Tech giants are the driving force behind the exponential growth of cloud computing, revolutionizing how businesses operate, and consumers interact with technology. Join us as we explore how hyperscalers like Amazon Web Services, Google Cloud, and Microsoft Azure are shaping the future of cloud computing and what it means for the digital landscape ahead.
The self-proclaimed experts will sell you almost everything on the internet claiming that employing a hyperscale provider will save you money. Today, we want to explore the stories told from a marketing perspective concerning the economics of working with hyperscalers and the hidden costs they bring to reveal to business. Join us as we attempt to undercover the bitter truths which lies behind the technocratic veil and save your company from financial damages in the future.
What are Hyperscalers?
The hyper scaler concept began arising when there was a need for organizations to process and store large volumes of data in real-time. This brought about an absolute need for the current day workloads and traditional data centers. Slower and higher processing was absolutely a problem until the industry was revolutionized by the rise of hyperscalers. Businesses are now able to process their data and access their applications from anywhere in the globe within no time.
The list that comes to mind when you speak of hyperscalers, would include AWS, Microsoft Azure, GCP, IBM Cloud, or even Alibaba Cloud. The sheer volume of investment that these firms have for their infrastructure places them even in multiple global locations.
Hyperscalers stand out from other traditional cloud providers because they are able to scale up and down based on user demand. Flexibility in these systems allow these providers to allocate resources freely without any form of disruption. Such features are perfect for firms with inconsistent workloads.
Disadvantages of Hyperscalers
High Spending: One of the most concerning disadvantages when using hyperscalers is the spending involved. These companies have a price tag associated with their services which becomes troublesome for businesses who require an increased level of computing storage power. This can be especially troubling for small or medium-sized enterprises with limited budgets.
Proprietary Technology Lock-In: Because hyperscalers have their own proprietary technology and tools, this makes it hard for other businesses to use another provider. Because of this, them tend to rely on the specific services due to the dependence they incur which creates vendor lock-in.
Lack of Tailoring: Every single business has different workflows due to the nature of their operations, which means every company needs a tailored solution. Standardized solutions do not cater for specific needs as many companies require flexible approaches that align with their structure.
Information Risk Management Difficulties: Businesses remain at risk for data breaches or loss associated with security lapses especially with hyperscalers managing and storing large data sets. Organizations must think critically around their data protection strategies when working with hyperscalers.
Limited Business Control Over Configuration details: Application and data storage systems used in partnership with a hyperscaler comes with little control due to the core infrastructure.
Requirement for Internet Connection: Like any other online services, hyperscaler services are cloud based. This means that businesses have to prioritize having strong internet connectivity. Any interruptions to internet services makesbusiness operations tedious thereby straining companies to depend on reliable internet to function optimally.
Hidden Costs and Fees Associated With Hyperscaler Services
Just like any small and midsize businesses, these enterprises struggle to match the competition posed by larger and well-known entities. Keeping up with the latest infrastructure and technology spending is almost impossible for small scale organizations due to the limited budget they operate with. This is one of the primary reasons why many small and midsized firms rely on hyperscalers.
While using hyperscaler services may seem to offer advantages to these companies. The flexible and pay as you go pricing for hardware and software services is more beneficial than spending a lump sum up front. Moreover, smaller companies get access to appropiate cutting-edge technology like AI and ML which can propel business growth and expansion.
Unfortunately, these advantages come at a steep strategic and financial price which is dangerous for small and midsized enterprises. A critical oversight is the lack of control of their operations and data with the use of hyperscale services. Smaller organizations essentially hand over control of their most invaluable asset, their data by storing it on remote servers which are not owned by them.
Having no control in these scenarios can create unwanted problems especially in data privcacy and security.
Cybersecurity challenges, for instance ransomware attacks and ensuring compliance with standards like GDPR (General Data Protection Regulation), may be difficult for small businesses to manage due to a lack of expertise or resources. Ultimately, it is the business owner who faces consequences from breaches or compliance disputes.
