The Hidden Costs in a Cloud-Based Service

You have to be careful about the hidden costs while choosing a cloud-based service. “Yes, there are hidden costs in the additional functionality. The plain vanilla SaaS offering is never enough.” said one of the SMEs we spoke to. That itself says a lot. A cloud-based service provider might advertise a very low cost service, but when you get down to using it, you find that most features that were being promoted come at an additional cost. Here are a few hidden costs you need to watch out for when choosing a cloud-based service.

Check renewal costs

You might close an attractive deal with a cloud service provider at a very good price point, only to find that the cost of renewing the service is atrociously high. So “Check the approximate renewal cost”, says Aabid A. Khambati, DGM-IT, Concept Pharma, a company that has already deployed cloud-based email and web hosting services. Once you've taken a cloud based service, it would be very tedious to shift to another, but you may not have a choice and end up paying a hefty renewal fee. So find out the renewal pricing structure beforehand so that you're not caught by surprise.

Read the fine print

“The add-on costs, fixed costs and recurring costs should be well defined. All the 'ifs and buts' should be put in bold in the contract and not in astrix.”, said Dheeraj Chawla, CIO at Shib Dass and Sons, a small company with less than 100 employees. This clearly indicates that you should check the fine print in the contract that might lead to additional cost for you later. It's better to discuss upfront with the cloud service provider about the likelihood of other costs coming up later. These could be costs related to further customization of services, additional features, or upgrades of the back-end hardware. It could even be support related.

Monitor SLAs judiciously

The greatest nightmare for any company after moving to a public cloud-based service would be downtime or service unavailability. Outages do happen, but are you covered by the cloud service provider in any way against them? If so, how adequately are you covered? What types of outages will the service provider take responsibility for and what types will not be considered? Some cloud service providers leave it to customers to monitor their SLAs or to report outages. Is this clearly communicated by your cloud service provider? It shouldn't happen that your customers know about the outage before you do, and you end up paying out of your nose to the CSP to rectify the outage. Plus of course, there would be serious loss of credibility for your organization, so you have to ensure two things. One, you know who's responsible for monitoring and tracking the SLAs and service availability and what kind of outages are you protected against; and two, ask the cloud service provider for tools that let you monitor the service levels.

“There is a lack of monitoring tools to enable organizations to check whether the service has met their SLA. Servers, storage, sites and applications in the cloud are each governed by their own pricing formula,” says Vivek Dharia, CIO, KNP Securities. The company has already deployed a host of cloud-based services, including email, cloud-based payroll system, web hosting, cloud-based invoicing, backup and replication, as well as cloud-based storage.

Other associated costs

Besides the hidden costs, you also have to worry about training your employees to use and manage the cloud services”, says Dhiraj Barpujary, Deputy Director-IT at The Institution of Engineers. “There's also costs associated with network support services offered by the Cloud Service Provider”, adds Barpujary. There would also be the cost of procuring additional Internet bandwidth and using security software to secure it.

As you can imagine, you may not be able to reap the benefits of cost savings by moving to the cloud if you're not careful.