Is it time to review your cloud spend?

Cloud computing has become a critical business enabler for enterprises over the past twelve months, providing agility, scalability and mobility. As a result, cloud computing budgets are rising exponentially, but keeping track of spending is proving a big challenge.

According to a survey by IDG, 92% of organizations’ IT environment is at least partly in the cloud today. In addition, more than half of organizations are now using multiple public clouds, with 21% saying they are using three or more. Furthermore, overall investment in cloud computing is growing: 32% of the IT budget will be allocated to the cloud within the next 12 months.

Defining cloud costs

However, in the rush to cloud, many organizations are struggling to control spending. Adopting cloud services has made deployment and usage easier, but this self-service model is also making it very easy to spend more. As a result, many organizations are waking up to the need to optimize their cloud spend and eliminate waste.

It isn’t just shadow IT that leads to cloud overspend. When using public cloud infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS), organizations are billed continuously as they consume. Gartner points out that this makes it difficult for organizations to create accurate estimates. As a result, they can rack up costs, waste software-as-a-service (SaaS) investments and destabilize IT budgets.

Organizations must have a robust and overarching cloud strategy, backed up with application audits to deliver a transparent view of their IT estates. “CIOs looking to prepare their organizations to thrive in the upcoming turns must take a differentiated approach to cloud computing,” explains Gregor Petri, Vice President Analyst at Gartner. “It will be essential for CIOs to develop a formal strategy that helps put individual cloud decisions in the context of the enterprise’s strategic goals.”

Cloud spend a crucial concern for all stakeholders

Controlling cloud costs is complex because of complex pricing, multi-tiered pricing structures, ease of cloud provisioning and a continuous rollout of cloud offerings from providers.

Cloud cost management is not just a concern for operations, however. According to Gartner, to be successful in controlling cloud spend, there needs to be tight collaboration among the disciplines of governance, architecture, operations, product management, finance and application development.

DevOps can lead to expensive cloud sprawl through unmanaged virtual machines (VM) and cloud instances. Efficient reporting is essential to manage cloud resources effectively. In addition, developing apps in containers can make it easier for teams to collaborate, thus reducing costs. Building in cloud cost automation from the beginning, however, is ultimately the way forward.

The key step is to put financial management processes in place, advises Gartner. These need to bring together multiple departments, including infrastructure and operations, cloud center of excellence, finance and cloud services consumers. These processes include how budgets should be allocated and how resources should be tagged, for example. Tagging can be used to break down cost reports, providing visibility into departmental spending. It is also essential to right-size resources to the usage profile to avoid wastage.

Cloud cost management software can help organizations to control their cloud spend by monitoring usage and computing demands. These include solutions provided by the hyperscalers as well as third-party offerings. However, organizations must thoroughly assess these tools to ensure they meet their requirements and determine if any gaps need to be filled.

Taking control of your clouds

As we enter the new different, organizations will want to shore up resilience and cut costs where possible. As a result, FinOps, also known as cloud cost optimization, is critical. Therefore, it is essential to all planning, budgeting and forecasting to understand where your cloud spending is going and the business value you are getting in return.

Some large multinationals invest in their own cost management teams to look at cloud cost optimization and analyze bills as their main responsibility. Consultancy, such as that provided by Orange Business Services, can help you map your costs and make an informed decision about your cloud investment to deliver business results. Cloud cost management can also be provided as part of a managed services provider proposition, which frees up internal teams to focus on business goals.

Getting to grips with cloud waste

Overprovisioning by organizations and always-on cloud resources alone will result in $26 billion in public cloud waste this year, according to Gartner. It is like running the electricity in a house with no meter and keeping the heating turned up constantly.

Organizations must have complete visibility of their cloud spend and environments. FinOps can help enterprises better plan and forecast to budget for cloud. Otherwise, the benefits that technology brings will end up eating heavily into the bottom line.

Find out how you can prioritize cloud to meet your business challenges in our ebook: A cloud strategy for the future.