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Cloud computing is revolutionizing small businesses, but the question is, are you fully prepared for the costs? Nearly half of SMBs will rely on platforms like AWS for critical workloads in 2025. 

However, without a clear cost strategy, what starts as a flexible solution can quickly strain your budget. Proper planning ensures that cloud adoption aligns with your business goals and doesn’t result in unexpected costs down the line.

In this guide, we’ll walk you through the different cloud pricing models, compare cloud hosting with traditional hosting, and offer insights on how to align cloud computing with your business.

What is cloud computing?

Cloud computing delivers essential IT resources, such as servers, storage, databases, and software, over the Internet on demand. For small and medium-sized businesses (SMBs), it offers a cost-effective, scalable, and flexible alternative to traditional on-premises infrastructure. 

With a pay-as-you-go model, SMBs can reduce upfront costs, scale resources as needed, and enable remote work by allowing secure access to data and applications from anywhere, making it an ideal solution for modern business needs.

Why do SMBs opt for cloud computing? 

Cloud computing offers several key advantages for small businesses: 

•  Enhanced security: Cloud providers offer security measures, including encryption and threat detection, ensuring data protection.

•  Business continuity: Automated backups and disaster recovery options help businesses recover quickly with minimal downtime.

•  Access to advanced tools: Cloud computing provides access to cutting-edge technologies like AI and machine learning, enhancing operations and customer experiences.

By tapping into these benefits, small businesses can streamline operations, stay competitive, and future-proof their IT infrastructure as they grow and adapt to evolving market demands. 

Common types of cloud services and hosting models

Whether it's cloud infrastructure, development platforms, or ready-to-use software, each model offers specific capabilities and cost structures to support various business goals.

1. IaaS (Infrastructure as a Service)

Provides virtualized resources like virtual machines, storage, and networking, offering flexibility and scalability. Services like AWS EC2 (Elastic Compute Cloud) and Microsoft Azure Blob Storage are common examples of IaaS.

2. PaaS (Platform as a Service)

Delivers tools for app development, allowing developers to focus on building applications without managing infrastructure. AWS Elastic Beanstalk is a popular PaaS offering that handles deployment, load balancing, and scaling while you focus on code.

3. SaaS (Software as a Service)

Provides software applications over the internet, eliminating the need for installation and maintenance. Examples include Google Workspace, Slack, and Salesforce, which handle updates and security automatically.

These service models often run on cloud hosting infrastructure, which differs significantly from traditional web hosting in terms of scalability, reliability, and cost. Choosing the right hosting environment is just as important as selecting the right service model. 

Cloud hosting vs. web hosting: what’s the difference?

When choosing how to host your website or application, each option comes with its own set of trade-offs, especially around flexibility, cost, and maintenance.

•  Cloud hosting gives you flexibility and control: It runs your website or app on multiple virtual servers, so you can scale resources up or down based on demand and only pay for what you use. No physical hardware or maintenance is needed.

•  Traditional web hosting is limited and fixed: It runs on a single physical server with fixed resources. You pay a set price whether you use it fully or not, and you’re often responsible for server maintenance and upgrades.

If your traffic is growing or you want more flexibility without the hassle of managing hardware, cloud hosting lets you scale as needed, so you’re only paying for what you use.

Common cloud computing pricing models 2025

Cloud providers offer different pricing structures. It's important to choose the one that aligns with your needs and helps manage expenses effectively.

1. Subscription-based pricing

This model involves fixed monthly or annual payments, providing predictable costs that simplify budgeting. It's commonly used for Software as a Service (SaaS) offerings. 

For example, let’s consider a 1-Year Reserved Instance (No Upfront Payment)

•  Instance type: m5.large

•  Term: 1 year

•  Payment option: No upfront

•  Hourly rate (2025): ~$0.067/hour

•  Monthly cost estimate: ~$48.91/month (730 hours × $0.067)

Note: AWS pricing is subject to change and can vary by region. For the most accurate and personalized estimates, consider using the AWS Pricing Calculator or talk to Cloudtech for personalized cost estimates

2. Pay-as-You-Go pricing

In this flexible model, businesses pay only for the resources they consume, making it ideal for those with fluctuating demands. Amazon EC2 (Elastic Compute Cloud) offers On-Demand Instances, where costs are incurred based on usage without long-term commitments. 

For instance, as of April 2025, the On-Demand pricing for a Linux-based m5.large instance in the US East (N. Virginia) region is $0.096 per hour and $70.08 monthly. 

3. Tiered pricing based on usage

This structure provides different pricing tiers corresponding to varying levels of resource consumption. Each tier includes a set amount of resources, allowing businesses to select a plan that best fits their needs. 

