Are Your Cloud Costs Outpacing Your Growth?

Here are three key business areas to investigate as you assess how the cloud is serving your larger business goals.

Guest Commentary, Guest Commentary

March 29, 2021

7 Min Read

As organizations begin executing their plans for 2021, budgets will remain under intense scrutiny -- and rightfully so. The tumult of 2020 has carried over into the new year and forced organizations to continue to justify every dollar they spend. Inevitably in the budget conversation, cloud costs take center stage.

IT leaders may find themselves under pressure to justify spend that’s much higher than what they projected or cloud bills that exceed company growth. If you find yourself in this situation, don’t panic.

By paying attention to how the cloud is serving your larger business goals, you’ll be able to right-size your spend, optimize your usage, and justify the cloud resources you need. Here are three key business areas to investigate.

1. Operations: Are you using what you’re paying for?

The first thing to investigate when cloud costs seem out of sync with company growth is operations. Specifically, it’s important to ask whether your organization is currently using what it’s paying for -- and if that use is delivering value toward your desired outcomes.

In most cases, answering this question requires forensic analysis of your cloud usage. Because this kind of analysis can be complicated and difficult, it’s a great opportunity to bring in an objective third party that can guide your research and keep you focused on essential business questions.

Often, costs grow faster than anticipated because the people using the most cloud resources are not focused on budgets. These people -- often developers -- are focused on solving problems as quickly as possible so they can move on to the next problem. In many cases, the quickest solution involves spinning up a new cloud instance or provisioning a new resource.

This scrappy, problem-solving mindset will often lead an organization to find itself in new areas of the cloud unintentionally, as fast-moving developers adopt new services, they know will solve problems. This is doubly true in 2021, where distributed teams will continue to improvise to solve all kinds of problems.

While a bias toward action can work on the micro level, it can lead to problems at the macro level. For example, when new services don’t get spun down when they’re no longer needed, organizations end up paying for zombie clouds.

A forensic analysis can spot these unused resources so organizations can eliminate them.

It’s not just unused services that can drive up costs unexpectedly, though. Let’s say you built an application utilizing a number of AWS Lambda functions, which are billed per second of transaction time. If you projected two seconds per transaction but each one takes four -- something you couldn’t have known until launch -- you’re likely paying far more than you estimated.

Still, if you need Lambda to deliver the experience your customers expect, then you are using what you’re paying for. The budgetary challenge becomes defining the ROI of that service to determine whether the spend is justified.

Of course, using what you have in the cloud is only one part of evaluating spend. It’s also important to investigate whether your existing resources let you innovate and deliver value for the business.

2. Strategy: Can you innovate as fast as you want?

To answer this question, organizations first have to get to the what and the why: What do you want to do and why do you want to do it? What, in other words, is your critical success factor? Once you’ve defined that, cost conversations become easier: Do you still want this result if it costs X? If it costs Y?

Just as important to consider here is that the cloud is not the only factor affecting the speed of innovation. In many cases, the development process itself can be adjusted for significant time and cost savings.

For example, maybe you have an AWS environment that you set up a decade ago. Because of its structure, only a few developers at a time can make changes to code. This means that code deployments that should last for minutes go on for hours days and new features take far too long to go live.

Updating the structure of the environment and the team could translate to shorter outages, happier customers, and more sales. Even if the costs don’t change, the ROI does. In fact, a key part of examining your cloud strategy is defining your expected ROI. That ROI may not be in dollars, either. For example, are you willing to spend 3x more for 10x better performance? Will you stop being competitive in your industry if you don’t offer a certain level of speed or reduce latency to a certain point?

Whatever the ROI of your cloud investment is, you want to quantify it. Even rough estimates, if that’s all you can get to, are more than enough to start.

One guiding principle I’ve found to be helpful across organizations is that of intelligently deployed cloud elasticity. Elasticity fosters innovation by providing flexibility while keeping spend in check. This begins with the identification and configuration of your cloud baseline -- the minimum functionality your business needs to operate. Once this is configured, you have the fixed baseline from which your resources can scale to meet changing needs.

Scaling your cloud up and down is where the third business component of controlling cloud spend comes into play.

3. Culture: Does your team have the right access to cloud resources?

Another way to ask the culture question is this: Do you have a culture of compliance? Do you have clear governance policies for who can use cloud resources and under what circumstances? For many organizations, the answer is no.

This often becomes an expensive problem. Why? Because it is incredibly easy to provision new resources and services in the cloud. It’s so easy, in fact, that it’s not uncommon for an organization to get a cloud bill for nine or 10 times the amount it was expecting as new services are explored.

One truly beautiful thing about the cloud is that it makes correcting this problem easy by allowing for continuous compliance. The cloud's ability to define and audit active compliance controls is unmatched. The biggest challenge organizations face is setting these controls up in the initial configuration process. This is almost always skipped or overlooked -- making updates later in the process significantly more difficult and costly.

Once continuous compliance is set up, it has the potential to save an organization a lot of money because it automatically prevents the unintended, unregulated spend that leads to so many surprise bills.

With the right cultural mindset here, the restrictions that compliance imposes can actually fuel innovation. It’s a move akin to pushing developers to write sonnets rather than free verse: The rules of the form will force them to try things they might not have otherwise. The outcome will be a more standardized environment that’s much easier to work with.

Again, the big lift here is investing the time and energy in setting up your cloud environments properly in the first place. This is a place where an objective third party can be invaluable for making sure you handle this process thoroughly and that you end up with a system that ensures you’re working within appropriate limits.

For 2021, budget optimization is critical

Earlier in this article, I noted that it may “seem like” your cloud costs are out of sync with your growth. This is an important mindset to maintain: Just because costs are high doesn’t mean they’re not justified. Tying all cloud spend to desired business outcomes will help determine whether costs are truly out of sync -- or whether they merely need to be contextualized differently within the business.

Just as important will be remembering that managing cost doesn’t have to mean limiting utility. Optimizing your team, governance practices, and processes can empower you to shift and reallocate resources to increase their impact.

If 2020 taught us anything, it’s that being able to adjust to unexpected operations and requirements is essential. As we race into 2021, having cloud resources and teams set up correctly will ensure that organizations are able to do just that, within their allocated budgets.


Eric Dynowski is the Chief Technology Officer at ServerCentral Turing Group (SCTG). SCTG offers cloud-native software development, AWS consulting, cloud infrastructure, and global data center services.


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