Cloud computing remains a highly consumed technology, and we have regularly—but briefly—discussed its adoption rate in our quarterly analysis. The IT world is heavily dependent on the cloud for applications, infrastructure, security, analytics, IoT, and much more. Beyond that, it offers various benefits like scalability, cost savings, flexibility, security, and competitiveness. The remote work environment of 2020 further accelerated cloud adoption. One of the cloud’s key benefits is cost savings—but cloud-related costs turned out to be a nightmare for CTOs. Companies are wasting a huge chunk of their cloud budget due to a lack of best practices and not having processes for governance and monitoring in place. Enterprises must put effective governance and cost optimization strategies in place to control their cloud costs.
Organizations’ lack of control over cloud provisioning shot up cloud costs
HFS research from July to September 2020 shows that organizations expect their cloud spending to grow by 5% over the next 12 months. Additionally, 56% of enterprise leaders believe cloud migration will be an absolute necessity post-COVID-19.
Every organization has been under some form of cost pressure because of COVID-19. Though many have been trying to take all the necessary steps to keep their costs under control, they face unexpected cloud wastage due to poor governance and provisioning and not having implemented best practices, even while their planned spending increased.
Many organizations do not understand how much infrastructure and cloud resources they need, and they often end up overprovisioning it—this is the major issue here. On top of that, organizations often fail to adequately monitor and administer their cloud resources. These are the two most common themes involving governance that we observed regarding wasteful cloud spending. Cloud cost optimization is one of organizations’ biggest challenges, and it’s one of the most-discussed topics in recent times. Fortunately, organizations that implement a few systematic management approaches can regain control of their cloud spending.
Best practices to help optimize your cloud-related resources
We don’t have any quick solutions that will help you immediately solve your cloud-related cost problems, but we do have some best practices to offer to help you keep your cloud costs under control and utilize your cloud resources more efficiently, summarized in Exhibit 1.
Exhibit 1: Apply these best practices for cloud resource optimization
Source: HFS, 2021
Identify the right resources
Many enterprises lack clarity on the magnitude of cloud resources their organization needs. It is important to have an internal team or third-party team assess your requirements. The assessment should identify computing instances, licenses, databases, and other cloud needs. These assessments must be done at least in the face of uncertainty and shifting market dynamics, it’s wise to plan.
Governance and policy management is crucial when adopting cloud services
Insufficient governance on cloud provisioning is a pattern we see emerging in enterprises; yet it is one of the most critical aspects of cloud management. Companies have policies in place for existing technology investment and deployment, including a department’s usage budget, application or program usage by department, and developer usage, to get an improved view of cloud resource utilization. Companies should ensure existing programs are used for approval process to keep cloud usage in check. As more Cloud solutions are adopted and business requirements change, review and evolve your governance – just don’t wait until after the fact.
Closely monitor infrastructure and storage services
Most cloud computing services are consumed by two services: computing infrastructure and storage. Enterprises must concentrate on these services while planning to accurately estimate their costs. Compare prices among cloud vendors to get the most competitive pricing.
Implement cost management tools
Enterprises can leverage tools from cloud providers like AWS (cost explorer and usage reports) and Azure (basic cost management tools) to track usage in both simple cloud environments and extensive multi-cloud environments.
Enterprises can evaluate automation solutions for cloud provisioning. Automation solutions help de-provision resources when they are not in use, and they provide greater flexibility. Additionally, automation tools provide various data on usage, visibility, cost overruns, and much more.
Explore third-party solutions
Seek guidance from service providers. Most providers offer guidance and assessment services in their cloud engagement package. For example, Capgemini offers cloud economic and optimization assessment services, Infosys offers Continuous Cloud contestability services, and HCL offers a cost optimization advisory service and provides recommendations based on various parameters.
IBM, Accenture, Capgemini, and others offer cost optimization services, which help enterprises assess their cloud usability if they are already on the journey—or predict their requirements if they haven’t started yet. Cost optimization services provide dashboards and usage insights via analytics, and they can help enterprises choose the right cloud vendor based on their requirements. They also recommend necessary cost optimization approaches.
For examples, we can look at some of HCL’s client use cases.
HCL manages the multi-cloud journey for some of its clients, including a leading managed care company, a multinational consumer goods company, and a multinational pharma company. For all of these companies, cost optimization is a key attribute HCL includes in its engagements. These firms saved approximately 25% from their initial budgets while incorporating HCL’s cost optimization approach in their journey. Other have provided additional similar examples.
Having proper governance and cloud cost strategies in place helps not only to reduce costs but also to improve security, visibility, accountability, cloud requirements forecasts, and cloud budget plans for the next cycle. Also, enterprises prefer the multi-cloud approach to access the best-in-breed platform and avoid vendor lock-in periods. Therefore, clear governance and best practices would help enterprises control costs and add more value.
The Bottom Line: Enterprises can bank on governance policies to utilize cloud resources wisely and bring down cloud spending.
Enterprises must act immediately to control their cloud spending. It’s critical now because we are witnessing an en masse adoption of cloud technologies on different levels. Despite multiple cost optimization best practices and various services offerings from service providers, cloud budgets are being wasted. We recently witnessed the industry’s biggest deals ever—Infosys-Vanguard and Daimler—and we will continue to see similar deals in the coming months. Therefore, it’s critical for enterprises to have good ideas for controlling their cloud costs. Enterprises must consider both seeking guidance from service providers to include cost optimization services and identifying automation tools that eliminate unused and unnecessary cloud provisioning practices. Last but not least, companies must set governance policies in place. These exercises bring true value to the business and keep costs under control. Great potential comes with greater responsibility. To yield the cost-benefit of the cloud, one must focus more on cloud cost optimization approaches.