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How to Make Cloud Pricing More Transparent

This article on “How to Make Cloud Pricing More Transparent” is originally published at https://www.eweek.com/cloud/how-to-make-cloud-pricing-more-transparent

 

eWEEK CLOUD PERSPECTIVE: It used to be nearly impossible to compare cloud costs because different providers typically have their own nomenclature for cloud features, define services differently and offer different tiers of services that don’t line up with one another. Forget apple-to-apple comparisons, cloud price bake-offs were more like contrasting apples to peach cobblers. But help is here.

 

Cloud has inspired almost as much evangelical fervor as open source computing, particularly in the heady 2000s. The advent of cloud computing seemed to render traditional enterprise software vendors as out-of-date as telegraph operators. The monolithic process of releasing software every 18 months wasn’t fast enough for business, running your own servers became as fashionable as generating your own electricity, and the expense involved restricted technology access to the wealthiest businesses.

 

Cloud computing represented a true democratization of enterprise IT, allowing small companies to compete with bigger rivals without breaking the bank to buy servers, storage and software. Tens of millions of dollars for the right to walk onto the playing field were no longer required.

 

The other promise of cloud computing was of a more transparent and equitable business model.

 

In one of my first interviews as an IT reporter, in 2003, I asked the chief technology officer of a large health IT organization to define enterprise software. “It’s when they can’t tell you the price of the software upfront,” he said.

 

Sure, this lack of transparency reflected the complexity of the forecasting applications on offer, but also showed that the dominant sales model gave more power to vendors than customers.

 

The emergence of profitable cloud-native businesses both threatened existing business models and inspired business transformation. The agility and innovation made possible by cloud computing inspired many businesses to move their IT stacks from their own server rooms or data centers to the cloud.

 

 

The law of universal gravitation as applied to the cloud

 

By 2020, however, the low-hanging fruit has been picked. Businesses have reaped the benefits of relatively lower costs and more frequent innovation. And with the lion’s share of IT spending at most companies moving into the cloud, cost – and cost transparency – matters. Yet, the transparency promised by the cloud revolution has largely failed to materialize.

 

As was the case with the previous generation of technology, obfuscation isn’t a bug, it’s a feature, and it begins with Newton’s Law of Universal Gravitation. Pricing structures at legacy cloud providers punish moving data from one cloud to another. By intentionally making the cost of putting data into their clouds as low as possible, while making it prohibitively expensive to move data out to interact with systems in different clouds—a concept known as data gravity—they are walling in their customers.  This is an explicit strategy to make their clouds “sticky” and keep forecasting applications from moving to other clouds.

 

But the reality is that businesses want and need to operate in different cloud environments for many reasons. Not to mention, who wouldn’t want to cut 10, 30, or even 80 percent of cloud costs if possible?

 

 

 

Newton’s law of motion applied to the cloud

 

It used to be nearly impossible to compare cloud costs because different providers typically have their own nomenclature for cloud features, define services differently and offer different tiers of services that don’t line up with one another. Forget apple-to-apple comparisons, cloud price bake-offs were more like contrasting apples to peach cobblers.

 

There is help available. For one example, Oracle Cloud Workload Cost Estimator is a new tool now available for obtaining empirical cost information. It lets customers assess comparative costs of Oracle Cloud Infrastructure and Amazon Web Services in as close to a real apples-to-apples comparison as possible.

 

The calculator prices not only computing and storage costs, but that of IOPS (data input/output per second), and data transmission out of the cloud as well. That last factor, also known as data egress, is usually a wild card because traditional cloud companies start charging a markup after a given amount of data flows out. So once you hit a monthly target—1GB for AWS, according to the cost estimator—data egress charges kick in. At Oracle the meter doesn’t start until after 10,000 times more data egress—or 10 TB—per month.

 

IT leaders can enter the parameters of proposed workloads and then run their own OCI vs. AWS comparisons. In the end, they may discover that one cloud provider offers services that are closer to Newton’s third law (that for every action in nature, there is an equal and opposite reaction) than to his first

 

 

 

A few examples

 

Cost and performance go hand in hand, especially as software-as-a-service providers rely on third parties to serve their software to customers. Data technology firm Complete Intelligence, for instance, provides real-time risk management and forecasting services for its customers. It needs to know how much it will spend providing that service on an ongoing basis, and also be sure that its customers get the responsive service their businesses need.

