While cloud computing has many benefits for businesses – such as increased flexibility – the biggest reason companies are moving to the Cloud is to help lower IT costs.

In a survey conducted by IDG Enterprise earlier this year, 71% of organizations said they planned to increase their spending on cloud services in 2012. The biggest motivator: cost savings.

But that doesn’t mean moving applications to the cloud will automatically cut costs for the company. If the proper steps aren’t taken, organizations can find that they’re spending way more on cloud services than they originally planned.

Here are five things businesses must keep in mind to avoid paying too much for cloud computing services:

1. Negotiate a better contract

While cloud computing contracts are still typically vendor friendly, a recent University of London study found that businesses are becoming better at negotiating terms of service with cloud providers. Researchers conducted interviews with cloud customers and providers, and found that many customers have been able to push for contract terms that lowered their costs or protected them from some of the risks associated with cloud computing (downtime, security threats, etc.).

The items organizations were most often able to negotiate:

  • Remedies for issues such as data loss and down time
  • Availability and up-time guarantees
  • Security and privacy protections
  • Termination rights
  • Protection against service changes without customer approval, and
  • Intellectual property rights.

2. Centrally manage cloud provisioning

In a traditional computing environment, it’s relatively easy for IT to control spending – or least be aware of how much is being spent on tech-related items. In general, IT employees are the only ones who can purchase and install equipment and software.

But with cloud computing, departments can provision services themselves, without any input from IT. That can mean the organization is signed up for too many services, and at unfavorable contract terms that were agreed to by someone without the proper knowledge. Companies should have a clear-cut process in which one person or team oversees cloud provisioning.

3. Right-size your cloud services

One of the biggest reasons cloud computing can help save organizations money is that it allows them to spend based on need. For instance, they can pay for only the amount of storage they will use, instead of spending big on upgrades to prepare for how much they’ll need in the future.

However, analysts warn that many organizations still take that old approach with cloud computing and pay cloud providers for more than they need. Many organizations look  for cases where a service must be scaled up, but may not be as diligent about finding instances when they can scale down. Many experts recommend starting out small with a service and increase as necessary rather than over-provisioning at the beginning.

4. Watch out for hidden costs

Before agreeing to a contract with a cloud computing provider, it’s important the organization understands the full costs of the service, beyond just the basic subscription fee. For example, businesses should be sure to find out if and what the vendor charges for:

  • Data transfers
  • Backups
  • Increasing or decreasing levels of service
  • Support and maintenance
  • Customization and configuration, and
  • Contract termination.

Companies must also be aware of the money they may have to spend on internal upgrades before making serious moves to the Cloud. For example, some organizations may find they need additional bandwidth to support all the data moving between the internal network and external service providers.

5. Minimize – and plan for – outages

Other than security, reliability is probably the biggest concern most organizations have about using cloud services. After all, businesses can lose a lot of money if an IT service goes down, even for a short time.

That’s why, when evaluating cloud providers, companies should pay close attention to how reliable they can expect a service to be. Businesses can avoid losing too much money from cloud outages that do occur by making sure their service agreements have sufficient penalties for the provider if availability guarantees aren’t meant and that sufficient back-ups and redundancies are in place. Many organizations also choose to avoid the Cloud altogether for mission-critical applications.


Although cloud services can end up costing organizations more than they originally planned, the total cost of ownership is still often much less than when keeping the service in house. Combine that with increased agility, speed of adoption, and other benefits of the Cloud, and those services are a great option in many cases.

But to get the best deal and avoid paying more than they have to, companies must do their homework. That starts with choosing potential vendors wisely and asking cloud providers the right questions before signing up for a service.