Managing the cloud cost optimization journey in a crisis

The Covid-19 presents a cloud cost puzzle: usage goes up, but costs need to come down.
30 June 2021

Cloud cost optimization during the pandemic. (Photo by MIGUEL MEDINA / AFP)

  • When starting out on a cloud adoption journey, businesses often miss setting up a framework for cloud cost management.
  • The longer it takes to optimize this complexity to deliver business value, the more complex the IT estate becomes.

One of the clear winners within Covid-19-induced digital transformation journeys for many companies has been the cloud. Though organizations have been through the fire and the flood over the last one year and a half, in many cases, with cloud adoption, many have emerged stronger and more agile than before. However, despite conceding to the benefits derived from cloud cost optimization, many organizations struggle with it.

Managing costs is one of the most pressing and debilitating cloud adoption challenges, more so in the current context.  In fact, a McKinsey report found that “around 80% of enterprises consider managing cloud spend a challenge.” More than 20% of enterprises spend upwards of US$1 million each month on the cloud, according to the Flexera 2020 State of Cloud Report, released Tuesday. 

In the next 12 months, companies expect to grow cloud spend 47% on average. Companies are 23% over budget on average, according to Flexera, which surveyed 750 cloud decision-makers and users. Respondents estimate they’re wasting 30% of cloud spend. 

The issue is that, when starting out on a cloud adoption journey, businesses often miss out on the need to set up a framework for cloud cost management. This usually results in cloud sprawl — an uncontrolled proliferation of an organization’s cloud instances, services, and/or providers – which is the tricky road that leads to high cloud costs. Experts label it as a “vicious cycle” since the deployment of more resources and services is needed, leading to increased complexity and higher spending. The longer it takes to optimize this complexity to deliver business value, the more complex the IT estate becomes.

How to adopt the right cloud cost optimization strategy

One of the first steps an organization can take is to negotiate deals and discounts with selected cloud providers. Competition pushes prices downward and puts one in a better bargaining position. Companies can even use tools that help compare prices between cloud providers.

Another important step is the organization arriving at the most cost-effective cloud architecture to meet their requirements by factoring in what’s on offer in the cloud stable, including newer features, and identifying what resources to use, by interpreting usage trends from past billing. In the past, organizations designed their infrastructure for availability, performance and security to be delivered from a finite set of resources, optimized for peak workloads. The cloud reverses this paradigm and allows for a more precise design that’s perfectly aligned to workload requirements. 

The architectural components in the cloud carry a price tag, and thus optimal cloud architectures need to be designed with cost in mind. To maximize cloud economics efficiencies, IT teams need to establish a strong automation foundation with everything as code (infra, security, configuration, network, documentation).

Another approach well reckoned by experts includes combining cloud providers. Since no provider has the perfect solution for each problem, an organization approach should be “Best-of-Breed”. In short, choosing the best or cheapest products from each provider and combining them in the company portfolio. All this while ensuring that your company does not forget to ensure technical compatibility and consider the aspects of integration complexity and inter-cloud communication, not to mention lag!

This way, organizations will benefit from the ‘best in class’ capabilities of different providers plus the diverse range of price models leading to cost savings along the way. At the same time, the risk to their cloud portfolio is mitigated by dividing the risk between different providers.