Why it’s the time to prioritize Cloud Cost Management

Blog: Capgemini CTO Blog

In 2018, Adobe reported that a development team in its organization accidentally racked up USD80,000 a day in unplanned charges for a computing job on cloud. Adobe, which itself is a software company, isn’t the only one struggling to manage their cloud computing costs. There are many examples of businesses failing to keep costs in check. While a growing cloud cost is not really a bad thing itself, and sometimes indicates business growth, that is not always the case. This has brought a lot of focus on the need to prioritize cloud cost management as an independent topic.

Cloud continues to be a game-changer for organizations — increasing business agility, boosting flexibility, and improving performance. Cloud computing has become the new normal for enterprise IT, which has provided its users much needed agility and easier scalability. Across industries, cloud continues to be one of the fastest-growing segments of IT spend. With greater spend, however, comes greater responsibility for CIOs to invest budgets wisely, and there is a bigger impact if things go wrong.

With growth comes the challenges

“IDC Cloud Survey 2020” represents key insights on growth on cloud consumption and related IT budgets:

32% of IT budget will be dedicated to the cloud by 2021
Enterprises’ average cloud spending is up 59% from 2018 to USD73.8M
More than half (55%) of organizations currently use multiple public clouds
Cloud technologies are now embedded in enterprises’ business strategies
92% say their IT environment (infrastructure, applications, data analytics, etc.) relies on the cloud, predicted to grow to 95% in 18 months.

As per survey, the biggest challenges that companies face when it comes to the ability to take full advantage of their public cloud resources are controlling cloud costs and data privacy/security challenges.

Organizations, on a hybrid cloud strategy, have found it difficult to keep pace with their own transformation journey, especially with cloud vendors releasing features and new releases almost every week. This makes it even more important for an organization to ensure their cloud spend is optimized and eliminating waste. To achieve this, it requires a multi-pronged approach from transforming people to process to technology.

Why do you need cost optimization?

Adoption of cloud has made deployment and usage of its services easier. But if we look closely, it has also been designed to spend money easily as well. This puts the onus on the organizations to ensure its detection, and to prevent overspending.

Cloud optimization has also been highlighted by Gartner as the key factor impacting cloud adoption. It also says cloud optimization would play a crucial role in taking decisions leading to multi-cloud strategies warranting provider independence and addressing concentration risk.

The biggest challenges that companies face when it comes to the ability to take full advantage of their public cloud resources are controlling cloud costs and data privacy/security challenges. In the wake of COVID-19, finance teams across the world will now be putting renewed focus to follow cost optimization aggressively. This paper talks about what IT leaders can do to take care of this aspect while building cloud strategy itself rather than looking at it as an afterthought.

What can you do about it?

You can achieve cloud cost optimization with a defined three-step approach:

Setup – It is all about defining the process, rules, and responsibilities. When you embark on a cloud transformation journey, it’s important to define some processes and governance – f, what your resource provisioning process should look like and who should be responsible for managing it, how the resources need be tagged or labelled, how the budgets should be allocated, what should be the billing and chargeback model, how the forecasting needs to be done. If the setup is done well, it’s much easier to control.
Observe – You can fix or change only the things of which you are aware. It is important to gain visibility on cloud consumption by monitoring, which will provide visibility on the budget and its forecast. Most leading cloud providers have cost management services that provide visibility and analysis of overall spend, which is helpful when it comes to making informed decisions.
Control – It is important to define how the spending will be controlled. Leaders need to access whether a third-party cloud cost management tool or native services or custom developed methods and scripts are needed. Analyzing the data and getting insights with right monitoring and observability measures in place will help clients manage the cost effectively. It will also help in revising the strategy and process put in place during the setup

Guidelines that can be used during these three phases to help with efficient cloud cost management include:

Look at low-hanging fruits

Tag all your resources to know where the money is really spent; better structuring of resources, using resource hierarchy and logical grouping of resources, supports better cost management.
Right-size your resources to match allocated resource to the actual usage profile.
Choose right pricing model based on your usage.
Measure and monitor your resources to check you are consuming what you have provisioned for.
Automate resource life cycle as many times resources are provisioned and not being utilized.
Delete orphaned resources – reserved iPs, unattached disks.
Match usage to storage class. It’s best to provision the right type of service based on the use case.
Increase elasticity though automation.
80% of the cost is consumed compute and storage – put more focus on that.
Utilize a Dev/Test pricing tier, which is significantly lower for some of the vendors.

Look at the commercial levers available with vendor

Vendor discount – approach your cloud vendor and discuss the usage and ask for a vendor discount
Reserved instance and sustained usage discount – determine your workload and how much consumptions they need
Consolidated billing – to avail volume discount.

Invest in a cost management team

It may be a good idea to establish a central group to look at cloud cost optimization as a primary responsibility. The team should work across the different business units, different subscriptions across hybrid cloud environments. Overspending, which is something that didn’t happen in the data center, has resulted in the need to build escalation procedures. For example, what actions are being executed at what level of overspending. The cloud providers will provide you a vendor specific view on cost. This makes it more challenging, since you now need to combine the costs for the hybrid cloud environment, to determine the actual spend and take meaningful actions. Some of the vendors have introduced new services to address this concern and have started providing a cost view inclusive of other providers as well. One such example is Microsoft’s Azure Cost Management tool which now supports not only Azure but also AWS.

Conclusion

In the current COVID 19 pandemic scenario, when companies are taking all steps to reduce cost including vendor consolidation and operational efficiency mechanisms, optimizing cloud spend is one of the key levers to reduce overall spend.

The important part is to take time to review your cloud spend and evaluate where your money is going. Effective analysis will help you identify areas of inefficiency and ensure you’re operating as cost-effectively as possible. Take time as an organization to regularly meet to review billing and expenditures related to cloud services. Review the respective expenditures with the technical and business stakeholders for each application as well. This brings increased visibility to the costs associated with an application, and the decisions made from a cost perspective.

If you are already on the journey and looking for a quick recommendation, Capgemini can help with assessment and best practices. Capgemini’s Cloud Economics and Optimization Assessment is a premier, enterprise-ready service designed to maximize your success. Our experienced team of cloud-accredited professionals will help you plan, detect, identify, and recommend necessary cost optimization. More details are available here.