Understanding Cloud Pricing

This lesson explains how cloud billing works and how to produce a defensible estimate for a small application.

In this lesson, you will learn to:

• Explain pay-as-you-go pricing and the billing units that appear on a cloud bill.
• Distinguish on-demand, committed-use, spot, and free-tier pricing.
• Build a rough monthly estimate using explicit assumptions and a pricing calculator.

Once you can name the providers and translate their services, the next question stakeholders ask is almost always about money: "so what will this cost us?" Cloud pricing looks intimidating because a single invoice can contain hundreds of lines, but underneath it there are only a handful of meters running. Learn what those meters count, and the bill stops being a mystery.

Pay-as-you-go means you are charged for what you consume, with no upfront purchase and no fixed contract. If you switch something off, that meter stops. This is the direct consequence of the measured, on-demand nature of cloud services you met at the very start of this learning path.

Four billing units cover most of what you will see. The first is compute time: virtual machines are billed for the time they run, usually per second with a minimum, quoted to you as an hourly rate. A machine costing $0.10 per hour that runs continuously for a month of roughly 730 hours costs about $73. The second is gigabyte-months of storage, because object storage is billed on the average number of gigabytes you hold over the month, so 500 GB held all month is 500 gigabyte-months.

The remaining two units catch people out more often. Gigabytes transferred are charged asymmetrically: data coming into the provider is normally free, while data leaving toward the internet, called data transfer out or egress, is charged per gigabyte. Additionally, the number of requests matters, because cloud functions are billed per execution and by how long each one runs, and object storage charges small amounts per operation such as reading or writing a file.

Here, Nova, a finance stakeholder, asks Tom, a cloud adviser, to explain an unfamiliar bill line.

• Nova: The invoice is fine on compute, but there's a line called data transfer out with no server attached to it. What is that?
• Tom: It's the data leaving the provider toward your users' browsers. Every product image someone downloads is billed by the gigabyte on the way out.
• Nova: So the pictures aren't charged when we upload them, only when people look at them?
• Tom: Exactly. Inbound is normally free, outbound is charged. That's why a busy month costs more even though nothing changed on the servers.

Notice that Tom names the unit before defending the number. That order matters when you talk to finance colleagues.