How brands should tackle exploding cloud costs 

Global cloud spend is expected to rise to a whopping $482 billion in 2022, Gartner estimates, an uptick of 22% from the previous year. This soaring price tag has been driven by a multitude of factors, particularly the pandemic.

As companies scale their cloud operations, they need to begin strategizing and managing their spend much more intelligently. And there’s no better time than the present to learn how to strike the balance of affordability and functionality. 

Why saving cloud for a rainy day isn’t a smart idea

Vendors have made it incredibly easy for anyone to set up a cloud account, leaving cloud usage and its gradual expansion relatively unchecked. Companies which already code and deploy in the cloud often end up overspending, purchasing advanced reserves they never actually end up using.

Cloud overspend is mostly created due to overprovisioning, typically occurring when companies buy more than they need in order to prevent slow-downs or pauses during production. It can be difficult to figure out the right size of instances needed because performance and capacity requirements for cloud applications tend to fluctuate over time, leaving underused and idle resources. 

Avoiding Cloud Lock-In on the small business front 

There’s a real growing concern coming from instances of “cloud lock-in,” which occurs when certain vendors, like AWS, keep customers limited to their services by charging excessive transfer fees to move data out of the cloud. As a result, companies become too dependent upon one provider for services they can’t get anywhere else. Most large companies already use multi-cloud, so this issue largely affects small businesses due to lack of budget. 

Adopting multi-cloud and third party optimization tools will essentially solve this issue and reduce costs. A cross-functional FinOps (cloud financial management) team pulls together technology, business, and finance to help optimize cloud vendor management, rate, and discounting. 

To stay organized and reduce cloud costs, companies can harness the power of AI to keep their data structured and aligned. Doing so will not only save them money on cloud costs, but it’ll also spare them from additional staff or engaging in expensive consultations to help with management tasks. Some great AI tools out there include Amazon EC2, Google G Suite, Microsoft Azure, and Cisco Meraki. 

The reason behind a business’s cloud spending is simple: to maximize performance and innovation. They can do so by avoiding four common mistakes that cost them time and money, as well as maximizing their cloud investment. 

Cloud Spending Mistakes To Avoid 

  • Not knowing workloads

The first step in evaluating a company’s cloud spending is to know what it has on the cloud already, so it can judge which of those workloads are best suited for continued use on a public, private, or hybrid cloud platform. 

There are several layers of this assessment, starting with how each application performs. For example, does it operate quickly? Do end-users interact with it or is it a back-office application? Does it store highly sensitive data? This helps get a clearer sense of the workloads best suited for continued use on a cloud platform, and whether it should be a public one, like GCP, Azure or AWS, or a private one, which can be launched on open source platforms like OpenStack, which allow greater customization. 

  • Making uninformed decisions 

Once a company has assessed which workloads make the most sense to continue using the cloud, there should be a measurable cost-benefit analysis that takes into account operational expenses versus capital expenses. 

From there, companies can then gauge whether it’s better to purchase reserved instances from AWS or Azure, for example. If so, will they have usage elasticity? Will they be able to scale up when workloads are high? And can they scale back down when workloads are low? 

  • Not having a strategy for multi-cloud

As more companies move to the cloud, the performance benefits that come from application portability are limited, especially if businesses use just one public cloud provider. It’s important to implement a multi-cloud strategy to be able to adapt in real-time.

Such a strategy can and should be flexible enough to include different use cases, too. For example, an on-premise private cloud for data sovereignty reasons can utilize another public cloud service for development purposes. 

  • Misunderstanding contract lock-in 

The final step is ensuring the terms that won’t lock companies into a long-term contract. It’s important to ensure flexibility to truly maximize a company’s return on investment, which means not being bound by lengthy contracts that will prove more costly over time. 

Leading public cloud providers offer different cloud services, each with different commitment and discounting options. In return, customers must commit to a specified level of usage. A Savings Plan, for example, is a resource commitment with a fixed term in exchange for discount pricing. Another type of commitment is a Reserved Instance (RI), a billing discount in which businesses can obtain discounts in advance.

Since cloud metrics are typically measured in terms of performance and innovation, having access to both insights and tools helps companies develop an intelligent multi-cloud strategy that can efficiently drive future growth without undermining your bottom line. 

There are multiple ways to do cloud cost-saving right, but certainly the way not to do it would be by using nothing but the native tools provided by vendors. To streamline these expenses, a holistic analysis of cloud cost centers is a complex yet necessary task that will benefit the organization more and more as it grows.

Guest article written by: David leads GlobalDots’ FinOps services, in tight collaboration with this field’s most promising vendor. With 10 years of finance experience in the startup ecosystem, from early-stage to mature startups, David Amir has deep Cloud Economy expertise, successfully applied through financial and operational cost reduction methodologies.

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