While looking after Cloud Cost Management at Cloudreach, I was often asked by clients how do they actually get started on better, more strategic management of their cloud spend.

To that end, I developed this whitepaper, assisted by my esteemed colleague Jonny James, to pragmatically lay out the steps on the journey to maximising their return of investment in the Cloud.

Cost Optimisation in Public Cloud – A Cloudreach whitepaper

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.

Check out my first blog for Arkadin:

#CollaborativeEconomy is on the rise. 

The Collaborative Economy – moving from community practice to a successful business model

What is the Collaborative Economy?

The Collaborative Economy or the Sharing Economy, is a term to describe economic and social activity involving online transactions. The Collaborative Economy is driving hybrid market models that are largely peer-to-peer exchange based, facilitated by community-based online services such as marketplaces.

Why is the Collaborative Economy on the rise?

A couple of years ago, PwC conducted a survey to understand if the sharing economy was a throwaway trend or a genuine business model to, amongst other goals, help companies become more resilient (i.e. withstand recessions), identify new revenue streams and deliver premium customer experiences. The study was fascinating and seven core pillars were identified as a result:

• Digital platforms that connect spare capacity and demand
• Transactions that offer access over ownership
• More collaborative forms of consumption
• Branded experiences that drive emotional connection
• Understanding an economy built on trust
• Rethinking value exchange
• The push for less friction

These pillars continue to support a wide range of business models that are in existence today. What is interesting to note is how it supports digital transformation, the current hot topic in industry, driving businesses to reassess their portfolio to drive new revenue growth. This begins with businesses examining their assets and understanding which can become digital and shift from offering an item to offering a relationship (and optimise that relationship accordingly). Implemented correctly, relationships create more perceived value, commanding more revenue as a result.

How are businesses tapping into the Collaborative Economy?

Subscriptions are one way to drive the relationship value exchange. Consumers get increased access to content in exchange for a subscription commitment. Other revenue-generating models, as described by Collaborative Consumption, include:

• Service fees: A company takes a percentage of the total transaction for successfully matching two sides of marketplace (e.g. hosts and guests, buyers and sellers, drivers and passengers).
• Flat membership/subscription: A company charges a flat monthly or annual membership fee regardless of usage.
• Tiered subscription: A company offers a range of subscription plans at different price points based on frequency of use or number of goods desired.
• Membership plus usage: A company charges a one-off or annual membership fee (sometimes with different plans offered based on frequency of use). Additional fees are charged based on usage.
• White label: A company creates a back-end platform that can be licensed and branded by other companies.
• Freemium: A company offers basic services or use of the platform/app for free. Users then ‘trade up’ for additional benefits and exclusive features.

But returning back to the premise the collaborative economy is based upon, businesses built on sharing of resources, an underlying level of communication and collaboration is implied to make this economy successful. Just recalling the pillars mentioned previously, it’s clear that emotive connections build trust.

“…the value of a brand is often linked to the social connections it fosters. Managing these connections is fundamental to successful marketing. In the case of sharing, experience design is critical to engendering emotional connections. By providing consumers with ease of use and confidence in decision-making, a company moves beyond a purely transaction-based relationship to become a platform for an experience…”

– PwC – ‘Assessing the Sharing Economy’

Key tenets for business growth in the Collaborative Economy

“Managing connections”, “ease of use”, and “become a platform for experience” look to be key tenets for business growth. It’s no longer selling a product set or solution, but selling and delivering an experience. And collaboration is key to helping sell those experiences. This is why, here at Arkadin, we have invested in delivering communication and collaboration platforms that are intuitive and brandable (white labelling that can be licensed/branded by other companies), to create those emotive connections. These platforms are backed by teams within Arkadin that companies have trusted in delivering powerful connections with their clients.

The Collaborative Economy is here

The collaborative economy is here. Think AirBnB or Uber, both successful organisations based on this premise. The concept of sharing has moved from a community practice into a profitable business model and at its heart is digital transformation.

What are you waiting for? Begin your journey to the digital workplace and start transforming your business.