costs and deliberate in selecting a provider. Ofcom’s findings underscore how important it is for businesses to evaluate their options for cloud providers thoroughly. Though hyper scalers make it harder for customers to explore alternative providers that are more affordable and transparent, it is worth it to determine what is the most cost-effective path forward for the long term.
The cloud will continue to be an integral part of business operations for years. Taking action now will help reduce costs and save money over time. With SDCIs, a single interface gives users access to billing, monitoring, security, and administration through a management dashboard. This allows businesses to keep their cloud fees in check, and their flexibility, efficiency, and security put SDCIs above other solutions, such as cloud ports and hubs.
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