How to Budget Effectively for Multi-Cloud

A growing number of enterprises are transitioning to a multi-cloud approach. By tapping into cloud services provided by several different vendors, adopters gain the flexibility to select services from individual providers based on performance, security, compliance requirements, geographical location, and perhaps most important of all, pricing.

Many enterprises find it valuable to have a presence in multiple clouds to drive optimal business outcomes. “Even if a technology leader’s goal is to concentrate on one cloud hyperscaler, an acquisition or new business partnership could quickly change the focus,” says Tim Potter, a principal with business advisory firm Deloitte Consulting. “It's becoming increasingly important for all companies to have a multi-cloud strategy -- this includes having a plan to manage financial operations across multiple cloud service providers.”

Multi-cloud technology is still evolving, and budgets tend to be complex and off-putting, particularly for new adopters. “Multi-cloud budgets must be comprehensive, while also having the flexibility to adapt based on evolving business needs and an ever-changing cloud market,” says Bernie Hoecker, partner, enterprise cloud transformation lead with global technology research and advisory firm ISG.

Maximizing Value

Using multiple cloud providers with different pricing models, contract terms, toolsets, support models, and security protocols requires an integrated enterprise strategy, Hoecker says. “Clients that don't have a comprehensive strategy run the risk of significant budget overruns and cloud sprawl, which could cripple the financial budget.”

The most effective approach to effective multi-cloud budgeting is to partner across your organization to understand workload plans, specifically regarding the cloud provider of choice, says A.J. Wasserman, product owner, Cloud FinOps, with Liberty Mutual Insurance. “This will provide a solid baseline for forecasting, which can then be used to drive budgeting,” she explains. “As you go through this process, it's important to attempt to segment the budget by cloud provider to understand how your actuals are tracking compared to the original budget.”

The best approach to multi-cloud budgeting is to focus on a multi-year plan versus an annual budget to allow for both tactical and strategic considerations, Hoecker advises.

Looking beyond budgeting and into financial operations, it's important to define a common tagging approach that can be applied consistently across clouds. This will enable common views, as well as the ability to compare cloud consumption and costs between cloud service providers, Potter says. “Cloud FinOps solutions can help provide real-time insight into cloud spend versus budgets, and alert relevant stakeholders early if costs are exceeding expectations,” he notes.

Planning for Multi-Cloud

Business unit leaders, application/product portfolio owners, and technology platform services teams should be fully engaged in multi-cloud budget planning, led by the IT finance organization or a FinOps group, Potter advises.

A multi-cloud budget should incorporate insights “down to the specific services to be consumed and up to the business initiatives that are driving it,” says Randy Armknecht, managing director, emerging technologies, and global cloud practice leader at management consulting firm Protiviti.

Budgeting should be a team effort, Wasserman says. “At Liberty Mutual, we have a strong partnership between FinOps, architects, finance, and the engineering teams to build the budget,” she explains. “Other companies may consider a similar approach, organizing a cross-functional team to build their budget.”

The cloud is a fast-changing space, Wasserman notes. “Use the best information you have to set the budget, but learn to pivot quickly,” she suggests. Strong cost transparency and reporting should be at the budget's core. “You will need this for chargeback, to set the budget, and to identify optimization opportunities.”

Pitfalls for Multi-Cloud Adopters

A big mistake many multi-cloud adopters make is failing to consider the cost of inter-cloud communications, particularly outlays related to data transfers. “Without thoughtful planning of the systems architecture, the networking and transfer costs can add up,” Armknecht says.

Another common blunder is assuming that moving from one cloud to another will result in an identical cost model. “There's a lot of application workload specifics that will dictate cost, and while services are often similar between providers, they aren’t identical,” Armknecht says. “Sometimes, those differences result in unexpected costs or savings.”

Failing to build an active management and governance model is yet another mistake many multi-cloud adopters make. “Strategies, budgets, and processes can be created, and may look great on paper, but having the ability to execute and course-correct during the multi-cloud budgeting process is critical to success,” Hoecker says.

Perhaps the most frustrating error multi-cloud adopters commit is aiming for budget perfection. “If you're under budget you may not be migrating fast enough, and if you're over budget you may be overspending on planned workloads,” Wasserman says. “Expect the unexpected.”

Takeaway

Migrating to the public cloud is a journey, and budgeting for the multi-cloud is no different. “Cloud budgeting can't be done in a vacuum, so be sure to partner to get the best information available to drive the most accurate budget you can,” Wasserman recommends.

What to Read Next:

Special Report: How Fragile is the Cloud, Really?

You Get What You Pay For: Cloud Edition

How to Maximize Your Organization's Cloud Budget