In this insight we are exploring the ways in which you may be hit with unexpected costs, the potential consequences, and how to avoid the risk through transparent, fixed pricing.
The potential problems with cloud pricing
There are two primary ways in which unexpected costs occur: price hikes and complex pricing models.
Price hikes
Significant price increases have been a clear trend over the last year amongst some major cloud hosting providers. While it is common practice for prices to rise incrementally in line with inflation, these reported price hikes go above and beyond what customers would expect. Our cloud consultants regularly hear from customers hit with unexpected price rises upwards of 30% in a year. The providers will often offer them a ‘deal’ of a slightly lower increase if they sign a 3 or 4 year contract, leaving them feeling trapped between two undesirable outcomes, with increased costs either way.
Complex pricing models
In addition to price hikes, many providers utilise unclear, complex pricing models, with hidden costs for additional bandwidth, API requests, or data migration. The monitoring tools to see your resource usage are often difficult to find, leaving you, the customer, with a lack of oversight. With these models, you can easily rack up costs and be hit with a large bill without realising it, wreaking havoc on your budgeting.
The consequences of unexpected cloud costs
Unexpected costs can impact you in a number of ways.
Decrease in profits and revenue
A sudden increase in cloud hosting costs can make the difference between being under or over budget for a year, and the difference between making a profit or making a loss. For many organisations, an increase in outgoings will mean cutbacks elsewhere to ensure business continuity. In the most serious of cases, an unexpectedly high bill could even cause an organisation to cease operations.
Unpredictable and unstable costs
For many businesses, margins will be tight, so budgets will need to be precise, and expenses kept regular and predictable. When you are unsure what you will be paying for your cloud services each month, this makes it very difficult to accurately budget and forecast. If you have long-term expenses to plan for, for example launching a new office, or upgrading equipment, this will be near impossible without an accurate budget.
Operational disruptions
If your expenses in one area, cloud hosting, are higher than predicted, you may need to scale back in others, re-allocating funds and resources. This can lead to delays in projects, reductions in service and/or quality, and disruptions in operations, ultimately costing you even more financially.
How transparent, fixed pricing is the solution
It is clear that unexpected costs are an issue you should be looking to avoid, so what is the solution?
When choosing a cloud hosting provider, you should ensure that they are transparent about their billing structure. When delivering their proposal, your provider should be clear about exactly what is included in your price, the price of each element (e.g. management hours, backups, or server space), whether these prices are fixed or usage based, and your expected monthly and yearly costs. Where elements are dependent on usage, the provider should either monitor usage for you and regularly keep you updated, or provide an easy-to-access tool to monitor your own usage and costs. This will allow you to understand and predict your billing, avoiding any surprise bills.
It is also important to ask about their policies on price increases. For ongoing contracts, you should expect there will be some increases, due to inflation and hardware and software cost increases for the provider. Is your provider upfront about potential future price changes in your contract? Ideally your provider should cap any changes, with the exception of costs rising outside of their control. This will protect you against sudden, unexpected price hikes.
How we solve the pricing problem
At Hyve, we operate with a fully transparent pricing model. Our solutions are tailor-made for each customer, with your platform optimised to maximise your budget. For more information on the optimisation process, take a look at our insight ‘How a managed service provider optimises your infrastructure for maximum efficiency and performance’.
After an initial consultation with our experts, you will receive a unique proposal, with all costs clearly explained. With our set prices calculated in advance, the price you receive in your proposal is exactly what you will pay. Unlike other providers, we have no hidden costs, and guarantee no sudden price increases on our end.
What next?
If you are currently experiencing unexpected costs with your hosting provider, or simply want to discuss the cloud solutions available within your budget, contact our cloud experts today. Fill out our contact form today and a member of our experienced team will get in touch.
