Usage-based billing to disrupt cloud market, says cloud provider

Out-Law News | 08 Sep 2014 | 5:18 pm | 1 min. read

UK businesses are only using 51% of the cloud-based server capacity they buy, a survey of 200 chief information officers (CIOs) has found.

Cloud customers buy additional capacity to ensure that services are not disrupted if there is an increase in demand, but cloud provider ElasticHosts which commissioned the survey said this "over-provisioning" is costing businesses more than they need to pay for cloud services.

Nine in 10 CIOs view buying extra cloud server capacity as "a necessary evil in order to protect performance and ensure they can handle sudden spikes in demand", ElasticHosts said in reporting the results of the survey. However, 88% of respondents revealed that their company often still "sacrifice peak performance" in an effort to control costs.

"Essentially, companies are paying for space they are not using half the time because they are running with extra headroom so they can handle peaks in performance," Richard Davies, chief executive of ElasticHosts, said. "Yet at times of high demand, when arguably it is even more important that everything is working smoothly, web applications or websites will run slowly or even fail because they do not have the amount of server capacity needed."

ElasticHosts said that only 14% of the CIOs it surveyed run a "completely automated cloud server infrastructure", with the remainder of companies managing cloud storage supply and demand issues manually.

Technology has developed to allow for the automatic adjustment of cloud customers' capacity needs and means that a new usage-based billing business model can be supported by cloud providers, ElasticHosts said. This will lead to disruption in the cloud market, it predicted.

“Companies are still thinking in terms of the old world computing model, where over-provisioning was rife and expected,  so many have shifted these expectations into the new world of cloud," Davies said. "But as the research shows, and as half of respondents recognised, cloud as we have it today really isn’t truly elastic – it does not expand and retract automatically to meet demands, and it is not paid for like a utility, based on consumption. However, with next-generation cloud and containerisation technology, change is afoot."

"Why would you ever choose to pay for capacity you aren’t using, sacrifice performance, and eat up your systems administrator’s time, when you don’t need to? Soon companies will be asking themselves the same thing, which will mark the end of capacity-based billing," it said.