For example, AWS offers various instance types, which vary by CPU, memory, storage, and network performance with specific configurations and pricing. This enables businesses to choose instances that align with their performance requirements and budget. 

A startup with light traffic can begin with a t3.micro instance at just $7.59/month (730 hours × $0.0104), and scale up as their needs grow.

Estimate your cloud costs here! 

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Cloud migration costs for small and medium businesses

Migrating to the cloud offers SMBs enhanced flexibility and potential cost savings. However, understanding the associated expenses is crucial for effective planning and maximising return on investment (ROI). Here's a breakdown of the typical costs involved:​ 

1. Initial cloud migration costs

The initial phase of cloud migration involves several key expenses:​

•  Assessment and planning: Evaluating your current IT infrastructure and devising a migration strategy can cost between $5,000 and $25,000, depending on the complexity and size of your operations.​

•  Data migration: Transferring data to the cloud may incur costs ranging from $1,000 to $5,000, influenced by the volume of data and the migration tools employed.​

•  Application refactoring: Modifying applications to function optimally in the cloud can be a significant expense, ranging from $20,000 to $100,000, varying widely based on application complexity.

2. Cloud migration services costs

Cloud migration can be handled in two ways: using managed service providers (MSPs) or relying on in-house teams.

•  Managed Service Providers (MSPs): Engaging MSPs for end-to-end migration services can cost from $10,000 to over $100,000, depending on the scope. While this represents a substantial investment, MSPs offer expertise that can mitigate risks and expedite the migration process.

•  In-house teams: Utilizing internal resources may reduce direct expenses but requires significant time and expertise, potentially leading to longer timelines and unforeseen challenges.

3. Ongoing post-migration costs

Once your workloads are live in the cloud, it's important to account for ongoing operational expenses that can impact your monthly IT budget. These typically include:

•  Subscription fees: Cloud service providers typically charge monthly fees based on resource consumption. For example, AWS's On-Demand instances are billed per hour, with costs varying by instance type and region.​

•  Data transfer costs: Moving data in and out of the cloud can incur additional fees.​

•  Additional services: Costs for services like enhanced security measures, backup solutions, and increased storage capacity can add to monthly expenses.​

Understanding these cost components enables SMBs to budget effectively and make informed decisions, ensuring that cloud migration aligns with their financial and operational objectives.

Note: The actual cost of cloud computing can vary based on several factors, like the region you deploy in, whether you choose reserved or on-demand instances, storage tier, and usage volume. The pricing shown here is meant to give you a realistic starting point, not an exact quote. Cloudtech can help you with a personalized estimate. 

Best practices for reducing cloud computing costs

Cloud costs can quickly add up if not actively managed. For small businesses, adopting the right strategies can lead to significant savings without compromising performance. Here are some practical ways to keep your cloud spend under control:

•  Rightsizing: Ensure that the cloud resources you are using are aligned with your actual usage. Avoid paying for unused capacity. For example, if you're running a t3.large instance for a light web app that could comfortably run on a t3.small, downsizing could cut your compute costs by over 70%.

•  Auto-scaling: Set up auto-scaling to adjust your cloud resources based on demand automatically. This allows you to pay only for what you need, especially during periods of low activity.

•  Cheaper storage options: Explore more affordable storage options for less-critical data. For example, AWS offers storage classes like S3 Glacier and S3 Glacier Deep Archive, which are significantly cheaper than standard S3 storage.

As you look into ways to optimize your cloud costs, you need to evaluate the pricing structures offered by major cloud providers. 

Sample cloud pricing for SMBs

Major cloud providers like AWS, Microsoft Azure, and Google Cloud offer flexible pricing models designed to help SMBs optimize costs. Here's an overview of their key options:

Pay-as-you-go: All three providers offer this model, meaning you only pay for the resources you use, which is ideal for businesses with fluctuating demand.

•  Reserved instances: Available on AWS and Azure, these plans allow you to save by committing to 1 or 3-year terms for predictable workloads, such as web apps or e-commerce sites.

•  Savings plans and committed use: AWS and Google Cloud offer savings by committing to a specific usage level over time. AWS's Compute Savings Plans can save up to 72%, while Google Cloud offers sustained use discounts and committed use contracts for long-term savings.

•  Hybrid benefits: Azure offers a unique option that allows businesses to apply existing Windows and SQL Server licenses, reducing costs.

These pricing models allow SMBs to scale their infrastructure efficiently without significant upfront investments, making it easier to manage resources and control costs as you grow.

Conclusion

Understanding the cost of cloud computing for small businesses is essential for SMBs to ensure they are getting the most value from their cloud investment. Modernizing your infrastructure and optimizing your applications can maximize performance and scalability while maintaining cost efficiency. With the right strategy, cloud computing can support your current needs and scale your business without unnecessary costs or inefficiencies.