 

“For us, it’s the entry cost, but it’s also the running cost for a cloud solution. And so that’s critically important for us. And not all cloud providers are created equally,” said Tony Nash, CEO of the Houston-based company, which picked Oracle Cloud Infrastructure.

 

Another example of how modern businesses use the cloud is data integration provider Naveego. The company helps customers parse data from a myriad of sources. It cleans the data, deletes duplicates, provides a trail of sources, and then provides a clean golden record of data that is ready for analytics in real time.

 

“To do that, we run instances of our product in multiple availability zones. AWS charges for communications back and forth between those availability zones. Oracle doesn’t, and the cost difference ended up being huge for us. So, we decided to move our research and development, and some production, cloud tenancies to Oracle Cloud,” wrote Naveego CEO Katie Horvath in a blog post.

 

The company saved 60 percent on its costs since moving to the Oracle cloud, while being able to do more research and development. “Oracle’s claims that Oracle Cloud Infrastructure is 65 percent more cost effective on computers have also proven to be true for Naveego,” she says.

 

We’re starting a new decade on an awkward footing, and businesses need technology to help make smarter decisions. They may still want to fail fast, but they will also want to know what went wrong fast, what the fast road looks like to the promised land – and at long last, what it costs to get there. They’ve long known the cost of sending a telegram, and they can finally figure out the cost of using the cloud.

 

Michael Hickins is a former eWEEK and Wall Street Journal editor and reporter.

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QuickHit: 2 Things Oil & Gas Companies Need to Do Right Now to Win Post Pandemic

This week’s QuickHit, Tony Nash speaks with Geoffrey Cann, a digital transformation expert for oil & gas companies, about what he considers as “the worst downturn” for the industry. What should these companies do in a time like this to emerge as a winner?

 

Watch the previous QuickHit episode on how healthy are banks in this COVID-19 era with Dave Mayo, CEO and Founder of FedFis.

 

The views and opinions expressed in this QuickHit episode are those of the guests and do not necessarily reflect the official policy or position of Complete Intelligence. Any content provided by our guests are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

Show Notes

TN: Hi, everybody. This is Tony Nash with Complete Intelligence. This is one of our QuickHits, which is a quick 5-minute discussion about a very timely topic.

 

Today we’re sitting with Geoffrey Cann. Geoffrey Cann is a Canadian author and oil industry expert and talks about technology and the oil and gas sector.

 

So Geoffrey, thanks so much for being with us today. Do you mind just taking 30 seconds and letting us know a little bit more about you?

 

GC: Oh, sure. Thank you so much, Tony, and thank you for inviting me to join your QuickHit program.

 

So my background, I was a partner with Deloitte in the management consulting area for the better part of 20 years, 30 years altogether. I had an early career with Imperial Oil and I’ve spent most of my career helping oil and gas companies when they face critical challenges.

 

These days, the challenge I was focusing on prior to the pandemic was the adoption of digital innovation into oil and gas because the industry does lag in this adoption curve and yet the technology offers tremendous potential to the sector. I see my mission, and it still doesn’t change just because of the pandemic, as the adoption of digital innovations to assist the industry and to resolve some of its most intractable problems. That’s what I do.

 

 

TN: Wow. Sounds impressive. I’m looking at the downturn in oil and gas and the downturn in prices. There have been big layoffs and cost savings efforts and these sorts of things with oil and gas firms. And, typically, a pullback is an opportunity for the industry to re-evaluate itself and try to figure out the way ahead. Are we there with oil and gas? Do we expect major changes, and as we emerge from the current pullback, how do we expect oil and gas to emerge? We expect more technology to be there. Do we expect more efficiency in productivity? Are there other changes that we expect as we come out of this?

 

 

GC: I’m pessimistic about the prospects for oil and gas and it’s driven by this collapse and available capital and cash flow to the industry.

