Cloud Bill Breakdown: A Beginner’s Guide

If you’ve ever received an invoice from a cloud service provider that was higher than you expected, you’re not alone. Cloud billing can frustrate IT managers for many reasons. This article explores the issue, including reasons cloud expenses can fluctuate from month to month and create unpleasant surprises for budget-conscious IT departments. It offers guidance on how to avoid unexpected costs and manage your cloud bills. It also discusses some advantages of working with fixed-price cloud vendors like Wasabi, which alleviate much of the pain caused by cloud billing. 

Understanding cloud billing 

You could argue that we’re mislabeling discussions about cloud billing; we’re actually talking about cloud cost management. You have a budget for cloud computing, but prices from service providers can be more variable than anticipated. 

What is cloud billing? 

Cloud billing refers to how a cloud storage provider charges customers for cloud services, and includes all fees and charges beyond storage costs that manifest in a bill you are expected to pay for these services.

The difficulties in cloud billing are quite simple—they are based on usage—but the specifics of measuring that usage and charging for it can be highly complex. 

Key components of cloud bills 

Cloud bills are based on the quantity and level of resources you use in a given billing period. Cloud providers like Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft Azure run businesses that make money by renting out expensive computer assets they’ve paid to deploy. Like a car rental company that charges you a daily fee for using a vehicle they own, AWS and others charge you fees for using their multi-billion-dollar cloud resources. 

Pricing comes from usage patterns, primarily: 

• Virtual Machines (VMs) — Based on factors like software licenses, CPUs, and performance levels. 

• Storage — Based on storage volume and performance, for example,  inputs/outputs per second (IOPS) and latency. 

• Transfers — Based on volume-based network usage fees, API request fees, and other fees. 

Why cloud bills get a bad reputation 

It’s easy to get frustrated with cloud billing, to the point where it sours the whole experience of working with cloud providers. You might start to think that the hyperscalers don’t care about customer satisfaction at all. However, it’s important to note that the hyperscalers (AWS, GCP, and Azure) are not doing anything unethical or unfair. They are simply charging you for exactly what they said they would. That’s why you should take the time to read their pricing policies carefully. 

A provider’s billing process and pricing model can be a bit opaque. When combined with the decentralized, self-service nature of cloud platforms, an environment where any number of employees can spin up cloud resources with minimal oversight, it’s easy to set up a situation where you’ll get a huge, unexpected bill. 

Examples of unexpected costs 

Here are a few examples of unexpected charges that will disrupt any cloud cost management program: 

• Data transfer fees — Being charged for adding data (ingress), removing data (egress), or moving data between storage tiers

• API requests — Discovering that a move like shifting data to a “colder” storage tier results in more API requests than you imagined, for example, backup software that divides files into small objects, each of which requires an API request to move into the new storage tier

• Storage costs for backups, snapshots, and unused resources — Getting invoiced for storage tasks that you thought were included in the service, as well as having to pay for storage you aren’t using but have reserved

• Compute costs — Realizing that VM fees may not cover all of the VMs; costs like paying extra for memory, fast networking, GPU use, etc.

Common misconceptions about cloud billing 

Some misunderstandings about cloud billing accounts come from unfamiliarity with the cloud industry’s “shared responsibility” model. When you sign up for cloud computing, you agree to be accountable for using the platform. This arrangement can lead to confusion about your job versus the provider’s. 

You may think, “It’s up to a cloud provider like Google to manage my bill.” While some have billing dashboards, such as the Google Cloud Console, and may offer valuable insights and send you alerts when your account has changes affecting billing, it’s up to you to manage your bill. This responsibility might not be clear at the outset, but the user experience of these dashboards isn’t always great with some providers. 

It’s also up to you to know what you’re buying and question assumptions you make about what services will actually cost. For example, it may be natural to think, “Choosing the cheapest cloud storage provider or tier means my bill will be lower.” This assumption is not always the case, with certain cold tiers charging much more for data egress, for instance, than you would pay at a “hotter” performing tier. You'll end up paying much more on a colder tier of storage based on these fees.

