“Free" cloud credits, they sound like a gift, but they often come with hidden costs and an agenda: lock-in.
The illusion of a cost-saving measure can quickly become a vendor-specific trap, forcing costly migrations or leaving your business overpaying for cloud services. This issue, which the UK Competition and Markets Authority (CMA) estimates contributes to £430M of annual over-payments in the UK alone, is what we call the "cloud credit trap."
In our recent webinar, Simon Hansford (Chief Commercial Officer at Civo) and James Marks (Founder of Canopy) explored this critical topic, sharing their extensive experience in the cloud market to expose the hidden risks, hyperscaler strategies, and actionable steps businesses can take to regain control.
Want to catch up with the full session before we dive into the insights? Catch up below 👇
The real cost of "free" and the cloud credit trap
"There’s nothing like a free lunch." - Simon Hansford
The word "free" creates a cognitive bias that makes teams less constrained when making architectural decisions, often leading to long-term liabilities.
James Marks defined cloud credits as a "virtual currency" used to entice customers. Simon elaborated on the core drivers for users (testing, performance confirmation, subsidization) but emphasized that the scale of credits offered by hyperscalers is calculated to get businesses "hooked," using a stark analogy:
"It’s a bit like... drug dealers hanging out on the street corner giving free drugs. They give free samples for a couple of months because they know at the end of it you’re hooked."
The primary concerns associated with this model are:
| Concept | Description |
|---|---|
| Vendor lock-in | The "free drug" that keeps you coming back, driven by lazy architectural decisions made when cost isn't a concern. |
| Bill shock | Bloated, inefficient infrastructure is the result. As Simon shared, 28% of survey respondents believed free credits locked them into long-term higher costs, and one startup received a $450k bill in 45 days when their GCP credits ran out. |
| Innovation suppression | Using proprietary features without a conscious business justification creates technical debt, which later makes migration (and innovation) too expensive. |
How hyperscalers create dependency
The speakers revealed how hyperscalers follow a three-phase lock-in strategy to move customers from a state of excitement to one of dependency:
As James pointed out, some companies get stuck in a negative loop: "instead of building my product, I’m spending all of my time migrating between places." The strategic key is to prioritize portability from day one.
The "Escape Plan": Building for portability and control
The most effective way to avoid the credit trap is to establish robust governance and choose platforms built on open standards. James Marks provided a detailed roadmap of the steps organizations must take, emphasizing that strategic planning is a competitive advantage.
James Marks emphasized the strategic importance of thinking long-term:
"I think it just comes back to thinking long term about some of the decisions you're making now and getting it right first time... and it'll pay dividends. You might have a bit of a short-term pain, but the gain is there in the long term."
James's essential strategies for building for portability and financial control include:
| Recommendation | Description |
|---|---|
| Conduct a portability assessment | Analyze your current infrastructure to figure out dependencies and offer clear next steps for unlocking yourself or planning any new build. |
| Embrace a diverse strategy | True multicloud (beyond just disaster recovery) makes you less dependent on one provider, giving you a commercial advantage when contracts are up for renewal. |
| Focus credits on iteration, not production | Use "free" credits solely for tests and development workloads. Once features are working, determine the most optimal and cost-effective place to run the stable production environment. |
| Map the full total cost of ownership (TCO) | Plan three years down the line. TCO must include not just current consumption, but also forecasting, migration costs (time, energy, and potentially third-party fees), and ROI of the entire solution. |
| Implement governance safeguards (Cloud 101) | Establish clear ownership, real-time visibility, and regular reviews of cost and usage. This information can influence business decisions on which products to grow, based on true economics. |
| Build future-proof teams | Ensure your people plan aligns with your technology plan. Hiring solely for one provider's skillset limits future options and portability. |
The Alternative: Transparent pricing and open cloud
The webinar highlighted that alternatives focused on transparent, utility-based pricing and open-source standards can deliver up to 59% lower TCO over the long term. Civo's pricing model achieves this. As detailed in the whitepaper and referenced by the speakers, Civo delivers up to 59% lower costs than hyperscalers while maintaining enterprise-grade performance, even for GPU-intensive workloads. This isn't marginal optimization; it's financial liberation.
- Cost clarity: No hidden fees, just clear, predictable pricing.
- Optionality: Building on open standards gives you a commercial advantage when contracts are up for renewal, as you can easily negotiate or migrate.
- Sustainable growth: Civo's startup program offers a scalable approach to cloud credits that supports customers as they genuinely grow, rather than trapping them.
- Sovereignty: Using platforms like Civo can align with data sovereignty (UK-based) and regulatory needs.
Summary
The conversation between Simon Hansford and James Marks made one thing clear: the initial lure of "free" cloud credits represents a false economy. While they offer short-term relief, they actively suppress innovation and agility by enforcing long-term vendor lock-in and inefficient architectural design.
Before choosing your next cloud strategy, ask yourself what matters most:
- Do you want to sacrifice long-term control for a short-term discount?
- Or do you want governance, portability, and true cost transparency built into your foundation?
For businesses focused on sustainable growth, the answer is a model based on open standards and clear pricing, a model that offers financial liberation by enabling you to build right from the start.
