Cloud computing is not a product you buy; it’s a service
Cloud billing is how cloud providers calculate what you owe based on the resources your applications use.
Most cloud platforms use a pay-as-you-go model, meaning you only pay for what you use. such as:
- Compute (VMs, CPU, memory)
- Storage
- Databases
- Networking/bandwidth
- Serverless functions
- Managed services
The pricing model is a systematic way in which either the cloud or on-premises providers charge for their services, based on factors like usage, time, or even commitment.
- On-Premises Pricing Model
- Cloud Pricing Model
On-premises and cloud pricing models differ mainly in how costs are structured and managed:
On-Premises Pricing Model:
Requires large up-front investment (CapEx) in hardware, software, and infrastructure.
Ongoing costs include maintenance, power, cooling, and IT staff.
Costs are mostly fixed and predictable, but scaling up means buying more hardware, which can be expensive and slow.
Cloud Pricing Model:
Low upfront cost - OpEx, usage-based payments, i.e., pay-as-you-go or subscription.
Costs scale with usage—pay only for what is used. Resources can be quickly scaled up or down.
In this case, the cloud service provider handles maintenance and updates as well as security, thereby reducing the workload for internal IT.
TCO (Total Cost of Ownership) is the complete cost of owning and operating a system, including direct costs (like cloud services or hardware) and indirect costs (such as support, management, and inefficiencies like over-provisioned resources).
TCO is the total cost of owning and operating a system over its lifetime, including all direct and indirect expenses.
ROI (Return on Investment) measures the value gained versus the total cost spent, helping organizations assess if their cloud or on-premises investments are delivering real benefits.
ROI measures the financial return gained from that investment compared to its total cost.
On-Premises Pricing Model:
- Perpetual License
- Subscription-Based
- Per-User/Seat-Based
- Tiered Pricing
- Capital Expenditure (CapEx)
Cloud Pricing Model:
- Pay-As-You-Go (On-Demand)
- Reserved Instances
- Spot/Preemptible Instances
- Hybrid Billing
- Operational Expenditure (OpEx)
Preemptible instances are cheap, short-lived virtual machines that may be shut down by the cloud provider without warning.
Uses:
- Cost Control
- Flexibility
- Predictability
- Savings
- Transparency
Cloud computing is like tap water. You only use it when you need it, but it’s available 24/7
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