Today, there is a rising awareness regarding the long-term cost implications of cloud. Investments in cloud solutions have led to large expenses for many companies, particularly those lagging in their digital transformation journeys just as the pandemic hit.
Continuing from our previous discussion on open source for enterprises, we now move onto cloud, more specifically, on cloud expenses, and how they can be optimized on an enterprise level. Today, there is a rising awareness regarding the long-term cost implications of cloud. Investments in cloud solutions have led to large expenses for many companies, particularly those lagging in their digital transformation journeys just as the pandemic hit. However, despite the continued investments, what part of that expense is truly justified is something that remains to be seen. In this blog post, we shall try to outline what leaders can do today to avoid overspending on cloud without compromising on the benefits.
State of Cloud Expenses: Stymying Transformation
As emerging technologies become mainstream, global public cloud spending rose by over 23% from 2020 to 2021, with a similar rate expected for 2022. However, in their eagerness to join the bandwagon many organizations are overlooking the complete picture of a cloud’s lifecycle and its impact on a company’s economics which can put pressure on margins and may outweigh the benefits. Even before the global disruption, almost three-fourths (74%) of all cloud transformation were failing and it was estimated that 70% of all cloud costs were considered “wasted”. On top of this, 73% of cloud decision makers reported not having sufficient cost visibility over spiraling cloud expenses. So, what do enterprise leaders need to change in order to avert this conundrum? Well, the trick, as always, may be within the right knowledge and its correct application.
Managing Costs: Tying Loose Ends
As we move forward, businesses have to be more cautious and precise in how they plan their future investments. Digital leaders need to find new ways of optimizing their cloud costs while ensuring security and performance outcomes. They need to leverage the flexibility that cloud offers and have a clearer assessment of which cloud solutions work best with their unique requirements so that investments can be allocated accordingly in a customized manner. Achieving such a balance means matching requirements with the right service providers. Partnerships with the right companies that offer the right mix of features will ensure greater flexibility and savings without compromising on performance and capabilities. From an IT management perspective, a best practices adoption can complement the approach and result in a holistic cost optimization.
5 Ways To Optimise Cost
1. Optimizing Resource Utilization – Unused or underused resources such as servers still account for 100% billing to their capacity. Identifying them and ensuring that they are used optimally is mandatory, or else they must be removed.
2. Using Heat Maps – A heat map is an important visual tool that shows the surge and dips in computing demand. Resource utilization should be mapped to computing heat maps. Tuning resources to this heat map can drastically improve cloud usage and control spending.
3. Right Sizing Tools – Right sizing tools do more than reducing costs. Using the right sizing tools can help optimize the size and various use cases of computing services to enhance efficiency, maximize ROI, and stem overall expenses.
4. Reserved Instances – Reserved Instances (RI) are a cost-effective alternative to on-demand pricing models. Some CSPs such as AWS and Azure offer reserved cloud or VM instances offering discounts of up to 72% as compared to on-demand costs. RI models increase flexibility and are cost effective. However, unused or unmatched instances will lead to a loss of Reserved Instance Credit.
5. Selecting The Right Plan – This is where IT blends in with business decision makers to make the right choice and enforce long term optimization. As example, not using multi-cloud environment unless absolutely required can help leverage CSP volume discounts.
The Cloud Imperative: Realigning Thought Process
Leaders must realize that cloud adoption, on its own, is simply a thought process and not the ultimate goal, and definitely not a silver bullet to solve all their problems. Instead, the goal needs to be defined as an effective technology landscape that fulfills several parameters; right from upgrade flexibility, enhancements, scalability, and more. All the while, keeping costs and technical debts down to a manageable level and maximizing returns. However, this is easier said than done. After a sizable cloud investment, most leaders would struggle to justify tangential investments even though they must be in stride with innovations. The cloud should be seen as a platform to optimize agility and innovation, and for continuity and growth while keeping costs low. While the cloud clearly delivers on its promise early on, it is becoming evident that as it matures, the pressure it puts on a Company’s margins can quickly outweigh its benefits. Another reason for the increase in cloud costs could be credited to a misguided digital transformation strategy and the adoption for wrong use-cases. Although a frictionless cloud transition is ideal, these mistakes can occur and lead to cost escalations and derailed business outcomes.
Driving Organizational Imperatives
Monitoring and optimizing costs is one of the primary cloud imperatives in the present as well as the near future. The RoI on cloud investment can determine the degree of success an organization achieves on their cloud transformation and the level of its future readiness. Cloud simplifies few of the issues at the moment, but offers a larger perspective to resolve bigger challenges. On an organizational scale, adopting agile methods offers greater cost control, transparency, and reliability. This can simplify complex architecture as well as the security, network, and infrastructure requirements. However, simply adopting agility doesn’t work in isolation. A holistic approach that factors in the establishment of appropriate teams, securing top management buy-in, and setting a watertight cloud strategy are also worth critical consideration. In the face of challenges hesitation can be the biggest risk. Now is the time to take the tough decisions, consider the fallouts, pursue opportunities, and mitigate the caveats of enterprise-wide cloud migrations on your own terms, and towards a smooth, successful, and a profitable cloud evolution.