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Summary

The overwhelming rise of on-demand, pay-as-you-go subscription services for every requirement of a modern digital life has revolutionized the speed and convenience of adopting new offerings. However, that frictionless, consumer-friendly purchasing model can result in unwanted costs if sensible governance isn't in place.

Don't leave too much mustard on the plate

There is no doubt that the move to on-demand subscription services is under way in every industry. The question is no longer "if" a migration of major services to the cloud will occur, but "when" and "how." While the benefits of increased agility and reduced capital requirements are accepted, there are a couple of small, often overlooked cost aspects that need consideration and appropriate governance.

"Bill shock" is a concern commonly raised by Ovum clients when discussing an impending migration of in-house applications to the cloud. Like the teenager running up a thousand-dollar phone bill keeping their holiday romance alive, several organizations have found their monthly cloud consumption bill to be orders of magnitude higher than anticipated. While these situations are undoubtedly real, they stem from a failure of governance rather than an implicit problem with the cloud model itself. Standing up resources such as compute or storage instantaneously is a key attraction, but without a strong linkage back to the accountable business unit's budget, it can result in costs ballooning. The trick is to ensure that cost control doesn't impose an excessive drag on processes, reducing agility and thereby undermining the very characteristic that makes the model attractive in the first place.

Applying appropriate governance to the resource creation process is one half of the cost containment challenge, but it is just as important to manage the de-provisioning of unwanted resources.

When the Englishman Jeremiah James Colman – the owner of the eponymous Colman's Mustard company – was asked how he made so much money from a humble, low-cost table condiment, he is reported to have replied, "I make my money from the mustard that people throw away on the sides of their plate." He was making the point that when considering ubiquitous utility products, small amounts of extra consumption can add up to a significant sum.

More than 150 years later, a similar scenario is playing out in the economics of subscription service providers across multiple industries. The quicker and easier it is for customers to sign up for online services, whether that be compute, data storage, music streaming, or television channels, the greater the uptake will be. Yet for a significant percentage of users, those pay-as-you-go services are retained long after they have ceased to provide value. Subscription TV packages that are rarely watched, data storage plans retaining files of no further value, or virtual machines instances idling for a project that has closed down are artifacts of the same problem. In many cases, the smaller the regular monthly payment, the more likely the charges will be overlooked – the digital equivalent of JJ Colman's mustard left on the plate.

Embedding routine processes that check and decommission resources no longer required, wherever possible automatically, will ensure that the organization accrues maximum benefits from the pervasive shift to the as-a-service paradigm while containing costs.

Appendix

Further reading

"The perceived risks of cloud depend on where you are standing," IT0007-000889 (May 2016)

"'Consumer-grade' is the new black," IT0007-000886, (May 2016)

"For the public sector, custom solutions should be the last resort," IT0007-000863 (January 2016)

Government Cloud: Where Are We Now? IT0007-000832 (August 2015)

Author

Al Blake, Principal Analyst, Public Sector

al.blake@ovum.com

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