Navigating the Cloudy Business of Cost Management

Cloud promotes lofty ideals, such as business transformation, market disruption, and technology modernisation.

While both business and technical leaders strive to make these broad improvements, they are sometimes more focused on incremental gains, such as relocating applications to more scalable environments (in the cloud); retiring old software that is available as-a-service (SaaS), or scrapping legacy storage hardware in favour of a cloud service that works out cheaper.

Do more, spend wisely – visibility and controls

Cloud platforms provide a more granular view of costs and levers that can be pulled to keep a lid on spending.

It’s a big deal, because better cost granularity and controls help technology leaders address the demand for platforms to spearhead innovation, without nasty surprises or bill shocks.

This more stringent approach to cost management is critical as spending on cloud services continues to rise, per Research firm Gartner, who is predicting a 43% uptick in spending on public cloud services worldwide to $591 billion in 2023.

Even hyperscalers are looking harder at costs

It’s not just clients who are obsessing on cost management.

In Amazon’s most recent quarterly report, published in February, CEO Andy Jassy explained that a key selling point for cloud was its ability to quickly reduce costs as demand or needs change, saying, “we are going to help our customers find a way to spend less money.” He added: “You see it with virtually every enterprise, and we’re being very thoughtful about streamlining our costs as well.” – per New York Times.

But then why do so many organisations overspend in cloud when the model is geared for efficiency? Per Reseller.co.nz, a survey of over 1,000 IT decision-makers across Asia Pacific, North America, Europe and Middle East found that 94% of respondents believed their organisations had notable, avoidable cloud spend.

Cost management in the cloud – more easily said than done

Cloud services have simplified once complex business technology. But it’s one thing to spin up a virtual server and quite another to orchestrate a coherent operating model in the cloud with robust cost management controls.

Technology leaders are aware of the pitfalls, with misconfiguration, poor visibility of environments, ‘sprawl,’ and confusing pricing popularly identified as factors in overspending. Many continue to struggle – per Gartner: 60% of cloud leaders will encounter public cloud cost overruns.

But things will improve as technology leaders mature their financial operating models. Here’s a selection of common cost-themed enquiries we hear from our clients, highlighting current moves to drive cost efficiency:

Cloud cost optimisation requirements

• Real-time visibility of what we are paying for so that there is no shock when it comes to my bill
• To be notified about costs likely to run beyond budget
• To be alerted to opportunities to optimise costs
• Visibility of costs associated with a solution
• Visibility of ingress and egress costs and other variable costs (mostly related to public cloud)
• Cost assurance

So, how can CIOs avoid overspending in the cloud?

Use the right tools.

Thankfully, there are plenty.

Where do technology leaders need to look to avoid overspending in the cloud?

Broadly, we help clients train their sights in several areas, including:   

• Cost management: Identify and optimise costs by analysing usage patterns, identifying idle resources, and make recommendations to right-size infrastructure.
• Cost optimisation: Analyse usage and recommend cost-saving measures, such as resizing instances, shutting down unused resources, and using reserved instances.
• Capacity buying options: Rather than buying capacity as it’s required, reserved instances allow you to make an up-front commitment to a specific amount of capacity for workloads with more predictable requirements. Alternatively, you can purchase unused capacity at deeply discounted prices with spot instances.
• Autoscaling: Monitor and adjust application scale to meet demands, using the minimum number of necessary resources.
• Data transfer fees: Organise data according to frequency of access, available transfer options, and services such as memory-based caching.

Technology leaders are challenged to bring a sharper focus to cost management.  

Ultimately, they must position cost management disciplines at the centre of their organisation’s hybrid or multi-cloud strategy, combining financial management and operational practices to balance minimum levels of performance with budgets to maintain overall service quality.

Cloud offers multiple cost management levers, but you’ve got to know which ones to pull,  when, and how decisions reverberate in your operating environment. Because cost-cutting at any cost will end up costing you in the long run.

BTW: Learn how CCL’s cloud experts bring a critical eye to cost optimisation in the cloud that can help your business scale, grow, and succeed. Contact us now and one of our experts will show you the possibilities.

For more on this topic, please read “CloudOps – The Cloud Operating Model” and “Is Your IT a Cost Centre or Strategic Partner?”