7 Tips for Better Cloud Cost Management

7 Tips for Better Cloud Cost Management

The cloud delivery model has come a long, long way since the turn of the decade. Back then companies were worried about public cloud security and the levels of availability associated with it. This has changed over time, thanks to the investments the top tier cloud service providers have made in both areas. Think about it – these cloud companies can’t afford not to make these investments if they want to keep existing and attract new customers. And in many ways, the level of availability and security with public cloud will be superior to what all but the largest of enterprises (with the deepest pockets and highest employee numbers) can provide on-premises.

7 Tips for Better Cloud Cost Management

In 2019, there’s now a much greater focus on what cloud costs, unless your organization has an IT budget to burn. To help, this blog looks at the area of cloud spend in more detail before offering up seven tips for better cloud cost management.

“As cloud use grows, organizations focus on cloud costs and governance”

This is the subtitle of the RightScale 2019 State of the Cloud Report from Flexera. Before jumping into the concerns and improvement initiatives related to cloud costs, it’s worth considering a few of the report’s adoption-level statistics:

• Public cloud adoption is 91% and private cloud adoption is 72% of organizations
• 69% of organizations use at least one public and one private cloud
• Companies plan to spend 24% more on public cloud in 2019 versus 2018

Hence, the public cloud is a growing reality for most organizations – as will be the issues related to cloud cost management, whether they realize it to be the case or not.

The RightScale report also offers an interesting dissection of cloud spend levels for enterprises and small-to-medium businesses (SMBs) to set the scene for better cloud cost management:

Managing cloud spend is the top challenge for enterprises

For enterprises, optimizing cloud costs is a growing challenge (84% in 2019 versus 80% in 2018), with this true regardless of cloud maturity. Interestingly, cloud cost management is only the fifth highest challenge for SMBs – at 67% (and behind: lack of resources/expertise, governance, security, and compliance).

Does this mean that SMBs are better than enterprises at cloud cost management? Probably not, especially if the lack of resources/expertise is their number one challenge. It’s more likely that they haven’t woken up to the need for (better) cloud cost management yet.

But cloud cost optimization is the key to cloud success.

“Optimizing cloud costs is the top initiative for the third year in a row and growing”

The RightScale report found that:

“As cloud use and cloud spend grow, 64% of organizations will be focused on optimizing their existing use of cloud in order to save money in 2019, as compared to 58% in 2018.”

And that the most important cloud initiatives change with growing cloud maturity:

“As cloud users become more mature, optimizing cloud spend becomes even more important. It is cited by 53% of beginner, 70% of intermediate, and 76% of advanced respondents.”

These are great statistics to see – that organizations are rightly increasing focus on what their use of public cloud costs and whether this cost could be reduced. This starts with having people in place to monitor and better manage cloud spend.

Applying people to the need for better cloud cost management

In terms of better managing cloud use, including costs, the RightScale survey identified that 66% of enterprises already have a central cloud team (or cloud center of excellence), with another 21% planning one. The top responsibility being managing and optimizing cloud costs (for 68% of these teams).

While this might paint a positive picture of cloud cost management, the report states that cloud-using organizations aren’t doing enough to optimize costs: “Respondents estimate 27% waste in 2019, but Flexera has measured actual waste at 35%.” Multiply that 27% by the company spend levels shown above and it’s some serious money. Despite the focus on cloud cost management, only a minority of organizations have implemented automated policies to help address the issue.

This technology-based point moves us on from not only having the right people involved but also arming them with the right IT financial management capabilities. There’s more on this in a moment.

7 tips for better cloud cost management

There are a number of steps and activities your organization needs to take to better control its cloud spend. These include:

1. Acknowledge the fact that your organization is (likely to be) wasting corporate resources by overpaying for more cloud than it actually needs.
2.Make the understanding and management of public cloud costs someone’s responsibility – not just them ensuring that the costs match the usage, but determining whether actual (and charged-for) usage is significantly different from your corporate needs. For instance, are you paying for cloud services that aren’t needed? This might be a “cloud service manager” role with a remit to maintain downward pressure on cloud costs (while not inhibiting business operations).
3.Be aware that the full cost of public cloud use is not what you see in the cloud service provider bill. You need to define the public cloud as an end-to-end service, which includes the monthly subscription cost, internal labor involved to manage it, network usage, security components, additional licenses required, etc.
4.Recognize that cost optimization is also a capacity management concern – with a need to tune capacity to match the workload with as little waste as possible. For example, turning off development environments out of hours – which could take up to two-thirds off your bill.
5.Use automated policies to optimize cloud costs. For instance, shut down unused workloads or to right-size instances.
6.Identify non-corporate cloud spend where a line of business is “going it alone,” paying for cloud services via credit card. While the need might be legitimate, it might also be incurring additional cloud costs and exposing your organization to other risks.
7.Leverage an IT financial management solution to provide greater insight in cloud spend trends and patterns, and to help identify appropriate cost optimization strategies.

Applying technology to the need for better cloud cost management

So, once you’ve considered and addressed all the above tips bar the last, what can you do to get better insight into your cloud usage, wastage, and cost optimization opportunities? ITBMO is happy to assist you defining, costing out, and operationalizing your public clouds to provide you with a true-cost picture in relation to your consumption and help you with optimization recommendations.