TCO: How to Calculate Cloud Storage Costs

Cloud storage costs can add up more quickly--and unexpectedly--than organizations realize.

Christopher Tozzi, Technology analyst

November 2, 2020

7 Min Read
TCO: How to Calculate Cloud Storage Costs
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At first glance, cloud storage costs can seem misleadingly simple. The only fees that are immediately obvious when you look at the pricing pages for cloud vendors’ storage services are the per-gigabyte storage costs. If you dig deeper, however, you’ll see that there are a variety of other fees associated with cloud storage costs. The total cost of ownership for storing data in the cloud is typically much higher than the simple per-gigabyte storage fees suggest.

With that reality in mind, here’s a primer on how to calculate the total cost of your cloud storage. It focuses on cloud storage services that are designed for large-scale, developer-oriented cloud storage needs, like Amazon S3 and Azure Blob Storage (as opposed to consumer-level file-sharing solutions like Dropbox or OneDrive, whose pricing is less complex).

Direct Cloud Storage Costs

To determine the total cloud storage costs, you should start by quantifying the direct costs. By direct costs, I mean the tangible, easy-to-calculate fees that you will pay for storing data in the cloud.

There are several such costs:

  • Storage costs: You pay a fee for each gigabyte of data that you store in the cloud. The storage costs vary depending on how much data you store (at higher volumes, the per-gigabyte fees are usually lower), as well as which storage tier you use (“hot” storage tiers, which allow immediate access to data, are more expensive that “cool” and “cold” tiers, which offer lower prices but may impose delays when you need to access your data).

  • Egress fees: Most cloud providers charge you a fee for every gigabyte of data that you move out of their cloud and into another location on the Internet, such as another cloud or an on-premises server. These are known as egress fees. You also typically have to pay a fee (albeit a lower one) if you move cloud storage data from one cloud region to another within the same provider’s cloud.

  • Access fees: Most types of access requests to cloud-based data involve a fee. Actions such as listing the contents of cloud storage, copying files within cloud storage (even if they remain in the same location and don’t involve any kind of egress), or moving data between one cloud storage tier and another incur fees in most cases. This is true whether you perform these actions manually for administrative purposes or they are performed programmatically by an application that has access to your cloud data.

  • Replication costs: If you choose to replicate your data by storing multiple copies in different cloud regions, you will pay additional storage fees. Generally, for each additional region you add for data replication purposes, your total storage costs will increase by about 100% compared to using just one region. The added costs may be worth it, of course, if you need the data availability protections that replication confers: When you use replication, your data will remain safe even if one cloud region goes down.

Note that, although you can expect to pay all of these fees when using the storage services on AWS, Azure and Google Cloud, not all cloud storage providers impose all of these charges. Some niche cloud storage providers don’t charge egress fees or charge negligible access fees, which is one reason why you may want to consider looking beyond the “big three” public clouds.

Indirect Cloud Storage Costs

The direct cloud storage costs described above are only part of the total cost of ownership for cloud storage. You must also factor in indirect cloud storage costs associated with setting up and managing cloud storage.

These cloud storage costs are largely intangible. You can’t calculate them definitively in the way you can with direct cloud storage costs. Nonetheless, you should assess how much you’ll end up paying in indirect storage costs when considering whether storing data in the public cloud is the right choice for you.

The major indirect cloud storage costs include:

  • Cloud data monitoring: To prevent unexpected surprises, it’s critical to monitor your cloud-based data. You should perform data-integrity checks to guard against the risk of data becoming corrupted; keep catalogs of your data, which detail which files should exist, and use them to perform audits that check whether the data that actually exists in your cloud matches what should be there; and identify and investigate incidents where applications or users could not access cloud data for some reason, which could be a sign that the storage is misconfigured or corrupt. Continuous monitoring for issues like these requires an investment of time and money on the part of your team, but it will help ensure that you don’t run into situations where data problems disrupt business operations.

  • Data security: Likewise, your team will need to make an investment in securing cloud-based data. You may need to encrypt your data to meet compliance requirements. You will also need to configure cloud IAM policies to control access to your data. And you should perform security audits to avoid the horrendous mistake of accidentally making your cloud data available to the public, among other security problems.

  • Cloud backup: Even though public cloud infrastructure tends to be more reliable than on-premises alternatives, public clouds can and do fail sometimes. For that reason, you should back up any critical data that you store in the cloud. You could back it up to another public cloud or to local storage that you maintain on-premises. Either way, the cost of deploying backup software, running backup routines and managing backup data is significant.

  • Data migration: If you choose at some point to switch to a new cloud provider, you’ll need to migrate your data. This could be quite costly and time-consuming, especially if you have a lot of data to move. You’ll need to pay egress fees to get your data out of one cloud and into another, and the speed at which you can move the data will be constrained by the network connection between the two clouds.

While precisely quantifying these types of cloud storage costs may be impossible, you can gain a general sense of indirect cloud storage expenses by determining how much your staff’s time costs you. Use that figure, along with the fees for any licensed software tools you use to manage your cloud data, to calculate the costs of the various tasks described above.

Do Cloud Storage Costs Add up?

When you’ve added up all of your direct and indirect cloud storage costs, you can figure out whether the total cost of ownership for cloud-based data beats that of storing data on-premises.

In many cases, it will, especially when you factor in the costs of acquiring on-premises storage media, not to mention backup storage. Plus, data that is stored on-premises requires an even greater investment in management and maintenance than cloud-based data because your team will have to manage the storage hardware and servers in addition to the data itself.

In use cases that involve frequent data egress or access, however, on-premises storage may be more cost-effective because you won’t be required to pay fees each time you move or access data.

The bottom line: No matter how you approach it, cloud storage costs much more than the basic per-gigabyte fees that vendors advertise. Be sure to assess all of the direct and indirect costs that will impact your cloud storage strategy before committing your data to the cloud.

About the Author(s)

Christopher Tozzi

Technology analyst, Fixate.IO

Christopher Tozzi is a technology analyst with subject matter expertise in cloud computing, application development, open source software, virtualization, containers and more. He also lectures at a major university in the Albany, New York, area. His book, “For Fun and Profit: A History of the Free and Open Source Software Revolution,” was published by MIT Press.

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