Just as every coins has two sides, so too does the investment in cloud-based environments. Along with several benefits, they also create their own challenges, but the key one is managing the costs. While in on-prem infrastructure, the payment is one-ff, in the cloud, it is an ongoing expense based on consumption. This makes predicting the cost estimates accurately difficult and when the bill arrives, explaining the many line items becomes difficult. Without timely financial management and cost optimization, the cloud may prove to be a greater drain on resources, nullifying the benefits it had promised!
According to a Deloitte study, spending waste is emerging to be a major issue in the absence of controls and governance around consumption, accounting for nearly 30% of the total IT spend.
Some of the complexities in managing costs of public cloud, according to a Gartner report, include:
- Complex billing models and multifaceted pricing structures facilitate several options and combinations, that can make selecting the best pricing option of each use case difficult.
- The bills are granular, running into several line items that can make it difficult to keep track.
- Since cloud service provisioning is very easy needing just a point-and-click and without capacity constraints, it can lead to unexpected charges.
- Cloud offerings are constantly being improved and new services, features, price reductions or new pricing models are being constantly announced, making it difficult for organizations to keep track and understand how it impacts their bills.
- Availability of alternative architectures, services and components for the same applications at varying price points can make it difficult to arrive at the most cost-effective option.
- There is no standardization of billing models across the different cloud platforms such as AWS, Microsoft Azure, and Google Cloud Platform (GCP).
Efficient use of cloud engineering services can provide tangible financial benefits and requires collaboration across disciplines such as operations, product management, governance, architecture, finance and application development. To improve return on investment (ROI), linking cloud costs with business KPIs can improve spend management and optimize costs.
Begin with Cloud Migration Planning
To have better control on cloud spends and maximize value from cloud investments, Deloitte recommends building a strong business case across the portfolio by identifying factors that contribute to tech spending. The following are the obvious costs:
- Infrastructure
- Application
- Outsourcing
- Labor costs
What is often overlooked, however, and significantly adds to the costs are:
- Region-specific cloud costs such as real estate taxes, duties, energy, and carbon penalties
- Costs of data transfer
- Security costs
- Refactoring costs that get compounded with the progress in migration efforts
Analyze the impact of spending on each of these cost factors and realign, redistribute, or reduce migration costs wherever possible without reducing performance.
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Optimizing Spend on Existing Cloud Infrastructure
While the earlier recommendation was for migration planning, what about optimizing costs for your ongoing cloud operations? Some of the factors that contribute to cloud-spending waste include:
- Resources that are no longer needed but continue to run result in ghost expenditures
- Reserved capacity being used at suboptimal levels due to a lack of understanding of how hyperscaler pricing mechanisms work
- Redundant infrastructure design similar to the on-prem architecture resulting in higher costs
- Redundant subscriptions and software license costs leading to wasteful expenditure
- Workforce with legacy skills and inefficient engineering leading to overspending and loss of productivity
Optimizing Spend
Businesses can bring down their cloud costs by:
- Rightsizing you cloud infrastructure
- Shutting down unused resources
- Correct storage
- Adopting lower-cost instance types or regions
Automating optimization can help reduce inefficiencies through alerts and reports on wastes, providing greater visibility and transparency. Apart from implementing a plan to optimize cloud spending, it also requires governance for ongoing spend management with clearly defined spending guidelines, elucidate processes to maintain savings and automate the implementation of recommendations for optimization.
The governance process should focus on:
- Access provision controls
- Cost views for provisioned resources
- Resource quota management
- Automatic shutdown policies
- Reserved instance purchase strategy.
Since measuring KPIs provides insights into spends, governance efforts define the metrics for factors such as:
- For every service, the budget and the actual spend
- By how much is the spend higher or lower
- Per person tooling cost, the number of resources provisioned per month, etc.
- Forecast spend trends as well as track enterprise discounts and reserved instances to leverage them appropriately
Indium Helps Optimize AWS Investments
Indium Software, a two-decade old digital engineering solutions company, is an AWS Select Consulting partner that helps customers design, architect, build, migrate, and manage cloud solutions built on AWS. One of the key focus areas for the company is to optimize costs and maximize investments in AWS by assessing the needs of the company, provisioning appropriately to avoid redundancies, create governance models for closely monitoring resources and shutting down the unnecessary ones and automating implementation and tracking to provide visibility and transparency.
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