The conventional wisdom is that cloud computing saves money by helping companies reduce their IT infrastructure, operational, maintenance, and staffing costs.
While that’s often the case, many businesses nonetheless wind up wasting resources and incur runaway costs as they migrate workloads to the cloud. In fact, a Gartner study published last year found that the average organization’s cloud costs are two or three times higher than anticipated.
Such cost overruns are particularly troublesome for small to medium-sized enterprises (SMEs) and midmarket firms that are already struggling with budget limitations. It’s no surprise that cloud cost optimization has become a top technology priority for SMEs and midmarket organizations, with more than half of the SMEs now spending at least $1.2 million annually on the cloud.
However, as much as a third of that spending is being wasted on overprovisioned resources that deliver no measurable business value, according to Flexera’s 2022 State of the Cloud survey.
Keeping Tabs on Enterprise Cloud Spending
If companies don’t have a formalized cloud governance framework, they tend to acquire resources on an ad hoc basis and that can invite waste. This informal approach makes it difficult to keep track of cloud spending, and organizations often pay for resources they no longer use but failed to decommission.
Many other variables impact cloud pricing. In some cases, software licensing for cloud instances can be double that of an on-premises deployment. Sales taxes, federal regulatory fees, and administrative fees can increase per-user costs. Pricing models for connecting to cloud resources can also vary dramatically by provider, which makes billing especially unpredictable in multi-cloud environments.
Here are six strategies for gaining more control over your cloud spending:
- Perform ROI Due Diligence
The first step any organization should make before shifting a workload to the cloud is performing proper due diligence on ROI. It isn’t always the case that moving workloads to the cloud will translate into financial savings. Many variables should be considered when calculating ROI, including current infrastructure, licensing, hiring, and more.
- Establish a Cloud Governance Framework
A formal cloud governance framework establishes rules, policies, and processes that formalize how cloud resources will be accessed, used, and retired. Accurately matching cloud resources to workload demands improves resource utilization and minimizes waste.
- Implement FinOps
FinOps, short for financial operations, is a management discipline that involves collaboration between finance, operations, and development teams to manage cloud spending. By implementing tools and processes for cost tracking, budgeting, and forecasting, businesses can gain insights into their cloud expenses and identify areas for optimization.
- Leverage Discounts
Providers offer a variety of discounts that can significantly reduce cloud costs. For example, reserved instance pricing models offer discounts to customers who reserve cloud resources over a fixed period. Some providers offer tiered pricing models in which the cost per unit decreases as you consume more resources. You might also be able to get discounts by prepaying for a specific amount of usage over a set period.
- Manage Egress Fees
Cloud providers typically charge egress fees for moving data out of the cloud, and large data transfers can add thousands of dollars to a company’s monthly bill. These fees can be reduced with a hybrid cloud architecture in which applications are hosted in the cloud, but data is kept on premises.
- Cloud Repatriation
You may find that moving some workloads to the cloud offers no significant performance advantages. Repatriating some applications, data, and workloads back to on-premises infrastructure can often improve performance while reducing cloud spending.
Take Ownership of Your Cloud
It all boils down to careful oversight. When properly managed, the cloud can be a boon for organizations, helping them improve efficiency, accelerate innovation, and adapt swiftly to changing business requirements.
There’s no reason to leave this to chance and risk expenses spiraling out of control. If you don’t have those skills in-house, it pays to work with a seasoned partner to “right size” your cloud spending and ensure that your investments deliver the expected value.
Matt Powers is Vice President of Technology and Support Services at Wesco Distribution.
