Cloud's Big Caveat: Runaway Costs

It's Friday, and as the software testing team heads home for a three-day weekend, they forget to turn off a 250-server cluster they've been renting from a public cloud infrastructure vendor. The cluster doesn't have a job to run, but it still racks up a $23,400 bill, 10 times what was planned. "It went from $2,300 to $23,000 so quickly," the testing team leader explained when he got back.

It's a true story recounted by a software company CEO, and it points to a major concern that would-be cloud buyers have: runaway costs. Sixty percent of companies using or evaluating cloud computing services are very concerned (22%) or concerned (38%) with the risk of runaway costs, finds the 2012 InformationWeek Cloud ROI survey. The reason for overrun could be error, mismanagement, or even an attack such as a distributed denial of service, which floods a website with information requests.

Cloud computing is a relatively new tool for IT--Amazon really launched the modern infrastructure as a service concept with its beta service in 2006. The management tools and IT practices used to control it show that inexperience. Also at many companies, cloud infrastructure is in a small-scale pilot that doesn't justify much spending on management tools, so the tool is a spreadsheet of what employees have said they plan to use. The technical term for such a system is "deploy and pray."

A manager might know how many employees have created Amazon Web Services accounts, but even that can be tough to know, since departments can spin up capacity just by providing a credit card. Even if employees are diligently reporting planned use, they can get tripped up by unexpected fees. If marketing has been accumulating tons of data from a new promotion and decides to download that cloud data to the in-house data center at the end of the month, that could set off Amazon's 12 cents per GB download charge, and 10 TBs runs up more than $1,000 in unexpected costs. Or a project manager who had been using a high-memory, double extra-large server four hours a day runs over to 7.5 hours a day, and the project bill hits $9,120 instead of $4,560.

Cloud managers in most cases have no real time accounting system tabulating charges throughout the month. Fifty-three percent of companies using or evaluating cloud say they use or plan to use monthly reports, our Cloud ROI survey finds. And that bill looks a bit like a household utility bill--some account numbers, categories, and total units of usage, but not a granular accounting to find the culprits for overcharges. Just over a third use in-house monitoring system; existing data center management systems are starting to offer more options for managing public clouds. Just one-fifth of companies use an alert system such as text messages, and 31% don't know how they will prevent cost overruns.

Cloud computing started with the idea of simplicity--a flat rate for on-demand computing infrastructure, delivered over the Internet. But as our four-part series on cloud computing pricing shows, pricing has gotten increasingly complex as the vendors and product variations grow. But even if companies get past that pricing complexity to pick the right vendor at the right price for them, IT faces a major problem of getting clear visibility into how the charges are run up.

But IT doesn't want to slow down cloud computing's use with a lot of administrative controls and approvals, so that creates another tension. One of the major benefits of cloud computing is speed--a researcher can launch a virtual server in minutes to pursue a new products idea, rather than waiting weeks for an IT team to buy and provision a conventional, physical server.

For companies in the early stages of using cloud computing, the reality is that they can probably get by with a good spreadsheet and regularly polling employees. But that becomes unworkable the larger the cloud adoption gets.