Cloudtech helps small and medium businesses unlock cost-effective cloud solutions built for growth, performance, and security. From data modernization to application optimization, our experts ensure you get maximum ROI from your cloud investment. 

Explore Cloudtech's services today to optimize your cloud environment and drive efficiency for your SMB with cost-effective solutions!

FAQs

1. How can I estimate my cloud computing costs before migrating?

You can estimate your cloud computing costs using pricing calculators offered by major cloud providers. These tools let you input your expected usage (like storage, compute hours, and data transfer) to get a rough monthly estimate.

2. What are the hidden costs of cloud computing for small businesses?

Watch for costs like data transfer, overages, additional storage, and scalability during peak times. Regularly monitor usage to avoid unexpected expenses.

3. How do I choose the best cloud service model for my business?

IaaS offers full control over infrastructure, PaaS simplifies app development, and SaaS provides ready-to-use software. The right choice depends on what works best for your business goals. 

4. Is it cheaper to handle cloud migration internally or hire a managed service provider?

If your team has the expertise, internal migration may save costs. However, Cloudtech offers comprehensive services to assist with cloud migration, reduce errors, and speed up the process, potentially saving money in the long term.

About

A non-profit healthcare insurance provider that encountered difficulties in managing the high volume of data on their on-premises system, which impeded their capacity to analyze that data efficiently to make informed business decisions. To address these issues, they chose to migrate their data to Amazon Redshift.

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Business Challenge

As their business grew, the insurance provider faced several challenges with their legacy system. Most importantly, their on-prem data warehouse, Oracle Exadata, required significant time and resources to administer, especially for large datasets. Additionally, the financial costs associated with building, maintaining, and growing self-managed, on premises data warehouses are very high.

In order to manage costs, keep ETL complexity low, and deliver acceptable performance, the customer had to constantly trade-off what data to load into the data warehouse and what data to archive in storage. 

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Technical Challenge

The customer’s data pipeline followed a collect, store, process/analyze, and consume model, leveraging multiple AWS services. Their data lake was created in an Amazon S3 bucket, and the data lake's stored data can be queried using dbt, utilizing AWS Glue Data Catalog Databases and Crawlers.We recommended Amazon Redshift and Redshift Spectrum to build their data warehouse. After mapping the data with Redshift Spectrum, Amazon Redshift processes the data to Redshift tables. Data is then visualized and consumed by users through Amazon QuickSight.

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AWS Services Adopted for this Solution

• Amazon S3, for data lakes
• AWS Glue, as a data datalog
• Amazon Redshift, as a data warehouse
• Amazon Quicksight, for data visualization

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Data Processing Solution for Healthcare Organization

Amazon Redshift's scalability and flexibility make it easy to manage expanding data volumes effortlessly. With Redshift, customers can reduce their total cost of ownership (TCO) associated with database environments. Redshift also provides a centralized and secure data storage solution, that also automatically patches and backs up the data warehouse, storing backups for a user-defined retention period. This replication and continuous backups enhance availability and improve data durability, and can automatically recover from component and node failures.

Amazon Redshift’s parallel processing and compression capabilities accelerate command execution, enabling it to operate on billions of rows simultaneously. Redshift Spectrum integrates seamlessly with other AWS services (such as Glue), making it easy to build end-to-end data pipelines. This ensures that data is always up-to-date, accurate, and secure.

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“Before moving to Amazon Redshift, our engineering team was spending too much time managing our on-prem data warehouse. Now, we are saving so much time on data management, and our data analysis has improved significantly.”

‍- CIO, Healthcare Insurance Provider

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Data Processing Results

With Amazon Redshift and additional AWS services, the customer gained a centralized and secure data storage solution, and a streamlined data analysis process. The scalability and flexibility of Redshift empowered the customer to handle expanding data volumes seamlessly.

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Get started with Healthcare Data Processing

Take the first steps to improve your healthcare data processing to see increases in data security, analysis, and scalability. Contact Cloudtech today.

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About

This financial services organization provides financial planning, advice, and educational resources that investors need in a timely manner - including retirement planning, wealth preservation, brokerage services, and more. The organization services customers worldwide to help them realize their financial goals.

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Business Challenge

The data ingestion process of a well-known financial services organization was not designed to scale to handle peak and projected future volume levels. Failures in that process could directly impact their ability to provide accurate and timely analysis, reporting, and investment advice.

Were that to happen, the ensuing reduction in assets under management and future opportunity loss would easily total tens of millions of dollars. Additionally, the data came from multiple sources in multiple formats and the whole system was governed by FINRA compliance regulations, including data encryption. 

