In 2020, annual company cloud waste was estimated at $17 billion, largely lost on idle and excess resources. This was according to Jay Chapel, CEO and co-founder of ParkMyCloud. Chapel should know. His company makes a business out of helping corporate IT departments identify wasted cloud assets and excess spend. “For example, one healthcare IT provider was found to be wasting up to $5.24 million annually on their cloud spend -- an average of more than $1,000 per resource per year,” he said.
Cloud waste is also why it might be a good time to bring in a cloud auditor to evaluate usage and spend. In this way, overages in cloud spend can be identified and eliminated. Alternately, IT could perform its own internal audit.
There are many places to look for cloud waste. The first is over-deployment of cloud resources that can result in “cloud sprawl.”
Cloud sprawl is most likely to occur when cloud resources get provisioned from multiple points within an enterprise without centralized coordination. This results in departmental “cloud silos” of activity since there is no central control point for cloud budgeting, tracking or usage.
Many companies attempt to tackle this problem of cloud silos by placing IT in the role of a centralized cloud management agent. Companies might even invest in an IT asset management system that is supposed to track and monitor every IT asset in the enterprise, so the enterprise knows how much it has -- and also how much it is spending on that IT.
Unfortunately, even IT asset tracking systems have their limits. For instance, there might be a standalone cloud-based application that users access through an internet portal, but that doesn’t present itself on the networks that IT tracks. HR payroll, benefits and insurance systems that are signed into through internet portals are examples of this. In these cases, the cloud usage may not be visible --although the costs associated with them certainly will be.
A detailed audit of all enterprise cloud resources can uncover situations like this, because the auditor not only looks at assets tracked by an asset management system -- he or she also interviews individual user departments about the applications and systems they use. This is how the hidden cloud use gets uncovered.
Poor Cloud Utilization
A second source of cloud waste occurs when cloud resources aren’t optimally put to work. IT application testing in the cloud is a prime example.
The virtual operating systems that are deployed in the cloud for application testing are paid for by the hour, minute or second. This is beneficial for developers during testing because the spend is less than if they had to deploy virtual OSs in their own data centers, where hardware and software is capitalized and expended for over years. However, cloud testing becomes a significant cost drain when the application developer completes testing and forgets to de-allocate the test OS that is now idle, and that continues to be charged for. When this happens, the test OS becomes a wasting asset.
Cloud resource waste can also occur when processing and storage are over-allocated. In an on-premises data center, over-allocation is a common practice, because you already own (or lease) the resource and are paying for it no matter what you use. Therefore, you have the luxury of provisioning more processing in case there are spikes or provisioning more storage because you may need it. When this practice of overestimation spills over onto the cloud, the risk is that you might be allocating (and paying for) more storage or processing than you use since there is no absolute “fixed pricing” for the cloud in most cases.
Many cloud vendors have tried to address this problem of over-allocation because they don't want their clients unpleasantly surprised with unexpected costs. Vendors do it by offering on-demand processing and storage that increments and decrements based upon demand. In this way, IT only pays for what it consumes.
Understanding What Cloud Costs
Cloud purchase agreements and bills can be extremely complex, and the challenge of deciphering them is compounded when multiple cloud providers are involved. For example, a virtual operating system might be called an “instance” or a “virtual machine,” depending upon which cloud you're using. Another issue for companies is exceeding the processing and usage thresholds they signed up for. At certain thresholds, new (and more expensive) pricing kicks in. Pricing can also vary depending on what geographies you are operating in. All of these issues are explained in the fine print of cloud vendor contracts, but when the fine print isn't read and higher-than-expected bills come in, companies get surprised.
To help, cloud providers have tried to assist clients in understanding how cloud costs are computed so the element of unpleasant surprise can be eliminated. They have done this by providing tools that can project budget costs based upon forecasts that IT provides -- but the tools are only as good as the data that is plugged into them.
For its 2021 State of the Cloud Report, Flexera, which sells computer management software, conducted a survey of 750 IT professionals. Survey respondents said that they were wasting an average of 30 percent of their cloud spend. Thirty-six percent of respondents said their companies were spending more than $12 million annually on the cloud, and another 32% said that their cloud spend was running between $2.4 and $12 million annually.
The “spend wasters” were idle or underutilized resources that remained deployed in the cloud and were not shut down after use; an inability of companies to understand how cloud providers were charging for services and resources; and internal problems in companies because cloud services were being subscribed to from every corner of the organization with little centralized coordination.
The good news is that there are tools and practices available that IT can use to better manage cloud assets and tamp down waste. If these tools and practices are implemented, there is opportunity to eliminate what many believe is a 30% cloud overspend. Think about the other IT projects and initiatives that could be funded!