Cloud Management Tools: A Snapshot for Buyers

As more and more enterprises move to the cloud, IT organizations are realizing the need for effective cloud management software, and are shopping for tools that help track, manage, and optimize their cloud spend. AWS, Azure, and GCP each provide native tools for these tasks, but a sizable number of our clients are exploring third-party Cloud Cost Management or “Cloud FinOps” solutions.

According to the 2021 State of FinOps Report from the FinOps Foundation, 46% of cloud customers are using native cloud tools like AWS Cost Explorer. However, nearly the same amount - 43% - primarily use a third-party tool, and we anticipate this percentage to grow.

In response to the high demand for these products, we summarized the most common pricing models and vendors in this space to help clients evaluate their options.

Pricing Models for Cloud Optimization Tools

We have observed two main pricing models in this space:

  • Percentage of Annual Spend: The leading vendors in this space, namely Cloudability and CloudHealth, offer a model where total fees are based on a percentage of total annual committed cloud spending, and it’s typically between 1.5% and 3.0%. The largest deals ($10M+ total annual commitments) are able to obtain rates below 1.0%, and as low as 0.70%

  • E.g., A client spending $10M/yr on cloud purchases that negotiated a 1.5% rate would pay annual fees of $150,000 under this model

  • Suppliers often charge a separate “overage” rate for usage over the commitment. This rate is typically slightly higher (0.1 – 0.2 percentage points)

  • This is the dominant model in the market, and pricing across vendors is fairly consistent. We can provide benchmarks for different volume thresholds based on this pricing model, which are a good indicator of market value

  • Per-VM Licenses: Some vendors, often those whose solutions have been used in on-premise use cases such as Densify, offer a per-VM license model. Customers pay an annual fee, typically between $50 and $200 per VM, managed by the platform. The largest, most competitive purchases we have seen have negotiated rates as low as $20/VM

  • This pricing model is much less common for Cloud FinOps, and is most common for vendors whose solutions also address on-premise use cases

Popular Solutions

Purchasing Considerations

To eliminate some of the risk in acquiring these solutions, we offer the following three steps:

  1. Ensure that the overage rates are clear. Rates for additional consumption of FinOps tools should be defined during initial negotiations, regardless of the which pricing model is being used. We recommend targeting these rates at the same level as regular consumption.

  2. Obtain renewal pricing. Purchases for these FinOps tools do not frequently include pricing protections, so we recommend securing contractual language limiting any price increases. For a percentage-based pricing model, we would recommend targeting language stating the offered rate will not increase, provided that the total commitment does not. It may also be possible to obtain a tiered-growth structure on this model to guarantee improved discounting.

  3. Make sure the solution provides all the required functionality. As a relatively fragmented market, there are still some differences in functionality across various tools used to support Cloud FinOps. We recommend ensuring that all the needed functionality is available for the FinOps teams.

In all deals, we advise clients to create and use leverage when purchasing, which comes from harnessing competition, timing, and deal uncertainty in any supplier engagement. For more information on optimizing your next purchase or renewal, please contact your Accenture representative.

- Kevin Cammarn is an Senior Analyst at Accenture.