Can you project monthly cloud storage costs?
If you’re going to adopt a dog, what kinds of things do you think about beforehand? How big it’ll get, how much it eats, how much exercise it needs - how it will fit your lifestyle. One thing you would never consider is that one month your dog will turn out to be a Chihuahua and the next month it will be a Rottweiler. You expect a certain degree of consistency, a certain amount of predictability.
Well - what kind of animal is your organization’s data storage? Are your needs and performance predictable from month to month?
OpEx vs CapEx
When storing data - like getting a new pet - there are many considerations. On-premise or the cloud? What about making sure your data is sufficiently protected and retrievable? When determining your cloud storage route, perhaps the most important consideration is pricing, and how you’ll pay for it. Figuring how to align your accounting strategy and manage your data costs may lead you to prefer a OpEx solution in the belief that a fixed, predictable monthly fee will save you time, money, and effort. However, OpEx plans are often not as fixed and the costs not as friendly as you hope. Many organizations think they’ve picked up a puppy that will grow to medium size and soon discover a large dog that’s eating them out of house and home. Let’s take a look at OpEx data storage logistics and how it’s often not as predictable as you’d like to think.
When making decisions about your IT capabilities and equipment, you can choose between two primary business expense approaches. You’ll need to assess your long-term financial goals, as each option has different ramifications for your taxes and accounting.
- The first option is to opt for a capital expenditure (CapEx) solution. In this case, you buy your software and hardware outright as an investment and split the expense up over time in your operating budget. In regard to data storage, on-premise data centers represent this method, because they’re fixed assets that will represent different values over time. When tax season rolls around, IT hardware can be tricky because it’s amortized over its lifetime instead of being deducted in one tax year. So, you have to be constantly assessing the depreciated value of the data storage system, plus leaving room for upkeep and maintenance costs. It could be categorized as a current asset, long-term asset, or equipment. Plus, there’s the labor cost associated with the people attending to the hardware.
- By contrast, a second option – approaching data storage as an operating expenditure (OpEx) – seems far more straightforward. Operating expenses are the ongoing, recurring costs to run a business. You spend the money each month and receive the material or service – not an upfront investment like CapEx. For organizations that move their data storage to the cloud, it most often means a shift from a CapEx situation to an OpEx one. At first, the financial setup seems like a relief. After the initial setup expense, you simply need to pay a monthly data storage bill, just like a monthly subscription. You agree to pay a set fee for someone else to store and protect your data and the costs hit the bottom line right away through general administrative lines. There’s no depreciation or maintenance to worry about, you’re not locked into any long-term investment, and – best of all – the cost is a straightforward, steady monthly fee.
Or is it?
OpEx Sticker Shock Strikes Again
The promise of OpEx cloud storage is a fixed, predictable, recurring cost. The truth, though, is that many IT managers face significant sticker shock when cloud storage charges fluctuate, sometimes doubling or tripling what has been budgeted. There are many ways that your monthly costs could change from how you’ve set them out in your annual budget. For instance, one obvious instance would be altering your storage capacity. After choosing an OpEx storage package, your storage needs could go up or down. If the pricing is subscription-based, the price may be able to rise or fall based on your capacity needs during the period. Others may automatically add extra space when approaching your limits. How likely is it that your capacity requirements could change over the course of your storage contract? Some research suggests that 80% of IT and business leaders will buy new or increase current storage within the next two years.
While this may seem like a straightforward pricing change, there are other, trickier variable costs that can sneak their way into your monthly budget. Many OpEx plans include costs to upload and download files charged either per instance or per byte. There are fees for copying data, creating data, moving data, and reading data – even charges to acquire a list of stored data items. It’s not unusual for these egress and transaction fees to constitute 15 to 40 percent of an average cloud storage bill, and they’re far from predictable
To account for the fact that more data access means higher and less predictable bills, many cloud storage providers define different levels of storage that are priced accordingly. For instance, AI or machine learning workloads perform highly transactional tasks on large data sets, where activity rates will skyrocket. This type of data may be placed into a more expensive, high performance storage tier. Less active data may be placed in a low-access archive tier. The activity costs associated with these low-touch tiers are the highest.
Although these performance tiers are helpful, they can create further complications and costs. If you figure incorrectly concerning a data set or an unforeseen situation occurs, transaction costs can grow rapidly. Even small fees can mount up if not managed properly. If the way you use your data changes even a little, the costs can add up – sometimes exponentially. In some use cases, the cost of using the data becomes higher than the primary storage cost.
Welcome to Free-gress
With all the complicated considerations in defining your storage needs and determining the right fit for your business, an OpEx approach seems like a smart, reliable option. However, don’t be fooled into thinking that OpEx cloud storage will provide consistent monthly bills or a lack of logistical headaches. The smarter you are at examining the storage plans in front of you, the better off you’ll be.
With NFINIT, you can put all worries about unpredictable costs behind you. We’re one of the only providers offering a standard, straightforward, consistent fee structure free of any variable costs. With NFINIT Object AO and LS storage packages, you’ll never see any transaction charges and you can access your data indefinitely free of charge. The world of Free-gress (free egress) is available to you now. To learn more, click here.
Kevin Johnson is NFINIT VP of Product.