Five Strategies to Control Cloud Costs

After the boom in tech investments during the course of the pandemic, companies are now looking inwards at all the shiny new technology in their infrastructure.

We’re in an ‘era of refinement’, and organisations want to maintain their infrastructure while simultaneously cutting costs – to allow them to remain buoyant in this stormy economy.

Cloud cost management is a top priority and foundational to a company’s digital transformation. Today, there is increasing awareness of cloud cost implications in the long-term, as usage can negatively impact budgets and to the total cost of revenue. In fact, Gartner predicts that 60% of cloud leaders will encounter public cloud cost overruns.

As organisations prepare for another potential period of economic downturn, it will be important to have a cloud cost management strategy in place to help optimise overall spend, utilisation of services, and increase profit margins.

Here are some ways to ensure there are no hidden surprises in your cloud bill today:

1. Understand Your Environment

Businesses are attempting to transition quickly to the cloud, but without an understanding of how different teams use resources, they risk being taken aback when their cloud bill arrives at the end of the month. It’s crucial to have a thorough understanding of your overall cloud environment when it comes to managing cloud cost. Across software as a service, your developer needs, infrastructure, and services like email and virtual desktops, “cloud” is likely in all parts of your IT estate. Getting a handle on what you’re paying for and if it’s worth paying for has always been difficult in IT, and the operating model of public cloud (where, someone else manages it for you) requires different ways of doing IT financing management. The first step is to obtain insight into all cloud resources being used throughout the organisation because you cannot manage what you cannot see.

2. Create the Right Governance Framework

Once you know what you have, the next step in managing cloud spend is to create an appropriate governance framework that establishes rules and boundaries for effective cloud operations. A governance structure provides notifications of approval or denial to users to guarantee correct resource deployment. More fundamentally, it gives people guidance about how they should be spending money (and not) beyond faceless budget numbers.

3. Know and Link Your #CloudValue

Establishing guidelines for identifying and linking cloud assets to specific teams, lines of business, or “value streams” is also essential. This practice is often called “tagging” an asset, similar to adding hashtags to social media posts to characterise the post and make it discoverable by others. It’s practically impossible to tell which assets belong to which teams and apps without adequate tagging, or what causes cost changes. First, this means you can start to understand what you have and who in your organisation owns and uses the assets. Second, as you’re figuring out how to manage your costs (and, let’s be real, it’s usually going to be reducing costs), you can get a better sense of what’s going on.

4. Understanding the Value of Cloud Costs

Reducing waste in your cloud spending is valuable, but being able to show why you’re spending that money in the first place is more valuable, and more strategic. Showing the value of IT to the overall organisation has always been difficult, sometimes impossible. And when you don’t know the value of something, it’s easy to “manage” that cost by simply demanding the lowest price. But, quantifying how valuable even the most basic IT services is can be difficult.

Unless you want your cloud cost control tasks to just be an annual practice in “doing more with less,” you need to show the value that each cloud asset is contributing. There’s an art to this for sure, but at a baseline, you should be able to link cloud assets you have to customer-facing parts of the business and internal-facing apps and services that are used to run the business. As you build up your cloud cost analysis, make sure you’re showing the link between any given cloud asset and the actual business function it provides.

5. ProfligateOps

Let’s look at the part of IT I care most about: software development, the apps that an organisation builds and runs itself for day-to-day business. Developers are notorious for their blissful ignorance of costs. Indeed, one of the recent insights from the FinOps community is that many cloud cost overruns are not so much from idle or wasted resources, but from application architectures that are expensive to run. When it comes to cloud, developers need to start thinking about how much it costs to run their apps from the start.  There are tools that can enable platform and application teams to understand the costs of their architectural decisions. This allows those teams to minimise cloud spending and streamline operations while also assisting developers in gaining visibility into the financial and operational consequences of cloud options for apps.

Shift Left

I don’t know about you, but it feels like we’ve been shifting everything left for a few years now. And there’s still more shifting left to be done, it seems. Pretty soon, we’re going to have everything all at once, there will be no more right or left, just The Now. Perhaps this will be some kind of CIO bliss!

That kidding aside, what you see in the spending environment now is proof that cost management can benefit from shifting left, especially when it comes to how your developers are architecting their application. As we enter 2023, with everything going on, CIOs are going to be asked to cut costs and getting a handle on cloud costs will be especially important for the foreseeable future. To be less dower, putting the right governance and controls in place that allow you to link what IT does to the business is always valuable. When you prove to the business side that you have the right costs control in place, instead of coming and demanding budget cuts, they tend to come and ask the CIO how they can use IT to innovate the business.

About the Author

Michael Cote is Senior Member of Technical Staff at VMware. VMware is a leading provider of multi-cloud services for all apps, enabling digital innovation with enterprise control. At the heart of everything we do lies the responsibility and the opportunity to build a sustainable, equitable and more secure future for all.​

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