The allure of "free" cloud credits can be tempting, but beneath the surface lies a complex web of risks and consequences that can ultimately lock businesses into costly and restrictive cloud ecosystems. Our latest whitepaper, "Decoding Cloud Credits", explores the true costs of these promotional offers and the implications for businesses.
The research reveals that the practice of offering "free" cloud credits is a deliberate strategy used by hyperscalers to attract, entrench, and retain customers. While the initial benefits may seem appealing, the long-term consequences can be severe. Let's dive into the key findings and explore the implications for businesses.
The cloud credit trap: A three-phase strategy
As the whitepaper highlights, the cloud credit trap is a deliberately engineered three-phase strategy used by hyperscalers to attract, entrench, and retain customers. The three phases are:
| Phase | Description |
|---|---|
| Attract | Hyperscalers offer substantial credits, often in the hundreds of thousands, with low eligibility requirements. For example, a startup may only need a valid account and functioning website to qualify. |
| Entrench | Once organizations are onboarded, they begin adopting platform-native tools like AWS Lambda, Google BigQuery, or Azure Cognitive Services. These services offer rapid deployment and platform-specific advantages, but they also entrench dependencies and weaken portability over time. |
| Retain | When free credits expire, organizations face the "cloud bill day of reckoning". Applications built without cost constraints or oversight generate unexpectedly high operational costs, catching teams off guard. The true lock-in is the architecture, making migration a costly and time-consuming process. |
The business impact of free credits
The research highlights several key concerns associated with free cloud credits, including:
| Issue | Description |
|---|---|
| Inefficient cloud spending | When infrastructure seems free, the incentives to manage usage responsibly disappear. Teams spin up unnecessary workloads, expand resources freely, and overengineer architecture without cost discipline. This behavior, normalized during the credit period, often persists after the free credits expire, leading to bloated, inefficient infrastructure that's difficult and costly to unwind. |
| Bill shock | The expiration of credits can introduce financial chaos. Startups and enterprises alike report massive spikes in monthly bills, sometimes escalating into tens or hundreds of thousands of dollars, with no easy path to course-correct. |
| Wasted engineering time | Credits guide teams toward proprietary services and optimized integrations, great for performance, but terrible for portability. Once credits expire or a team decides to move to a more cost-effective provider, they're faced with technical debt: reworking infrastructure, replacing APIs, and rebuilding CI/CD pipelines that had become platform-dependent. |
| Suppressed agility | Vendor lock-in makes switching providers costly and complex due to the use of proprietary tools and configurations. This suppressed agility can stall innovation, delay compliance shifts, and prevent organizations from pursuing multi-cloud strategies when they matter most. |
What is Civo doing to help?
The implications of these findings are significant. As the cloud computing market continues to grow, businesses must be aware of the risks associated with "free" cloud credits and take steps to mitigate them. The UK government's recent investigation into the cloud computing market highlights the need for greater transparency and competition in the industry.
At Civo, we're committed to providing a cloud solution that prioritizes transparency, control, and flexibility. Our cloud infrastructure is designed to give businesses the freedom to choose where their data is stored, processed, and governed, and to provide them with the tools and support they need to manage their cloud environments effectively.
By offering simple, transparent billing with no hidden fees, we help businesses avoid the pitfalls of "free" cloud credits and ensure that their cloud spend is optimized for their needs.
You can learn more about this research in our whitepaper "Decoding Cloud Credits" here.
