The Complicated World Of Cloud Cost Management

In this post, originally posted on the Cloudreach Blog, I considered the complicated economics of public cloud and suggested how enterprises can address cloud waste with effective cost management practices.

Cloud cost management is proving to be a key challenge for enterprises trying to realize the true value of their public cloud initiatives. Cloud wastage continues to be the main concern with 64 per cent of enterprises surveyed in Flexera’s 2019 State of the Cloud Report confirming optimizing existing cloud spend as the top initiative for the third year in a row.

But why is cloud wastage such common a problem?

The economics of public cloud is complicated.

First, you need to get to grips with the differences between the consumption-based, OpEx financial model of the cloud, next to the cyclical, predictable CapEx model of data centres.

Then you need to take into account the sheer number of products and services available from the Cloud Service Providers. Market statistics demonstrate there are as many as 500k SKUs collectively across all CSPshaving pricing/feature changes almost every other week.

This complexity is also underpinned by the different mechanisms to procure cloud, as well as associating the best instance type to the corresponding workload.

Now let’s look deeper into how organizations operate. Many enterprises have very complex sets of cost-related criteria for projects, (moving timeframes for procurement for agile projects, associating and implementing multiple cost centres and identifying, implementing and enforcing global tagging strategies). We then need to examine the all-important invoicing perspective, this bringing along their own set of challenges. You must ensure invoices marry up to consumption (reconciliations taking the most effort and time), ensure credits owed are pursued/received and payments are paid in a timely fashion to maintain a healthy and consistent budget (not to mention ensuring regulatory compliance is met!).

Let’s now turn our attention to the team that needs to undertake this effort. You can begin to see how this is not a one-person job. Effective cloud cost management requires a skilled team that is able to scale the workload and responsibilities of financial governance, reporting and data visualization to support showback/chargeback, the optimization process itself, as well as procurement support.

Hiring one or two full-time employees is still insufficient from a business-as-usual perspective as holidays, sickness, and training needs to be covered. Relating to the latter, with Cloud Economics being a new discipline, it takes significant time to (a) develop the skills needed and (b) maintain the knowledge with all new developments from cloud service providers. This is further compounded when enterprises procure cloud from more than one provider.

Lastly, both new processes and software are needed to help maintain control over cloud cost spend. This applies across your business and must be maintained between Finance/Procurement and IT/Engineering/Development. With Cloud Economics disrupting the traditional planning and procurement process of provisioning moving from weeks/months to hours/minutes, it is clear Finance and Procurement need new processes and software to take as much of the load where possible.

Where do you go from here?
So, how do you start managing your cloud costs? What best practices do you leverage? What are the cornerstones of effective cloud cost management? How do you deliver managed governance, optimization and achieve a tangible return on your investment?

This new journey starts with rediscovering your environment through the lens of cost management. Once cost optimisation opportunities across instance types, processes and automation become apparent, these can then be collated and put together into a set of actionable recommendations with associated savings. Implementing those recommendations is no easy task, so having the right skills and relevant experience is highly critical. The nuances and idiosyncrasies of Cost Management are subtle but powerful and manipulating the various spend levers available need to be managed with care.

Nothing beats knowledge. A regular drop-in training driving education around this topic is a wise option. Perhaps, more importantly, educating the principles of cost management is key for driving a culture of cost awareness throughout the organisation. This helps to drive the correct behaviours around developing cloud-native cost-effective architectures, using various mechanisms like scheduling and auto-termination policies to shutting down idle resources. It also helps to drive outcomes such as well-aligned teams (particularly between Finance / Procurement and IT / Engineering / Development).

Cloud Cost Management is a primary challenge and number one priority across mid-market to large corporate enterprises. Do not delay and get started on implementing the necessary strategies for managing cloud waste in your organisation.

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