 

When the industry hits this kind of survival mode, there’s a standard playbook that you dust off. And that playbook includes trimming your capital, canceling projects, downsizing staff, closing facilities, squeezing the supply chain, trimming the dividend. Anything that is considered an investment in the future is put on hold until the industry can get back on its feet.

 

And this is the worst downturn. I’ve lived through six of these. This is the worst I’ve seen.

 

Certainly sharpest, fastest, and deepest and coupled it with the over excess production in the industry. When the industry comes out of the other end of the pandemic, what we’re going to see the industry do is devote its capital to putting its feet back on the ground and getting back into its normal rhythm. But what that means is all the changes that our potential out there are likely to have been set aside in the interim.

 

 

TN: If you were to have your way, and if you were running all the oil companies, and they were to make some changes in this time, what would those changes be? What would some of those key changes be?

 

 

GC: There is a gap between what other industries have discovered, learned, and are adopting, and where oil and gas is at. That gap is, first, needs to be addressed by raising the understanding and the capability and the capacity in oil and gas to deal with the possibilities presented by these technologies. And so there’s task number one that oil and gas companies can absolutely do even during a downturn. Just train people and get them across the newer concepts or newer ideas.

 

A second possibility is to embrace the foundational elements that have proven to be the key success factor for so many other industries. One of those would be cloud computing. The adoption of cloud-based infrastructure, moving data into the cloud, is not costly, it generates an immediate payback because cloud infrastructure is so cheap, and it puts the company into a solid position for when the normal day-to-day running of it gets back in gear, the investments it may have been making an in digital innovation can all now be brought back into stride because this foundational technology will be in place.

 

So those are the two things that I would do: Get people ready for the journey ahead and put one of these foundational steps in place to get ready.

 

 

TN: Those are really enabling technologies, right? They’re not substitutional. They still need people, they still need engineering skills. It’s really just enabling them to do more, right?

 

 

GC: Correct, yeah. And covering off that gap incapacity is the key thing. Somewhere down the road, there will be the adoption of artificial intelligence and machine learning tools to improve the performance of the business. Those are coming and they’re coming very quickly. We’re not there yet. The job is where the industry needs to move forward, and as I see those are the two steps.

 

 

TN: Do you see this as kind of a generational thing? Is this five-ten years away? Or is it an iterative thing where you see it changing bit by bit for each year? How do you see this on the technology side for them?

 

 

GC: Well, in my book, I actually sketched out a way to think about this problem. And I call it the fuse in the bang. The fuses, if you think about Bugs Bunny cartoons. Bugs Bunny and it would be a comically large keg of gunpowder. It’ll be jammed into the back of your Yosemite Sam. As they go racing off, they leave a trail of gunpowder and Bugs would just drop a match in it. It always ended in a comically large but not very terminal explosion. So imagine that the length of fuse, that trail of gunpowder is how much time we’ve got and the size of the keg of gunpowder is how big the impact is going to be. In my book, I could actually go through some ways to think about this.

 

But you have to think about it in these terms, oil and gas is principally a brownfield operations business. In other words, most of the assets predate the Internet Age and they’re continuing to run and they run 24/7, they’re extremely hard to change, and so as a result, the idea that we can quickly jam innovation into these plants is just nonsense. It’s not going to work. So it’s going to take quite a long time.

 

The generation is on two fronts. One is the technology is legacy and therefore it has generational barriers to adoption of change. We also have a workforce, which is tightly coupled to that infrastructure and it also has struggles to cope with change. So we have to come across these two generational shifts that have to happen and they basically have to happen at the same time.

 

 

TN: Very interesting. Geoffrey, I wish we could go on for another hour. There’s so many directions we can take from here. So, thanks much for your time. It’s been really great talking to you and I hope we can revisit this maybe in a couple of months to see where the industry is, how far we’ve come along, just with the downturn of first and second quarter, look later in the year just to see where things are and if we’re in a bit of a better place.

 

 

GC: It’d be great fun because this is, you know, as I’d like to tell people, this is not the time to actually leave or ignore the industry. It’s when it goes through these great troughs like this, this is where exciting things happen, so pay attention.