Fear of an economic turndown, reduced revenues and higher costs, forces many organizations to tighten the belt in a number of areas. This is a natural precaution and often a sound instinct. However, it is difficult to balance short-sighted cost-cuttings while keeping focus on the future and get the ability to grow and innovate for your long-term goals.
When it comes to reviewing costs and investments, an area that is increasingly scrutinized is the cloud. For many organizations, the main driver to go to the cloud has undoubtably been cost efficiency. Reality has shown, however, that moving to the cloud was not a quick fix to save money. Do not misunderstand me here. There is no doubt about the positive impact of cloud-based solutions and cloud-based environments. It is just a bit more complex than it seemed (or how cloud suppliers present it) for many organizations.
Avoid the unnecessary spend
When moving to the cloud there are several areas that need to be taken into consideration. The whole idea, and benefit, with the cloud is that things are run differently. This means you simply cannot think and act as if you have an on-prem environment, while running your IT in the cloud. For a fact, adapting your IT environment to be cloud-ready can be complex, time-consuming, and therefore also expensive. If you have not included these adaptions into the equation, the costs can come as an unpleasant surprise, and significantly larger than anticipated.
For many organizations cloud costs have also shown to be difficult to control. One of the strongest USPs for the cloud, has been the flexibility and scalability, which is absolutely true. But the downside is that when new resources are set up or expanded, they are eventually not terminated when the use or need is no longer there. Without proper control, cloud resources can result in significantly higher than expected, and often totally unnecessary, cloud costs.
To some, the lack of control was overseen as innovation, and new development resulted in faster time to market in a cloud permeated environment, despite higher-than-expected costs. But in a tighter financial climate, many organizations are now evaluating to repatriate some of their IT from the cloud or considering leaving it entirely.
This is significant in global surveys and analysis done on the topic. In the Flexera 2023 State of the Cloud Report, four out of five organizations with both light, moderate, and heavy cloud usage state that managing cloud spend is the top challenge.
An efficient method
From my experience the main reason for not being able to control cloud cost, is that many organizations still lack a proper cloud cost management. This is essential for an organization to govern and optimize the cloud costs in a sustainable way and throughout the whole life cycle.
At CGI we have developed an efficient method for ongoing cost management. In short, this method focuses on the following areas:
- Plan & Forecast
In this phase you have to develop your cloud onboarding plan by aligning your business requirements, define business risks and tolerances as well as define budgets, spending and forecasts to the various business units. This will form the foundation for your cloud strategy, your purchase plan and the cycle of work and responsibilities.
- Awareness & Insights
In this phase you have to ensure you can monitor capacity, response times and costs, as well as identify anomalies in your usage and set cost alerts. Ensure you can provide timely and consistent data of the individual spend and usage to all relevant stakeholders. This should also be compared to some type of performance benchmark, to ensure your environment and supplier is optimal for your needs and usage patterns.
- Optimize & Improve
Here you have to put processes in place to optimize your usage, reduce over-capacity and manage the sizes and workloads for your organization. Recurrent and concurrent processes in this area can be automated for increased efficiency and control. The management of the cloud also needs to include regular oversight of the architecture, integration, and scaling features as well as a technical assessment, to ensure you have the right platform and features in place.
- Operate & Governance
To properly operate and govern your cloud environment you should organize to have a Cloud Centre of Excellence (CCoE). Here relevant lines of business, together with Finance and Operations take ownership of improvements and operations of the cloud environment. To regularly evaluate and review optimization opportunities, policies and best practice should be part of the CCoE’s agenda as well as updating your project onboarding plans and have clear visibility of proper charge-back to each relevant unit or department within the organization.
With these areas in place, you will have a clear financial governance of your cloud environment which will build a cost-awareness across your entire organization, and where you have the ability to optimize your cloud resources, spend and utilization for optimal results.
The benefits of the cloud do not materialize out of thin air. But I can assure you, that the right cloud cost management will ensure you get the best of the cloud, while also having the proof and data to back it up.
Do you want advice of how to get efficient cloud cost management in place, just get in contact.