10 Cloud Strategies to Avoid Cost Overruns
If optimizing your cloud spending is on your to-do list this year, these tips could help you stay within budget.
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Nearly every company that uses public cloud services -- and at this point, that includes pretty much every company -- has experienced an unexpectedly high bill at some point. And unfortunately, the experts say that problem is likely to get worse before it gets better.
According to Gartner, “Through 2024, 60% of infrastructure and operations (I&O) leaders will encounter public cloud cost overruns that negatively impact their on-premises budgets.”
Over the past year and a half, a big contributor to those cloud overruns has been an increased dependence on cloud computing because of the coronavirus pandemic. The Flexera 2021 State of the Cloud Report found that 90% of respondents experienced higher than expected cloud costs due to COVID-19, and 61% of respondents had significantly higher than planned costs.
How high? Sixty-eight percent of enterprises said they spent more than $2.4 million on cloud computing, and 36% said they spent more than $12 million.
Perhaps it shouldn't be surprising then that the top cloud initiative for 2021 -- cited by 61% or organizations -- is optimizing cloud costs.
However, as cloud usage has grown, cloud environments have become incredibly complex, and anticipating costs has become more challenging than ever. Many enterprises want to reduce their spending but aren't sure where to begin. Others are looking for a “silver bullet” that will take a huge chunk out of their spending without requiring a lot of time and effort.
Unfortunately, most enterprises aren't going to be able to find one of these silver bullets. However, that doesn't mean they can't do a better job of preventing overages and controlling costs.
The following 10 slides highlight strategies that other large organizations have found helpful for avoiding public cloud cost overruns. You might not be able to use them all, and every single one of them will require some effort. But they might be worth it.
Before any of your teams spin up new cloud instances, make sure you understand what kind of costs you are likely to encounter. According to the Flexera survey, the majority of large enterprises (77%) have a centralized cloud team or cloud center of excellence that takes the lead in managing costs. Whenever possible, these teams should be creating models that estimate best-case, worst-case, and most likely scenarios for cloud costs. Even if your organization doesn't have a centralized team or sophisticated modeling tools, all the major cloud providers have calculators that can help you generate a ballpark estimate of your likely costs. Establishing a process that requires users to model these costs in advance is the first step to getting cloud costs under control.
After you've modeled your costs, your next step should be to set up a budget for your upcoming cloud project. You already have an overall IT cloud computing budget, of course. What you need to set up is a budget for the particular services the new project will be using. And you want to enforce that budget with an automated tool if possible.
Most third-party cloud governance and cost management tools can cut off spending if you exceed a certain limit, and the cloud computing providers themselves have also made similar services available. AWS Budgets, Azure Cost Management and Billing, and Google Cloud Billing all give you the ability to set up -- and stick to -- budgets so that you don't overspend. Third-party tools may also give you the ability to make those budgets more granular and project based.
In addition to using a budgeting tool, you should also set up additional alerts well in advance of when you max out your budget. You don't want to be caught off guard when your project suddenly exceeds the budget target and gets shut down. To avoid that problem, set up multiple thresholds that give you advance notice of your spending. For example, you might set up alerts that send an email or text when you have used up 25%, 50%, 75%, and 90% of your monthly budget allocation. Again, you can do this through a third-party cloud management service or through the tools provided by the public cloud vendors themselves.
Cloud spending alerts don't do much good unless you also have a way to dig into your cloud usage and see where you are exceeding expectations. For that, you need a good cloud monitoring tool.
You can use the logging tools provided by the vendors themselves, but ideally, you want a tool that can span multiple providers. The Flexera report found that 90% of enterprises use multiple clouds, so tools that can aggregate data from multiple vendors in one place, while also giving you the ability to dive deep and troubleshoot problem areas, are ideal.
From the beginning of the cloud era, one of the promises of this style of computing has been that it makes it very easy to increase or decrease computing capacity as needed. Unfortunately, enterprises don't always take advantage of the autoscaling services at their disposal, preferring instead to overprovision and use manual processes to control the size and number of their public cloud instances. But while manual processes can give you the illusion of being in control and prepared for a surge in demand, human-dependent processes can never react as quickly as automation. In many cases, an overreliance on human intervention leads to overspending on instances that aren't needed. Instead, use autoscaling and automation as much as possible.
If you have a mix of cloud-based and on-premises applications, you might be overspending on licenses and support. Organizations that use a mix of cloud-based and on-premises services often find that they are getting charged twice for applications, operating systems, or support fees. Make sure you understand what your existing licenses cover before turning on a new cloud service. You should also audit your existing licenses and look for ways to negotiate more favorable terms when it comes time to renew subscriptions and contracts. This hidden source of savings can help you reduce your overall spend and make it less likely that you'll be surprised by a higher-than-expected bill.
How many copies of your data are you currently storing? If your cloud provider is also backing up your data, do you have the right number of backups? Are you moving stored data to less-expensive archival services at the right time or are you keeping data in faster-than-necessary services? Are you using good compression algorithms?
Because the volume of data that organizations are storing in the cloud is growing so quickly, cloud storage is one of the most likely culprits of budget overruns. Auditing your current usage, re-evaluating your strategy, and using automation to optimize storage costs can help prevent these sorts of problems.
For organizations that use infrastructure as a service (IaaS) or platform as a service (PaaS) to run internally developed applications, your own internally developed code might be contributing to your expenses. Make sure that your developers understand how they incur charges when accessing public cloud services. For example, if an application is making multiple, inefficient calls to a database, that might be more expensive than making fewer database calls that request more information each time. They might be able to achieve other cost savings by minimizing the number of storage writes or refactoring code in other ways that both improve performance and optimize costs. Utilizing DevOps practices can help break down the barriers between developers and operations teams and give your developers more awareness of how to help control cloud costs.
Is your organization using primarily IaaS, or are you using primarily PaaS or even serverless? If you're using IaaS, are you running virtual machines (VMs) or containers, and are you using the cloud service's management tools or your own? Choosing a particular strategy of cloud computing is going to affect your overall costs. And unfortunately, there isn't a one-size-fits-all approach that will always result in the lowest costs and fewest cost overruns. But an analysis of your current spending and projected spending for switching to another style of service might turn up some opportunities for savings or to at least minimize overruns.
Many different vendors offer excellent cloud cost management and optimization tools, but in the Flexera survey, only 42% of respondents said that they use multi-cloud management tools. These tools (often themselves cloud-based services) can simplify the process of identifying potential savings, and they often quickly pay for themselves. They can also automate many of the tasks your IT team might currently be handling, freeing them up for other tasks. You certainly can implement some good governance and cost control without paying for one of these tools, but you should at least consider if the return on the investment would make a purchase worth the cost.
Check out other InformationWeek slideshows.
Many different vendors offer excellent cloud cost management and optimization tools, but in the Flexera survey, only 42% of respondents said that they use multi-cloud management tools. These tools (often themselves cloud-based services) can simplify the process of identifying potential savings, and they often quickly pay for themselves. They can also automate many of the tasks your IT team might currently be handling, freeing them up for other tasks. You certainly can implement some good governance and cost control without paying for one of these tools, but you should at least consider if the return on the investment would make a purchase worth the cost.
Check out other InformationWeek slideshows.
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