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Mary E. Shacklett
April 10, 2023
6 Min Read
simon bratt via Alamy Stock
This is good news for cloud services providers and their business clients, but it’s not without concerns. For instance, a CloudZero survey revealed that 60% of companies felt their cloud costs were too high, but only three in 10 could account for where their cloud spend was going.
With tighter IT budgets in 2023, it is incumbent on CIOs and IT leaders to maximize the IT resources they have and to avoid wasting budget dollars. Assessing the effectiveness of cloud usage is a good place to start.
Getting To Know the Cloud Can Be Cloudy!
It isn’t easy to understand how your organization is using cloud resources, the benefits you are receiving, and the resource underutilization that you may not be aware of.
In IT, the growth of self-service cloud resources for developers, such as being able to render and deploy their own test environments for testing applications, doesn’t necessarily make it mandatory for someone to look closer to ensure that, once testing is complete, the storage and processing resources that were allocated for testing are then de-allocated.
In end-user areas, the growth of citizen development and mini-IT budgets for individual user departments also complicates being able to monitor cloud resources for effective utilization. A user can ink a contract with a cloud services provider and begin to use resources without anyone actively monitoring how fully these resources are being used.
You can’t overestimate the attractiveness of someone being able to instantaneously subscribe to and deploy IT in a cloud without having to amortize it over time like a capital investment, or even go for budget approval on it. Unfortunately, with this laissez-faire cloud deployment model, the financial vulnerability for companies is that they may be spending more than they need to on cloud, and they might also lack visibility into how they are invested in cloud services. The CloudZero survey shows this.
Given these factors, how do you assess the effectiveness (and the efficiency) of the cloud investments that your company is making? Follow these four steps:
1. Know that assessing cloud use is political as well as technical
If users are subscribing to cloud services on their own, even if they are not fully using these services presently, they will argue that they will be using those services in the future. If the users have their own mini-IT budgets for cloud services, citizen development, etc., these will be jealously guarded from an old CFO trick that companies play out in annual budget meetings. The trick is that CFOs look at what you actually spent on a given budget category (e.g., outside IT services). If your spend was lower than what you had been allocated for the previous cycle’s budget, finance will seek to reduce your budget to a lower figure based on what you actually spent, plus some kind of incremental increase. Hence, the pressure is on for individual user departments and sub-departments within IT, to protect what they budget for cloud services.
Given the political nature of the situation, it might be advantageous for IT (or whoever is charged with assessing cloud spend) to procure an outside resource to assist in performing a cloud spend assessment.
There are a number of companies that provide this service, as well as traditional IT audit firms.
2. Simplify cloud billings
One of the things you will want to ask of your cloud cost evaluator and cloud vendors, is for ways to simplify the bills that you receive for cloud services.
In many respects, billing for cloud services rivals the complexity of telecommunications billings. For the latter, companies became so frustrated with trying to figure out their telecom bills, that they brought in outside consultants to break down the bills, explain them, and to find ways to save on costs once the breakdowns were understood.
Cloud service providers know that the complexity of their bills frustrates customers. Accordingly, many of them offer bill breakdown tools and services that help companies understand what they are paying for. It’s also highly recommended that companies issuing RFPs to cloud vendors list ease of understanding bills as one of the evaluation criteria on their RFP checklists.
3. Identify the major areas of cost bleed
It’s relatively straightforward to predict where your cost bleed is with cloud services. It will be in underutilization of what you are paying for; failure to optimize cloud usage for least cost; or leaving dormant the cloud assets that you are buying.
By looking at the results of your cloud spend evaluation, you can spot areas of cloud under- or non-utilization, as well as where you are spending more on cloud processing and storage than you need to pay.
These areas are likely to pop up for every corporate cloud user, because one of the benefits of cloud is that you can deploy it instantly and on demand. While this is a great advantage, it comes with the drawback of not always assessing the cost impact of deploying cloud resources on the fly.
4. Mitigate cloud overspend
Cloud overspend can be mitigated in several ways. Here is rundown of common overspend causes, and how to fix them:
A common area of dormant cloud resources you continue to be charged for is application testing.
Developers can now provision their own operating systems and test environments in the cloud. This saves time for database administrator and systems programmers, who in the past did this work. Unfortunately, self-provisioning also leaves cloud resources in place once testing is done. Why? While application developers can self-allocate cloud storage and processing, they forget to de-allocate these resources. The result is dormant storage and processing you continue to pay for.
This situation can be addressed by establishing rules for how long cloud processing and storage can remain active, notifying users of that fact, and then automatically de-allocating after a period of non-use time (e.g., 30 days).
A second area of financial exposure for companies is that no one really knows how many cloud vendors and resources the company is using.
Users, as well as IT, can subscribe to their own cloud services if they have the budgets to do so.
There should be a centralized knowledge of the total clouds and cloud spend that a company is using/incurring. A best practice for achieving this is for IT to use corporate-wide asset management software to track all clouds, regardless of who subscribes to them. IT and Finance will likely work together, since the financial group also needs to know the total cloud spend.
Another area of company cloud waste is not optimizing cloud utilization.
Does all of your processing need to occur at times when cloud resources are most expensive, or can you schedule usage to occur in off-hours when the cloud has cheaper utilization charges?
When you allocate more cloud resources to meet the demand of a busy retail season, do you also systematically de-allocate processing when sales are slow?
Finally, at what price point does it make sense to negotiate a fixed price, discounted contract with a cloud vendor?
Addressing all these issues should be part of your overall cloud spend and optimization strategy, giving your organization more bang for its cloud dollars.
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About the Author(s)
President of Transworld Data
Mary E. Shacklett is an internationally recognized technology commentator and President of Transworld Data, a marketing and technology services firm. Prior to founding her own company, she was Vice President of Product Research and Software Development for Summit Information Systems, a computer software company; and Vice President of Strategic Planning and Technology at FSI International, a multinational manufacturer in the semiconductor industry.
Mary has business experience in Europe, Japan, and the Pacific Rim. She has a BS degree from the University of Wisconsin and an MA from the University of Southern California, where she taught for several years. She is listed in Who's Who Worldwide and in Who's Who in the Computer Industry.
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