What are the Cloud Cost Models?

What are the Cloud cost models? As a developer, software enthusiast, Cloud engineer, or even just a business, you might have wondered how cloud services charge you.

First of all, they are dynamic in nature. For instance, the value-based models are driven by demand, and the cost-based models by the supply structure.

These are basically pricing plans for when you wish to get cloud services. More and more companies are taking advantage of cloud-based services for their business operations.

The organization can access large computing services or tools via the internet. That is an investment companies make to have easy access to such resources.

However, you will be careful using such third-party services as the pricing model for cloud services may vary upon your usage. To plan your pricing scheme, service providers offer you cost models.

In this article, we will discuss the meaning of cloud cost models along with their types and components.

What are the Cloud Cost Models Exactly?

Cloud cost models lay down the foundation for how much you will pay based on the services you choose to have access to. They might include storage or computing power.

They are dynamic pricing models to help you make informed decisions about using cloud services efficiently. They tell you how to plan out investing in such services that are more resourceful and cheaper.

Cloud computing pricing models are flexible so that customers only pay for the services they choose as per their needs.

There is no direct way for cost reduction in cloud computing otherwise. Not enough people are aware of the several pricing models available for cloud computation.

Recommended Read: The Future of Cloud Application Development: 2024 Insights

Three Main Components of Cloud Cost Models

We have listed the main three components of the cost model in cloud computing that determine the service cost:

Compute Cost

This component includes services charged for using VMs (virtual machines), containers, or functions without a server.

Cloud service providers offer combinations of services including compute instance types each compatible with a distinct hardware set, memory capabilities, and graphics.

The subscribers only pay according to how many instances they used, what kind they were, and the time duration.

Networking Cost

The networking cost is associated with functions like data transfer between distinct zones, and even the cloud environment services.

Under this, the pricing policy follows the amount of data transported within the cloud services. However, an additional cost may be charged for visualized network services such as gateways, IP addresses, and more.

Storage Cost

Storage cost, as the name suggests, is for storing data in the cloud server. This cost majorly depends on the data and the storage type.

It can be imposed by cloud providers for managing and storing the data within the infrastructure. Customers will be paying for the full volume of data storage and management.

It can even include data storage in object storage solutions such as Amazon S3, Google Cloud Storage, and Microsoft Azure Blob Storage.

Must Read: Why has Cloud Computing changed the way Companies Budget for Software Solutions?

What are the Cloud Cost Models: The Main 5 Types

When talking about cost model in cloud computing, there are a variety of them targeting different businesses or industries, and their needs.

These pricing models help in making strategic decisions where organizations only pay for the services that are useful for them. The main purpose of such cloud cost models is to break down the services in order to minimize the cost.

Here are major 5 types of cloud computing pricing models:

Subscription-Based Model for Cloud Computing

This is a prepayment model. The clients pay charges in advance for a specific package of services over a certain time duration. One thing about this model is that the longer subscription duration lowers the cost.

This a Platform as a Service (PaaS) and Software as a Service (SaaS) model. Under this package, you will get several hardware and software components.

Pay-As-You-Go Model For Cloud Computing

Under this model, customers pay as per the services they are using. It all depends on their consumption of certain services.

This pricing model for cloud services may include services such as power computation, storage, networking, and any other resources available on the server.

You have the flexibility to scale your resources as you need them and only pay for those.

Reserved Instances Model For Cloud Computing

This is a more ideal cloud cost model for organizations. As businesses use cloud services for a longer time duration, for example, one to three years, as per their requirement.

Under this, the discount will be higher if the commitment period is long and the advance payment is huge.

You may find that the discount percentage can go between 50% and 75% even, which is a great deal.

Spot Instances Model For Cloud Computing

When hit with the question “What are the Cloud cost models?”, we can best explain to you with this type of costing model.

This model is categorized by the components such as value, demand, supply, and actual usage of the server.

This might be one of the best economically strategic options as it may offer up to 90% discounts compared to others. But, it comes with a drawback that spot instances can be interrupted at short notice.

AWS Savings Plan Model For Cloud Computing

AWS Savings Plan allows an organization to commit to some usage in return for lower prices in comparison to the on-demand rate.

In this regard, commitment refers to a pre-defined amount of hourly spending on Amazon services.

AWS provides three types of Savings Plans:

» Compute Savings Plans applies to all Amazon compute services

» EC2 Savings Plans apply exclusively for Amazon EC2

» SageMaker Savings Plans apply exclusively for use with SageMaker usage.

Within this model, there are three kinds of payment options:

No upfront

This option requires one to pay monthly, based on actual usage.

Partial upfront

One has to pay over half of the contract upfront and pay the rest every month.

Full upfront

One has to make a full upfront payment for the commitment.

Related Read: Top 7 Cloud Development Platforms to Consider for Your Project in 2024

What are the Advantages of Cloud Cost Models?

Here’s why the cost model in cloud computing is beneficial for you:

Pay-as-you-go flexibility

Rather than paying for expensive hardware upfront, you only pay for what you use.

