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Cloud reselling
November 9, 2022

Challenges of Cloud Costs Faced by Public Cloud Resellers

Rena Mochizuki
Customer Success Manager
Translations are provided by machine translation. In the event of any discrepancy, inconsistency or inconsistency between the translation provided and the English version, the English version shall prevail.
Table of contents

This article summarizes the challenges of cloud cost management and billing tasks that need to be considered when reselling public cloud services. It aims to help resellers solve issues related to cloud costs. The structure of the article is as follows. The article also includes an overview of the public cloud resale market as a whole, but if you are interested in the challenges and solutions, feel free to skip the introductory part.

Growth of the Public Cloud Market

First, let's look at the public cloud market that cloud resellers handle.The shift to the cloud in the private sector is steadily progressing, driven by the desire for benefits like "variable costs," "cost advantages," "agility," "global expansion," "no need for capital investment," and "speed and promptness." This trend is also affecting the public sector.

According to a survey by IT research firm IDC Japan Co., Ltd., the domestic public cloud (IaaS & PaaS) market is expected to grow at an average annual rate of 30%, and the market size in 2026 is projected to be approximately 2.4 times that of 2021, reaching 3.7586 trillion yen.

Concurrent with the market expansion, the number of resellers reselling each public cloud is also increasing. As of 2021, there were about 705 AWS partners, about 140 Azure partners (as of 2020, CSP), and about 350 Google Cloud partners, with these numbers expected to increase. Among them are IT distributors and IT consulting firms that already have a customer base through other products and services and are now trending towards offering public cloud as well.

Source: Excerpt from IDC Japan, 3/2022

The business model of cloud reselling involves purchasing cloud services from cloud vendors and providing them to end clients. Under the "economy of scale" principle, the more a reseller purchases, the cheaper they can buy, and thus offer discounted prices to end clients (discount rates vary by cloud vendor). Increasing the number of end clients and usage fees leads to more discounts and higher transaction volumes, creating a Win-Win-Win relationship between the cloud vendor, reseller, and end client.

Challenges Related to Cloud Costs Faced by Resellers

So far, we have looked at the growth of the public cloud market and the increase in new entrants to the cloud reseller business. However, there are potential challenges for new cloud resellers.

One significant challenge is related to cost and billing management.

The business model of cloud resellers, as explained, benefits from an increase in the number of end clients and transaction volumes. However, this also means an increase in operations and management costs for invoicing these clients. The "pay-as-you-go" billing model of cloud services further complicates these operations.

Typically, cloud resellers manage monthly fluctuating costs of end clients and issue invoices within a few days to a week after receiving invoices from cloud vendors. The process of totaling end clients' usage fees, verifying billing amounts, and issuing invoices incurs significant operational costs. Below is an example of typical monthly operations:

  1. Receive invoices from cloud vendors
  2. Verify invoices
  3. Download billing data from each vendor's portal
  4. Total the billing amount for each end client
  5. Verify the totaled amount, including with sales representatives
  6. Issue invoices

It's common to use in-house tools like Excel and batch processing for automation or semi-automation of these complex calculations. However, this requires ongoing tool modifications to accommodate different contract types and conditions for each end client and any changes in data format needed for the tools. If a separate billing system is used, system integration and maintenance are necessary.

Alphaus' Own Survey Results (Targeting approximately 1000 IT companies)

Common Solutions

To streamline operations, it's common to automate the aggregation process based on AWS Cost and Usage Reports, Azure Partner Center, and Google Cloud Billing. Methods like Excel macros and in-house batch processing are widely used.

Although automation is possible with the above methods, other issues arise, such as maintenance costs of developed tools, securing personnel, and problems related to the personalization of tools. The resources needed to keep up with the rapidly growing cloud market continue to increase daily.

Moreover, the aggregation work for cloud billing often requires the resources of a few skilled engineers. Without resolution, operational costs can grow unnoticed, becoming a difficult situation to extricate from. The shortage of skilled cloud engineers is a serious issue, meaning these valuable personnel are often tasked with monthly billing and cost aggregation work.

Alphaus' Own Survey Results (Targeting approximately 1000 IT companies)

Best Practices

Many companies face the above challenges while managing monthly billing and cloud cost operations. But what is the ideal state? Below, Alphaus, which supports multiple resellers with their cloud cost-related operations, shares its thoughts on best practices.

First, let's define the ideal state for best practices:

  • Operations costs are minimal, and invoices can be issued within a set period each month.
  • Management and maintenance are minimized, requiring little management effort.
  • The risk associated with the personalization of operations is reduced.
  • Billing operations can be continued long-term with low risk.
  • The target profit margin is maintained.

The ideal is to automate operations as much as possible and minimize the monthly operational costs of billing. Many companies use Excel macros and in-house systems to achieve efficiency. However, it's important to consider the resources needed for operational efficiency, maintenance costs after development, and issues related to personalization. Maintenance to keep up with AWS specification changes and additional feature implementations to meet multiple client requests require continuous resources from engineers who understand cloud costs. Billing operations, especially where mistakes are not tolerated, often lead to significant pressure, and operating the system continuously can be more burdensome than anticipated.

Several solutions can solve these issues and achieve a state close to the ideal. One method is to outsource the billing operations to another company, or implement a service or tool specialized in managing cloud costs. Outsourcing frees up valuable personnel from billing and cost management, allowing them to focus on more business-critical tasks.

As stated in AWS's white paper "AWS Partner Profitability and Success Insights and Best Practices from Successful AWS SI Partners," there's a trend among MSPs (Managed Service Providers) in various countries to review and outsource operations that can be streamlined or to implement tools to ensure profit margins and growth rates.

Implementing tools frees up resources for other crucial business-related tasks, accelerating the business.

In Conclusion

This article has discussed the challenges faced by public cloud resellers. Companies currently facing these challenges may find some points relatable. As the market continues to grow, establishing an environment for sustainable growth is crucial to achieving the desired growth curve. Alphaus Co., Ltd. supports multiple AWS partners, including AWS Premier Partners, Azure Partners, and Google Cloud Partners. Companies facing the challenges mentioned in this article or considering automating billing operations when starting a reselling business are welcome to contact us using the form below.


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