Cloud Computing Costs in 2024

Kevin Bogusch | Oracle Senior Competitive Analyst | January 24, 2024

As cloud computing continues to fuel enterprise innovation, business and technology leaders must rationalize its costs beyond the upfront capital savings on hardware and software. Organizations that diligently match their computing power to the cloud use cases they support will be able to avoid overprovisioning compute or storage capacity. Seeking out cloud providers that offer predictable pricing for networking resources will put companies in the best position to optimize their usage and manage their costs while increasing the ROI of their technology investments.

Note that we’re addressing core infrastructure—compute, storage, network. There are many, many services and functions that companies can layer on this framework that will add costs and increase complexity. To begin the journey to optimized IT, it’s best to start by understanding the foundational aspects of the cloud.

What Is Cloud Computing?

Cloud computing provides compute resources and services over the internet or a private network through an on-demand delivery model in which an organization pays a cloud provider for the use of its infrastructure and applications and for the management of the underlying cloud infrastructure.

Key Takeaways

  • Cloud computing incurs both direct and indirect costs.
  • Pricing depends on workload and compute needs, data transfer requirements, and other specifications.
  • Some cloud providers discount their prices based on volume, contract length, and other factors.
  • Decision-makers should be aware of hidden or unexpected costs that could add up.
  • Workload estimator and cloud cost estimator tools can help businesses calculate total cost of ownership (TCO).

Cloud Computing Costs for Businesses

Cloud computing is on track to reach a significant inflection point, according to IDC analysts, who predict that shared cloud infrastructure investments will surpass traditional non-cloud infrastructure spending for the first time in 2023. As more mission-critical workloads move to the cloud, the onus falls on companies to closely manage their costs through the lens of cloud economics.

This point is not lost among enterprises, which, according to the Flexera 2023 State of the Cloud Report, cited managing cloud costs as their top challenge this year, even ahead of security.

Smart technology buyers are mindful that cloud investments should generate value, not just reduce costs. That’s why fiscally responsible business leaders are prioritizing the following:

  • Right-sized usage: No company wants to pay for more resources than they need; that’s likely part of the reason they turned to cloud computing in the first place. Which is why, they’re seeking cloud providers with tech stacks that allow them to minimize overprovisioning. Businesses should look for the ability to consolidate core units within CPUs, control core runtime hours, and auto scale the size and lifecycle state of computer instances between peak and off-peak hours.
  • Continuously optimized usage: To avoid waste, organizations are more stringently engaging in cost optimization practices that continuously resize capacity to exactly meet their needs. This requires visibility and control over cloud infrastructure to terminate idle instances and orphaned storage volumes, reshape instances to match workloads, and quickly downsize oversized instances.
  • Native high-availability, regulatory, and security functionality: Cloud offerings, such as storage, are often tuned for average use cases, so providers may charge considerably more for high-availability configurations of services such as block volume, file, or object storage. On the regulatory and security side, services such as policy management, robust identity management, and monitoring have traditionally been add-ons to a provider’s cloud infrastructure. Now, organizations are seeking out providers that include these capabilities as part of their standard service offerings.

How Much Is Cloud Computing?

By investing in cloud services, most organizations can operate more efficiently and less expensively than they did with traditional on-premises implementations. In fact, per the 2022 Deloitte US Future of Cloud Survey Report, 88% of respondents reported positive outcomes in “increasing efficiency and agility” because of their cloud investments, while 83% cited gains in “reducing and optimizing costs.” Other advantages, such as the creation of new operational processes or workflows, mitigation of business and regulatory risk, and expansion of existing product or service revenue, also ranked highly among participants.

So how can an individual business determine how much cloud computing will cost? The answer depends on its workload and compute needs, configurations, data transfer requirements, and other factors—which means that any company will need to do its research and perform a total cost of ownership (TCO) analysis to establish a meaningful cloud cost estimate.

Baseline estimates for monthly cloud pricing on compute (virtual machine instances and Kubernetes cluster), storage, and network resources.

How Do Businesses Determine Cloud Costs?

Most cloud providers offer workload estimator and cloud cost estimator tools to help businesses analyze and calculate cloud TCO. This analysis should include a review of various cloud provider pricing models and pricing options. For example, some providers offer a discount for a multiyear commitment or higher-volume usage. Businesses should also assess potentially unpredictable or hidden costs, such as early termination or unexpected cloud data egress fees.

Here are five important steps businesses should take to more accurately predict their cloud costs.

