Services Global Viewpoint – August 2018

Myth of Cheap Cloud

The Broadcast Bridge has published multiple articles and tutorials about the industry’s increased use of the cloud as an important tool. It would be good to examine how the cloud is now centric to many traditional in-house workflows. However usage is addictive and must be actively managed to control costs.

A simple internet search for the phrase “media cloud” returns more than 10 million hits. Perhaps 90-percent of them do not relate to broadcast and production applications. Even so, that leaves one-million internet links to resources on cloud and media applications. Could our industry be that entwined with off-premise cloud? The simple answer is yes.

Cloud is a Building Relationship

Moving to cloud-based resources is often considered a one-time event. Perhaps a production demand requires a huge amount of image rendering. The project does not support investment in GPU hardware, so the task is out-sourced to cloud. When the project is completed, the cloud application is spun down and expenses cease.

Shortly thereafter, another project needs something processed and again the cloud is the selected solution.The process repeats itself.

The cloud, pay-as-you-go model is an intoxicating attraction. Be forewarned, pay-as-you-go is not the same as inexpensive.

The cloud, pay-as-you-go model is an intoxicating attraction. Be forewarned, pay-as-you-go is not the same as inexpensive.

The cloud solution model has now justified itself over time and projects. This cycle of cloud use grows by adding new tasks. The result is a combination of cost-savings and cost-increases. Soon the facility finds that control over expenses has been lost. The time required to realize value from these applications vary by task and depend on staff experience. One early-recognized benefit is that project costs now fall under OPEX and are identifiable at each stage of the work. Finance managers love such accountability.

Cloud is Addictive

Media cloud workflows often begin for one of two reasons. The first reason, workflows exceed in-house capability, or it may be the end of life for existing hardware. Using a measurable resource as OPEX (cloud) is often a preferred solution.

A primary factor for cloud adoption is reduced costs when compared with traditional solutions. The following chart comes from 451 Research, “Voice of the Enterprise: Cloud Transformation, Organizational Dynamics 2017.” The number one and two reasons for cloud adoption are cost and scalability.

Expected costs savings and scalability are the two most common reasons for adopting cloud solutions.This also is reflected in the increased number of media-focused SaaS solutions now available on the cloud. Click to enlarge.

Expected costs savings and scalability are the two most common reasons for adopting cloud solutions.This also is reflected in the increased number of media-focused SaaS solutions now available on the cloud. Click to enlarge.

Cloud usage may be addictive. Spinning up resources is quick and easy. Once that happens, in-house resources may be retired and no longer available. In addition, once an application is switched to cloud processing, that cost has already been absorbed.The switching cost will no longer be a factor.

Once applications move to the cloud, in-house consolidation is often in order. No longer is maintenance on in-house hardware required. As the old platform is migrated to the cloud, management will expect to see cost savings from increased labor efficiency and higher utilization. At this stage, the fixed requirements of the old platform are no longer applicable. This often results in tough decisions regarding staffing.

Cloud Becomes Expensive

Once a facility moves significant portions of workflows to the cloud, costs rise. The ease with which new projects and tasks can be cloud-based often drives increased usage. While per-unit cost may be low, total costs increase.

Unless access to cloud resources is carefully controlled, projects end up leaderless. Yet because they still reside in the cloud, there is an expense. The financial managers want to control costs, but developers want access and flexibility offered by cloud solutions.

At least three common cloud management changes are used to help control costs. First, administrators should look for pricing discounts from the provider. According to 451 Research, this means using alternative pricing models, such as AWS reserved or spot instances, Microsoft enterprise agreements, or Google's sustained-use pricing models. The Cloud Price Index average discount is 38%. Few business managers would leave those funds on the table.

Second, another available resource is cloud brokers. The 451 Cloud Price Index, tracks over 400,000 SKUs from AWS alone. Third-party tools and consultancies can determine the best combination of resource models to keep costs low while meeting work-processing requirements. The broker can then obtain the needed resources on the user's behalf to keep costs low, and balance them across multiple providers and pricing models.

There are literally hundreds of thousands of pricing points for cloud processing. Amazon alone has at least 400,000. Making sense of the options is difficult and users may benefit from using a broker.

There are literally hundreds of thousands of pricing points for cloud processing. Amazon alone has at least 400,000. Making sense of the options is difficult and users may benefit from using a broker.

Thirdly, cloud access becomes more tightly controlled through management. This may be expressed as a single-point of control cloud access manager, written usage policies or charge backs to the using departments. All of these steps are designed to help control cloud costs.

Cloud is not Cheap

While early proponents claimed cloud usage was a cost savings nirvana, the fact is not so clear. Research shows that total costs generally do not shrink, but grow at a steady and relatively low rate. Cloud usage unit costs can be kept low through proper governance and the use of the best pricing models. At this point, every resource should be deriving value to the company through increased revenue and productivity.

If the above remain true, then the rising costs of cloud usage are a good thing. The costs enable the business to grow and scale, which is ultimately the greatest value of cloud.

Editor’s note:

The 451 Research report "The Cloud Transformation Journey" was used in this article.

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