Step-by-step guide to managing your cloud bills 

What can you do to manage your cloud bills better and engage in cost optimization? There are several practical steps you can take. Perhaps more importantly, it’s essential to recognize that the cloud bill is simply the financial outcome of many underlying decisions about your IT estate. The more careful and coherent those decisions, the fewer surprises you’ll have with billing, assuming that you also invest effort into gaining a deep understanding of cloud service pricing. 

Step 1: Identify your cloud service needs 

What cloud services do you need? What is the best provider for those services? It’s a great practice to determine your main workloads before choosing a provider. And try to understand what those workloads will mean for cloud services. For example, if your enterprise systems require low latency, that might translate into a need for high-performing CPUs, leading to high costs. Automation in software might spur repeated processes that result in charges. 

Try to estimate your storage volumes and the tiers of storage performance you need, then double-check your assumptions. For example, you may think that it’s best to back up your data to a low-cost cold storage like AWS S3 Glacier. However, before you do that, understand how your backup software handles data. If it splits data into small objects and then verifies them, a 1-TB backup suddenly requires thousands of API requests to store and verify. If you want to test the data restoration function, that might trigger egress fees, and so forth. 

Step 2: Choose the right cloud service provider 

You will quickly discover that cloud service providers charge differently for the same service. Reducing your monthly bills might mean switching to a new provider. Wasabi, for example, doesn’t charge for API requests or egress. It offers a simple, predictable pricing model. 

Step 3: Monitor usage and adjust accordingly 

You have to pay attention to your usage if you want to avoid billing issues. The information is there. You just have to notice and react accordingly. Your cloud provider’s dashboard provides insights into real-time usage. You can also utilize analytics to discover anomalies and determine the optimal cloud setup. For example, you might learn that metadata created by storage processes adds to your storage volume. 

Returning to the backup example, if you have racked up two million API requests versus the two thousand you were expecting, you can switch the backup to a storage tier that charges less for API requests to avoid being charged for the high number of requests. Alternatively, understanding your usage helps you forecast your future bills. For instance, you can probably project the amount of data your email server will generate each month so you can plan accordingly for growth in your storage needs. 

Step 4: Regularly review billing statements 

Your bill itself is the best resource for dealing with the problem of unpredictable cloud invoices. The details are there. You just have to be able to understand them. This analysis might take some effort, along with discussions with the cloud provider, engagement with user groups, and the like. The more you know about your monthly charges, the better you can budget. You might think, “Who has time for that?” The answer is that saving money is usually worth the time, so it could be a good investment even if you have to get additional resources involved. 

Step 5: Utilize cost management tools 

Some providers, like AWS, provide cost management tools for your use. They understand that their services and pricing can be confusing. However, if you don’t know what you need or how your software interacts with the cloud platform, the tools may not help much. In any event, it shouldn’t be so complicated. 

Why Wasabi's pricing model is superior 

With Wasabi’s flat-rate pricing model for cloud object storage, you won’t need cost management tools or to become an expert in arcane cloud pricing techniques. Our predictable and affordable cloud storage pricing costs up to 80% less than the hyperscalers and never charges access fees, such as API requests 

Predictable pricing explained 

You shouldn’t need a business analyst to figure out your monthly storage bill. With Wasabi, you pay only one low rate for capacity. This pricing might seem hard to believe, especially if you’ve been poring over monstrous cloud invoices for years. Wasabi storage costs $6.99 per TB/month. That’s it. One flat fee is available on a pay-as-you-go basis or pre-paid through the Reserved Capacity Storage (RCS) model. A range of payment methods are available. 

Benefits of no egress or API fees 

Storing your data with Wasabi comes with no hidden fees. Wasabi doesn’t charge for egress, API requests, or transfers. You can plan your budget to the penny. Your bill won’t change, no matter how much you access your data. If you want to optimize cloud costs and learn about the many different fees you get with the hyperscalers, read Wasabi’s eBook on cloud cost optimization. 

Conclusion 

Cloud bills invariably come with surprises that can disrupt your cloud budget. Reasons run the gamut from overly complex service offerings to misunderstandings about how software interacts with cloud platforms. It doesn’t have to be this way, however. Our predictable pricing puts an end to unpredictable cloud bills. The Wasabi cost calculator enables you to compare flat-rate pricing for Wasabi Hot Cloud Storage to pricing for the hyperscalers.