  1. Estimate direct cloud operational expenses. The most fundamental expenses for cloud services are the following three core cloud infrastructure areas:

    • Compute: The number of virtual machine (VM) instances or Kubernetes container clusters, processor cores per instance, estimated CPU/hours per month, plus compute shape configuration requirements that delineate processing power
    • Storage: Block volume requirements including those for high performance storage, which involves a lot of mobility
    • Network: Bandwidth use and inbound/outbound data transfer; the use of virtual private network (VPN) connections, load balancers, and network gateways; and analytics
    In addition, organizations will likely want to layer on other services, such as cloud-based application services, integration connectors and API management, data services, monitoring and analytics, and security tools. These could incur direct costs related to, for example, API calls per month, users per month requiring access governance, and resources and events per hour that require monitoring.
  2. Compare pricing models. Consumption-based, or pay-as-you-go, models give organizations the flexibility to scale their cloud infrastructures as their needs change while keeping costs under control. Depending on their requirements, companies may also benefit from pricing models that offer savings through volume purchasing and long-term commitments. Additionally, pricing can be impacted by capacity types that include the following:

    • On demand: Businesses pay for what they use
    • Preemptible: Providers offer highly discounted instances that they can interrupt or terminate when capacity is needed elsewhere
    • Reserved: Businesses book compute capacity in advance
    Each cloud provider packages capacity, commitments, and services differently. As a result, businesses shouldn’t assume they are making a direct pricing comparison without reviewing all the details.
  3. Uncover hidden costs. As organizations start comparing pricing models and options from different cloud providers, they’ll need to dig deeper to understand variable costs and fees, which can significantly increase the risk of a billing surprise. Examples include the following:

    • Cloud data egress fees: Some cloud providers charge exorbitant egress fees for the bandwidth used when data leaves the provider’s network. These fees can add up quickly and effectively lock business data into the cloud environment.
    • Termination fees: Organizations that reserve cloud capacity or engage in use commitment discounts may face termination fees should they wish to adjust their use or end their contracts.
    • Support costs: Cloud providers offer varying levels of support services packaged with cloud tiers. Companies could be caught off guard if the technical support they need adds hefty surcharges to their bills.
    • Regional pricing considerations: Some service providers price their cloud resources according to the geographical location of their systems. For global enterprises, this can introduce significant unpredictability in pricing when they seek to distribute resources worldwide.
    • Usage credit limitations: Buyers should be aware of the specific terms of their volume discount agreements. Some providers might limit how and where resource credits can be used. They may also charge list price for any additional services required if buyers use up their credits before the end of a contract, rather than extending the volume discount.
  4. Budget for implementation and migration. Organizations that are either moving their applications and data to the cloud for the first time or switching to a new cloud provider should factor migration and implementation costs into their TCO calculations. These expenses include specialists to design and optimize cloud architectures, developers to optimize existing applications for the cloud, engineering services to manage the migration of applications and workloads, and support staff to handle post-migration training. Migration services can be handled by a third party or, potentially, by the cloud provider.
  5. Compare TCO with on-premises costs. IT teams will typically compare cloud TCO with the projected cost of on-premises data center infrastructure to determine when it’s time to exit the data center and whether to hang onto some existing assets through a hybrid strategy. As organizations make these comparisons, they should account for the indirect costs of on-premises infrastructure, including licenses and maintenance, the salaries and services needed to support infrastructure management, security, and opportunity costs from deployment backlogs. Granted, some organizations could wind up spending more on the cloud than on on-premises infrastructure, but that’s often because they haven’t managed and optimized their resources properly.

Benefits and Cost Savings of Moving to the Cloud

Moving to the cloud can offer companies many advantages, including performance benefits, process efficiencies, access to advanced technologies, and opportunities for significant cost savings over the deployment of physical servers and on-premises infrastructure. Companies around the world are tapping into the business value and savings of cloud migration in the following ways:

  • Superior performance for the cost: Cloud computing can lead to higher performance for lower TCO by automating and streamlining operations, scaling, and optimizing resources to match demand. This has been true for carmaker Mazda, which migrated its global inventory management system to the cloud to improve its ability to forecast demand for repair parts and accessories. When handled on premises, the workload involved analyzing thousands of order records, which negatively impacted other essential functions that required access to Mazda’s server and storage infrastructure. By moving the process to the cloud, Mazda states that it has realized a 70% performance increase and an estimated 50% lower TCO over a five-year period.
  • Eliminate licensing, maintenance, and upgrade cost headaches: Cloud providers typically bundle the cost of licensing, infrastructure maintenance, and software upgrades into their prices. This not only simplifies accounting, it makes pricing predictable and, notably, removes the burden of managing and performing these time-consuming tasks in-house.
  • Speedier software deployment: With the infrastructure already in place, a company can quickly deploy new software and scale current apps and services. For example, after Körber, a worldwide provider of supply chain software solutions, moved its platform to the cloud, the company reports that it was able to help customers implement its software four times faster than when its system was on premises. In addition, the cloud infrastructure cost 25% less and processed customer transactions 40% faster.
  • Heightened infrastructure security: Through a collaborative security responsibility model in which cloud service providers share cybersecurity responsibilities with their customers, providers can better secure, or harden, their underlying cloud infrastructure resources. The result is a higher level of infrastructure security than can be achieved in most on-premises environments. In addition, cloud providers can typically hire the experts required to safeguard a company’s data more easily than the individual company could. In a related use case, Charles Taylor InsureTech, whose policy administration system contains a wealth of sensitive customer data, turned to the cloud to better detect fraud and questionable activities while staying in compliance with the EU’s General Data Protection Regulation.
  • Faster time to market: Moving high performance computing workloads to the cloud can have tangible business benefits by accelerating product development. For instance, Toyota reports that it was able to dramatically increase the speed and efficiency of car design and development by running complex computational testing and simulations in the cloud, alongside its existing on-premises environment. The company is also better able to test new technologies.
  • Improved IT staff efficiencies: Cloud service providers manage the underlying cloud infrastructure for customers. That means organizations can save significantly on the personnel required to support their digital initiatives, reallocating resources to more high-value projects.
  • Cost-effective scalability: Any growth-oriented organization needs to be able to expand as quickly as possible to support new lines of business, products, or geographic expansions. Luggage giant Samsonite International, for example, turned to the cloud to scale up its Bagsupport application, which handles passenger claims and repairs for damaged luggage on behalf of participating airlines. By moving its app management from its own data center to the cloud, the company eliminated the downtime it had been experiencing. More importantly, the move gave Samsonite the ability to quickly scale Bagsupport from a limited European implementation to a global one without having to invest in additional data center capacity.

