Report: Cloud cost control: expense management and auditing for SaaS and beyond

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SaaS
Cloud cost control: expense management and auditing for SaaS and beyond by David S. Linthicum:
Today’s Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS) offerings enable near-instant productivity and capacity. Businesses, however, have little visibility into or control over their cloud solutions’ true cost.
Cloud computing allows lines of business to self-provision tools, often without IT’s knowledge. The result is an increase in localized productivity. But provisioned systems are often redundant, contracts are poorly optimized, and businesses are unable to manage or audit the lifecycle and usage of these services. They also lack the data and clout to negotiate more favorable terms.
Cloud computing may put unprecedented power into the hands of business users, but the processes for centralizing management and auditing distributed resources are not new. The challenges that businesses face today are similar to those telecom expense management faced 10 years ago. Considering telecom’s best practices and tool sets can help us develop methods and techniques that maximize the benefits of the emerging cloud computing space.
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Is AWS offering a better exchange rate than your credit card?

Amazon Web Services recently announced that its customers who pay by Visa and MasterCard credit and debit cards can now be billed in their choice of 11 non-USD currencies. AWS claims that this could simplify conversion tracking for accounting departments and potentially yield a better rate than their current cards are providing. Amazon advises checking the latest credit card statement against the AWS Billing Console Dashboard.

The choice of currency when using a credit card abroad is becoming more familiar. When paying a hotel via credit card, you may be offered the choice of paying in your home currency or in the local currency. You then have a dilemma – who will offer the better rate, the tourist hotel or your opportunistic credit card provider Enter the same dilemma, but for the cloud.

Strategic Blue recently manually collected the current AWS forex rates buried within the AWS web console, together with the previous end of day mid-market rates from xe.com. When we divide the prevailing AWS rate by the mid-rate, we expect a ratio above 1 (otherwise AWS loses money). The closer the ratio is to 1, the better the deal for the customer.

Our initial finding is that the average “spread” that AWS is charging is a very modest one percent, based on the 7 days of data that we collected. Contrast that with what credit card providers frequently charge, from two to three and a half percent, and there is a potential for significant savings.

There is however some variability around this figure. The plot below shows the average spread (low is good for the customer, high is good for AWS), with the error bars indicating the maximum and minimum values we have seen during our 7 day collection period.

ErrorBarFXPlotSource: Strategic Blue Pricing Insights

This variability is likely caused by AWS setting its FX rate at a different time of day. For most of these currencies, there should only be tiny differences between reliable Forex data sources at any given time. As AWS may not update its rates within day (the company says it updates “daily”), it may be that a customer might get a surprisingly good, or a surprisingly bad rate, depending upon which way the FX rate goes after AWS fixes its rate. Ideally, AWS would update its FX rates immediately before issuing its invoices. This would be practical for the end of month invoicing run, but not for Reserved Instance purchases which can be invoiced throughout the day.

The alternative, of course, is to leave this FX conversion in the hands of your credit card provider. However, if AWS maintains its spread at approximately 1.07 percent, going through AWS will yield the best rate with few exceptions.

The primary concern then becomes whether these rates are here to stay, or whether they are more of an “introductory offer.” Though it says it worked hard to provide competitive rates, AWS has not explicitly stated how it comes up with its rates. Are we going to see an upward trend on this spread? Could this be the reason that Amazon allows you to easily revert back to U.S. currency in the Dashboard at any time? Is this another data point that needs to be monitored by your cloud broker tools?

TrendAnalysisFXSource: Strategic Blue Pricing Insights

Data from the last seven days does indeed show an upward trend. Six out of 11 currency pairs had a significant upward trend on the spread charged by AWS, four had a slight upward trend, and only SEK showed a slight downward trend. This could be due to a short-term trend affecting the USD (which then shows up in all the exchange rates). Let’s hope so, because right now, AWS is offering its customers a pretty awesome exchange rate.

A cloud startup gets transparent on pricing

Ben Uretsky, CEO of cloud computing startup DigitalOcean, came on the Structure Show this week to talk about how his company lures customers in the shadow of Amazon Web Services and Google.

Is Verizon’s Cloud Pricing Too Complex to Succeed?

It’s not that I have a one-track mind pointed directly at cloud computing, but week after week the paradigm dominates discussions around cutting-edge infrastructure. This week, for example saw several new players — some of them rather large companies — step into the cloud ring with entirely new platforms. LongJump announced its all-inclusive PaaS offering; Computer Sciences Corp. said it will be launching an enterprise- and federal-grade cloud; Contegix introduced Zeus, its managed-hosting-style cloud; Akamai outlined its cloud strategy; and Tibco previewed its upcoming cloud application platform, Silver. But it’s Verizon Business, which took the wraps off its cloud service called, fittingly, Computing as a Service, that has me asking the most questions.