Saving money on cloud services may sound like simple goal but flat-out refusing to pay the bill as a negotiation tactic might be a bridge too far.
It came out recently that under Elon Musk’s ownership, Twitter reportedly stopped paying for Google Cloud services it uses to augment its own infrastructure as the social media platform angles for lower pricing on its contract. Earlier this year, Twitter also reportedly delayed payment to AWS for its cloud services, again to cut costs.
Such an extreme approach to reduce cloud computing spending will surely get the attention of a service provider. Musk’s influence, power, and control over a large enterprise are factors, obviously, in such a decision. That does not mean it is a wise approach.
“I wouldn’t necessarily say it’s the smartest way to conduct business,” says Eli Katz, director of cloud and consumption services with PKA Technologies. Finding the right balance of technology that an organization needs to make purchase decisions, he says, can help avoid going down the road of nonpayment for services.
“To stop paying a bill puts yourself in a position of immense risk,” Katz says. When other types of payments are not made, vehicles and equipment might be repossessed; fees, fines, and interest can increase; and service can be summarily shut off.
Finding a Tempered Approach
It is possible for a company to realize it is paying for cloud services it underutilizes or does not use and wants to cut back. Katz says companies might overprovision, buying ahead of their actual demand because they have the cash at the time. “Use it, depreciate it, and hope they see a 100% return on that investment. More often than not, they fall short,” he says, “because they had the money available, they bought more than what they needed, but they never actually end up using the entirety of a technology.”
A company may find itself spending money and without being able to align that spend to a line of business and see value out of it, Katz says. The other side of that coin, he says, is a hope that a sales rep or technical engineer works with an organization to pair a technology back to a business goal instead of selling the latest, shiny resource on the shelf. “Why are you looking to make a change now? Why are you looking to make a purchase? What has changed in your business?” he asks. “What is the value the business is looking to get out of an investment approach?”
Hyperscalers in cloud continue to face questions about the cost and reliability of their services, especially in light of the brief AWS outage on June 13 that affected Southwest Airlines, McDonald’s, and The Boston Globe along with others. Further, some organizations face regulatory requirements that preclude the use of the cloud for certain datasets and transactions, Katz says. “There’s really no one-size-fits-all answer because every manufacturer, every organization, every company has different requirements.”
There can be times when a cloud-first approach does not make sense for organizations. Katz says his company worked with a client whose dataset is very transactional with lots of changes and database read-writes. “We ran an assessment for them and going off to the public cloud was going to be eight times more expensive a month than keeping it on prem.”
Determining if applications and code are modern and cloud-ready can be ways for organizations to mitigate some headaches and potential costs when it comes to getting value out of the cloud, Katz says. One of the biggest tensions that affects the cloud sector currently is cost, he says.
Much of the market is pushing toward a cloud-first world, but the economics could become challenging in the future. “At some point in time, the cost of doing business in the cloud is going to be exponentially higher, usually, than if you were to buy a depreciating asset and then kick it to the curb,” Katz says. “With economic uncertainties, how are we going to support, grow, protect the business if we’re still spending so much on a cloud spend without being able to ensure there’s going to be revenue and profits coming in to support all of those goals and needs?”