Choosing a Cloud Computing Solution

Before evaluating cloud providers and service offerings, businesses should prioritize their key objectives and then consider the cloud service attributes needed to achieve them. This will help narrow the provider field so companies can assess pricing and service options to check whether their TCO calculations are accurate. Areas to consider when evaluating the cloud economics of each solution include the following:

  • Pricing complexity: Organizations should establish how easily they can apply resource credits across different services and accounts to achieve commitment and volume discounts. Prices may vary depending on the resources used for globally distributed workloads.
  • Hidden costs: Identifying and understanding the potential traps of each provider—be it pricey cloud data egress fees, high support costs, or termination fees—will make it easier to judge options more accurately.
  • Capacity waste: With elastic pricing options that allow for more granular allocation of compute resources, companies can more easily avoid paying for unused capacity by matching their workloads to the resources they buy.
  • Cost management controls: Some cloud vendors offer cost management analytics and dashboards that can help companies manage their cloud costs over time.

Take Advantage of Cloud Economics with Oracle

Confusing customers with complex pricing is a surefire way to scare them off. Oracle Cloud Infrastructure (OCI) offers consistent and simple cloud computing pricing with cloud infrastructure built to match the most demanding mission-critical use cases. The economics are clear.

OCI platform services can be easily purchased with Oracle Universal Credits, which can be applied to any service in any region. By purchasing enough credits, customers can qualify for volume discounts. With flexible instances, OCI customers can build cloud setups tuned specifically to their workload needs, ensuring that they don’t waste capacity they’ve paid for.

Further bolstering pricing predictability, OCI charges uniform pricing in every region, including government regions. Additionally, enterprise support is bundled into the base fees for OCI services. Finally, OCI provides customers with powerful cost management and governance tools that enable IT and finance to monitor, control, and report on cloud usage and costs for full financial accountability.

When organizations follow the principles of cloud economics, they’re able to derive maximum value from their cloud computing investments while driving down the costs associated with an on-premises environment. They also can benefit from cloud-powered performance efficiencies, more effective resource provisioning, and quicker software deployments. By using estimator tools to help calculate total cost of ownership, companies can better understand how much they could be saving—and what funds they could redirect to growth and innovation.

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Cloud Computing Cost FAQs

How much do cloud services cost per month?

The cost for cloud services varies depending on the use case and configuration of services. Based on Oracle’s Cost Estimator, examples of the monthly cost for various cloud services include the following:

  • $333 for one instance of a virtual machine running 32 vCPUs and 32 GB of memory
  • $43 for one 1 TB instance of block storage
  • $320 for one instance of Oracle Base Database Service running on a server with two vCPUs, 16 GB of memory, and 256 GB of storage
  • $1,897 for one GPU instance featuring a 2X NVIDIA Pascal processor with 32 GB of GPU memory

How much does a cloud setup cost?

Cloud costs are highly dependent on the compute shape and architecture of the chosen cloud setup. Organizations can fine-tune their cloud setup cost expectations using online cost estimators.

How much does cloud computing cost?

Cloud computing costs depend on how many compute, storage, and network resources are needed. Total cost of ownership (TCO) analysis of cloud computing requires an assessment of those needs, plus additional application, data, security, and integration services.

Is cloud computing more expensive?

Cloud computing enables companies to avoid many up-front capital costs associated with on-premises deployments, but long-term costs vary based on a company’s size, workload, and needs. That said, more than 8 in 10 organizations reported cost benefits after moving from on-premises to cloud infrastructure, according to the Deloitte US Future of Cloud Survey Report.

How much does it cost to move to cloud computing?

Cloud migration costs include both direct and indirect expenses, such as data transfer fees, architectural design, staff, and consulting labor for implementation, as well as hidden costs including downtime and productivity losses during the transition. Costs can range from $5,000 to $500,000 depending on workload size.

How much does a cloud server cost per month?

Cloud server cost structures vary by compute, storage, and network needs. Per Oracle, prices can start anywhere from $54 per month for a virtual machine instance featuring four AMD vCPUs and 16 GB of RAM, up to $1,734 monthly for a Kubernetes cluster with 100 vCPUs and 750 GB of RAM.

Is Google giving one 1 TB workspace for free?

A subscription to Google Workspace Individual includes 1 terabyte of cloud storage.