By doing this your costs scale up or down according to actual needs. It helps you avoid overpaying for such services.

Predictability of costs

Since most service providers' prices are clear and transparent, it's far easier to estimate, calculate, and predict most of the expenses.

It also helps with budgeting and ensures that you can avoid any unwanted expenditures.

Less hardware costs

It means that with cloud services, you are no longer investing in any sort of physical servers, storage, and data centers.

You save both equipment technology and maintenance resources all in the same server without paying extra.

Scalability without upfront investments

Whether it be the growth of your business or occasional surges in demand, the cloud model scales resources in the blink of an eye without requiring large initial investments.

Operational Efficiency

As modern technology thrives, more cloud providers will be handling the infrastructure management overall.

You won’t have to waste your time in maintaining hardware or troubleshooting server issues but could focus on more critical tasks while the cloud servers take charge of you.

Speed of Innovation

Since cloud providers make most technologies and features available immediately, innovation adoption will happen more easily without waiting for expensive upgrades of existing infrastructures.

Explore more here: The Role of Cloud Computing in the Internet Of Things (IoT)

What are the Drawbacks of Cloud Computing Pricing Models?

After reading ‘What are the Cloud Cost Model’s advantages’, let’s discuss some challenges it comes with. Here are a few drawbacks regarding these pricing models:

Difficulty in cost predictability

Since the requirements in the cloud service are of a dynamic nature, it makes it difficult for the user to predict costs about the prices of cloud services.

It will be easy to predict the cost for fixed usage patterns, but when there is no fixed pattern of use cases, then it is very difficult to predict anything.

Poor cost management

Cloud cost models do provide various cost-estimating tools to help a user predict or manage costs according to his use cases.

However, these can be a bit complex and tricky for a user to manage these tools. It can cause poor cost management by the uninformed user.

Unexpected costs

Users can have issues related to unexpectedly high costs based on variations in the use pattern of services by the user.

It may also be influenced by a failure to monitor cloud usage or service provider pricing policy changes.

Complexity of pricing models

Cloud cost models are pretty complicated and may hardly be understood by any user.

Because of the complexity, the user will hardly be able to choose the right strategy to minimize the cost while utilizing maximum resources.

Strategies for Cloud Cost Management

Cloud cost management can help businesses maximize their ROI using cloud technology. Despite having the pricing model for cloud services there is still a need for proper management to improve the system’s productivity, and to control the cloud’s costs.

Here are some of the strategies below:

1. Budget control

It includes a budget to be designed for cloud services by the enterprises. It enables teams to be aware of the maximum expenditure limit and not exceed it for a particular project.

2. Auto-scaling

Scale resources up and down flexibly according to application demand. This way you will be paying for extra cloud resources only when there are peaks in the usage of an application.

3. Set Schedule

Most of the cloud services can be scheduled to be turned off during periods when they are not needed since most of the services are not needed all the time.

Services used by a team located in Australia may sleep outside Australian business hours, for example.

4. Tracking unused resources

It's simple to create and abandon resources such as compute instances, storage volumes, load balancers, snapshots, and many others.

To save money, an organization should be allowed to look through the cloud deployment for unused resources and clean up.

Read here: What Describes The Relationship Between Edge Computing and Cloud Computing?

Final Thoughts

We have finally reached the end of this article. We have dismantled the biggest question— What are the cloud cost models?

We have covered the meaning, its three major components, Its types, advantages, and disadvantages.

We have further discussed some cloud cost management points that will help users economically strategize their cloud computing pricing models.

We concluded that cloud models help estimate cloud computing cost-effectively. This provides users with transparency and flexibility for the services they pay.

Furthermore, Arramton Infotech is here to provide you with not only cloud-based services but also any kind of development services from web development to software development and even app development.

We hope you have gained all the necessary information regarding the cloud cost models, and will be making informed decisions for the same if needed.

Frequently Asked Questions

Q. What are the cloud cost models?

Ans: The cloud cost model refers to when you pay for what you use, be it storage, computing power, or bandwidth. Most of them have flexible pricing, ranging from on-demand rates to reserved instances in which, depending on your long-term commitment, you might get lower prices.

Q. What affects cloud costs?

Ans: The following are some of the elements responsible for cloud cost.

» data stored

» the number and type of computing resources used

» data movements between zones

» and other specific services used

The reason many extra costs occur with cloud deployments is underestimation and inefficient tracking.

Q. How do I manage these cloud costs and avoid extra expenses?

Ans: A monitoring of the usage of resources by the enterprise regularly is needed, and scaling up automatically to prevent over-provisioning might help too. You can also use cost management tools provided by the cloud platforms.

Q. Are all cloud cost models cheaper than traditional IT infrastructure?

Ans: Not necessarily. While the cloud services eliminate upfront hardware costs and provide flexibility, over the long term for businesses with steady, predictable workloads, it can be more cost-effective to own and manage their own infrastructure or similar system.