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Technical Challenge

The organization needed an event-driven data processing solution that securely ingests, prepares, analyzes, and scales during peak and projected volume levels. This solution needed to handle data from multiple data sources in multiple formats, be cost-effective, and meet their FINRA compliance regulations. This solution would also allow the organization to have access to timely analysis and reporting with a comprehensive visualization of the data.

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AWS Services Adopted for this Solution

• Amazon EventBridge, for data requests
• AWS Lambda, for file validation
• AWS Glue, for ETL
• Amazon Athena, for queries
• Amazon QuickSight, for data visualization
• Amazon CloudWatch and Amazon SNS for monitoring and alerts

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Event-Driven Architecture Solution for Financial Services Firm

Cloudtech implemented an event-driven solution anchored by Amazon EventBridge, AWS Lambda, and AWS Glue. During non-working hours, Amazon EventBridge triggers Lambda to request new data and store it in Amazon S3. AWS Lambda also performs file validation before moving on to a AWS Glue Crawler and then AWS Glue Job for ETL to an AWS Glue Catalog, where the data is queried using Amazon Athena and visualized using Amazon QuickSight. Monitoring and alerting are handled throughout the process flow using Amazon CloudWatch and Amazon SNS. The result not only enhances scalability and accuracy, but also enables cost savings.

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“Cloudtech's event-driven architecture solution is the backbone of our timely and accurate investment advice that our clients rely on.” 
- VP of Engineering, Financial Services

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Event-Driven Architecture Results

Cloudtech provided the organization with an event-driven data processing solution which was secure, scalable, and handled multiple data sources and data formats. In addition, the solution provided timely analysis, reporting and a comprehensive view which allowed the organization to provide accurate investment advice to their clients. In turn, this solution helped the organization avoid the potential future opportunity losses which could have cost them tens of millions of dollars.

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Increase Your Data Security

Learn how you can realize the benefits of an event-driven architecture for your financial services data, to improve security, analysis, and customer experience. Contact Cloudtech today.

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About

A global IT staffing company that serves customers in every major vertical from startups to Fortune 100 companies, was looking to modernize their business operations so they could more reliably make data-driven business decisions.

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Business Challenge

The IT staffing company initially built a dual-purpose system that functioned as both a customer relationship management and enterprise resource planning tool. While custom-built for their own specifications, the existing system created some unique business challenges - specifically in the log analytics portion of the tool built on Elasticsearch.

The first challenge was price; between the Elastic licensing fees and the cost of labor associated with upkeep and maintenance, it was not a cost-effective solution. Next was reliability; the system was prone to frequent downtime and performance issues. Add to that, the business disruptions caused both internally and externally, signaled that the customer was ready for a change.

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Technical Challenge

Cloudtech analyzed their data infrastructure, and determined that the current solution - self-managed ELK stack - to be suboptimal compared to the licensing fee costs. Also, the solution required eight engineers to maintain and troubleshoot.

In addition, data streams were vulnerable to disruption, and lack of shard availability and rebalancing issues caused frequent search throughput breakdowns. Lastly, upgrading the solution was tedious and time-consuming, taking up to a month in some cases.

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Log Analytics Solutions

Based on the challenges, Cloudtech proposed a centralized logging platform using Amazon OpenSearch Service, AWS Fargate, Amazon Elastic Container Registry (ECR), and Amazon Elastic Kubernetes Service (EKS). This platform provided the customer with the scalability and data integrity required to store and analyze logs generated by their CRM/ERP tool. Given that cost and maintenance were important issues to address, Amazon OpenSearch Service was chosen for its speed, price, and security. Additionally, as a managed service, it alleviated the maintenance overhead associated with the previous solution.

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“The cost savings and downtime reductions we experienced were far above anything we expected, and have since significantly impacted our business in a positive way. The insights we get from reliable log analytics are driving our business forward.”
- CTO, IT Staffing Company

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Log Analytics Solution Results

Cloudtech’s solution enabled the customer to centralize their logs, process logs in real-time, gain insights, and make data-driven decisions. Amazon OpenSearch Service made it easier to perform search operations, enhance search efficiency, and provide scalable searching. In fact, the ability to scale up and down in minutes improves search throughput. In addition, OpenSearch Service allows the customer to schedule service software and auto-tune updates during off-peak hours, helping to better plan their deployments. Most importantly, the customer realized 40% cost reduction and 80% reduction in downtime.

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Reduce Costs with Log Analytics Solution

Implement your own data processing and log analytics solution, and realize the business benefits of reduced downtime, optimized costs, and improved business decisions. Contact Cloudtech today.

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