*Assuming 24/7 full workload
**5 Year Amortization
For 100% utilization, On-Prem clearly comes out on top, however; for seasonal workloads not exceeding 30% of full usage, cloud computing drops to ~$26K/ Year.
When to stay On Prem: With a steady workload that aligns seamlessly with operational demands, maintaining on-premises infrastructure allows companies to leverage available CAPEX effectively without the unpredictable costs associated with hyperscale environments. The reasonable power and staff costs further enhance this approach, ensuring that resources are allocated efficiently while preserving compliance with industry regulations and internal governance policies. For those who require unwavering reliability in their systems, on-premises setups provide an unparalleled sense of security and predictability, essentially putting businesses in the driver’s seat when it comes to data management, operational oversight, and cost containment
When to use Cloud Options: Flexibility allows businesses to scale resources up or down as demand fluctuates without being tethered to fixed capacities, enabling them to respond swiftly to market changes. For companies leveraging SaaS integrations, where seamless access to diverse applications can propel productivity, the ability to innovate rapidly becomes paramount. In this context, the benefits derived from enhanced agility and ecosystem connectivity often outweigh any cost premiums associated with hyperscaler services. Organizations find themselves prioritizing capabilities that foster faster deployment cycles and improved responsiveness over merely seeking low-cost solutions
When to go Hybrid Cloud: By leveraging the agility and scalability offered by Hyperscalers alongside traditional systems, companies can craft a hybrid model that not only enhances operational efficiency but also fortifies their security posture against evolving threats. Investing in advanced security tools such as identity management protocols, encryption standards, and real-time monitoring capabilities enables organizations to maintain control over their assets while reaping the benefits of flexible resource allocation inherent in hybrid architectures.
Nfina stands out in the realm of Hybrid Cloud solutions by eliminating egress fees, allowing businesses to seamlessly access their data without hidden costs. This innovative approach is complemented by features such as rollback capabilities and immutable snapshots, ensuring that your critical information remains secure and easily recoverable.
With competitive pricing structures tailored to meet diverse organizational needs, Nfina’s offerings are not only accessible but also adaptable for any scale of operation. Furthermore, availability is immediate, giving companies the agility they require in today’s fast-paced digital landscape. In addition to its robust Hybrid Cloud services,
Nfina also provides on-prem storage solutions that integrate smoothly with cloud functionalities, empowering enterprises to harness the best of both worlds, while maintaining control over their infrastructure and data management strategies.
Impact on Small Businesses and Startups
Small and midsize organizations are already at a disadvantage when it comes to competing with larger, more established companies. They often have limited resources and smaller budgets to work with. This makes it difficult for them to invest in expensive infrastructure or keep up with the latest technological advancements. As a result, many turn to hyperscalers for their computing needs.
At first glance, using hyperscaler services may seem like an advantageous choice for small and midsize businesses. They offer flexible pricing models, allowing businesses to pay only for what they use, instead of investing in costly hardware or software upfront. Additionally, they provide access to advanced technologies such as artificial intelligence and machine learning that would otherwise be out of reach for smaller companies.
However, these benefits come at a high cost – both financially and strategically – for small and midsize businesses. A concerning issue is the lack of control over their data and operations when using hyperscaler services. By storing their data on remote servers owned by the hyperscaler, these companies essentially hand over control of their most asset – information – to a third party.
This lack of control can have severe consequences in terms of data security and privacy. Small businesses may not have the resources or expertise to properly secure their data from cyber threats such as a ransomware attack or ensure compliance with regulations such as GDPR (General Data Protection Regulation). In case of a breach or non-compliance issue, it is ultimately the business owner who will be held accountable.
Hyperscaler Alternatives
As the costs of hyperscalers continue to rise, many businesses are looking for alternative hosting options that can help them save money while still providing reliable and efficient services. In this section, we will explore two popular alternatives to hyperscalers: self-hosting and cloud hosting with smaller providers.
However, self-hosting also comes with its own set of challenges. Businesses need to have a dedicated team of IT professionals who can manage and maintain their servers regularly. This includes performing updates, backups, security measures, and troubleshooting any technical issues that may arise. For small businesses without an extensive IT budget or expertise in-house, self-hosting may not be a feasible option.
Another alternative is cloud hosting with smaller, boutique providers such as Nfina. These providers offer similar services as hyperscalers but cater specifically to small and midsize organizations with custom needs and smaller budgets. They often have more affordable pricing plans and customizable options that allow businesses to pay only for the resources they need.
One major advantage of choosing Nfina’s Cloud Hosting is personalized support and customer service. Unlike hyperscalers where customers often feel like just another number in the system due to their large client base, Nfina provides more attentive support and tailored solutions for each business’s unique needs.
Hyperscaler Migration Case Studies
Case Study 1: Dropbox
As a company, Dropbox serves as both a file hosting and cloud storage service for both individual users and corporations. It relied heavily on Amazon Web Services until 2016, when it chose to build its own infrastructure. According to Dropbox’s Vice President of Infrastructure Engineering Akhil Gupta, the choice paid off, saving them around $75 million within two years.
The major reason for abandoning AWS was its high service charge based on usage per hour. For Dropbox’s infrastructure, self-hosting proved to be more cost-effective due to their stable workloads and predictable traffic patterns. The switch not only helped them cut down costs but also enhanced control over data security.
Case Study 2: Pinterest
Pinterest is a social media site where users can share videos and photos on virtual boards. Like most companies, Pinterest relied on AWS for its cloud infrastructure but began shifting away from it in 2017 due to rising costs.
As reported by Pinterest’s CTO Vanja Josifovski, they managed to slash cloud computing expenses by almost 50 percent after building data centers in regions with a significant user base.
With this strategy, Pinterest was able to enhance user experience through faster loading times and improved data privacy compliance, all while saving millions.
Case Study 3: Netflix
Netflix is a leading global streaming service, boasting millions of subscribers. The company made headlines in 2016 when it announced plans to shift away from AWS to construct its own content delivery network (CDN). This shift was necessitated by a desire for greater control over their infrastructure and also to cut costs.
Netflix’s Chief Product Officer Neil Hunt projected savings of over $100 million a year from building their CDN as opposed to using third-party services like AWS. These savings enabled Netflix to lower subscription prices, subsequently expanding their customer base.
Conclusion: Weighing the Costs of Hyperscalers
While hyperscalers offer a range of benefits such as scalability and advanced technology, it is crucial for businesses to carefully consider these advantages against their financial implications and the fact that most small and midsize businesses have fixed size infrastructure, so they may be paying for functionality they don’t need. As we have seen, what may seem like a small monthly fee can quickly add up to significant expenses over time.
It is essential for organizations to conduct a thorough cost analysis before adopting any hyperscaler services. This includes determining their specific needs and comparing prices among different providers. Businesses should also consider if they truly require all the features offered by hyperscalers or if there are more cost-efficient alternatives available.
Companies must be aware of hidden costs such as data transfer fees and storage charges. These can have a significant impact on their bottom line, especially if they are dealing with substantial amounts of data or experiencing unexpected growth. It is vital to read service agreements carefully and understand all potential costs before signing up with a hyperscaler.
Another factor to consider is lock-in contracts with hyperscalers. While some may offer discounted rates for long-term commitments, these contracts can restrict a company’s flexibility in terms of switching providers or scaling down services if needed. Businesses must evaluate whether these contracts align with their long-term goals and weigh them against potential savings in the short term.
Businesses should not overlook the importance of security when considering working with hyperscalers. With sensitive data being stored on external servers, there is always an inherent risk involved in terms of privacy breaches or cyber-attacks. Companies must ensure that proper security measures are in place and that compliance regulations are met by their chosen hyperscaler.
While hyperscalers offer a range of benefits and convenience, the costs associated with their services are significant. It is crucial for businesses to conduct thorough research and consider all factors before selecting a cloud hosting provider. By carefully weighing the costs and benefits, companies can make an informed decision that will benefit their bottom line in the long run. Contact us today to have a conversation about the benefits of Cloud Hosting with Nfina.