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3 steps to optimize cloud spend

JANUARY 2024

PUBLISHED JANUARY 2024

Sound data, prioritization and governance can prevent companies from falling victim to "cloud sprawl"

Cloud solutions revolutionized the corporate world over the past decade. Companies invested time and money to move their data and applications to a central nervous system that promised efficiency, elasticity and cost savings.

But a few years into the transition, some CIOs and CFOs are looking at their budgets and IT operating expenses and wondering where things went wrong. Cloud spend is high, and not everyone is seeing the maximum return.

If your company isn’t seeing the return on investment you hoped for, you’re not alone. Overspending on cloud is a digital pandemic. The term “cloud sprawl” gained traction as corporations realized the pitfalls of unused space, unchecked storage growth and limitless levels of cloud resources/workloads due to lack of cloud governance. These elements of cloud sprawl weigh down organizations financially and expose them to budget overruns.

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Chadd Schwartz

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Jason Ashabran

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CLOUD SPEND LANDSCAPE

31% 31% of enterprises spend more than $12 million on public cloud services every year (RightScale, 2022)

50% Nearly 50% of IT executives struggle to control cloud costs (State of Cloud Cost Report 2022)

$678 BILLION Global spending on public cloud services is expected to grow 20.4% in 2024, totaling more than $678 billion (Gartner, Inc.)

53% 53% report cloud waste stems from a lack of visibility into true cloud usage and costs (State of Cloud Cost Report 2022)

The good news is companies can take three steps to turn things around. This article will show how collecting and analyzing your spend data , executing quick-turnaround, high-value projects and building a sound governance structure can show near immediate returns and set your business on the right path.

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Obtain cloud spend data

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"You can’t optimize cloud usage if you don’t have the data to understand what to act on."

CHADD SCHWARTZ, CLOUD DELIVERY LEADER

In IT huddles and board rooms across the nation, leaders are looking at their cloud bills and scratching their heads. As with any problem, the first step to solving it is determining the cause.

“A lot of customers say, ‘Our cloud bill is too high, but we don’t know why,’” said Chadd Schwartz, Kforce’s senior director of cloud delivery. “They don’t have the right data to understand how much they are spending on specific resources and where to start optimizing.

“You can’t optimize cloud usage if you don’t have the data to understand what to act on.”

A CIO article reported 94% of enterprises surveyed globally are overspending in the cloud due to a combination of factors including underused and overprovisioned resources and lack of skills to utilize cloud infrastructure.

Companies need to make sure they have the right cloud spend management and reporting tools to provide insight into their cloud spend and utilization anomalies. This includes tools that provide tagging strategy and management, resource optimization and rightsizing, identification of underutilized or orphaned instances are essential. Native-platform tools such as Amazon Web Service (AWS)’s Cost Explorer and Microsoft Azure’s and Google Cloud Platform (GCP)’s cost management tools can help. But in many cases, these may not be sufficient to obtain the data and metrics necessary to make decisions. Without the right cloud cost optimization tools, organizations lose track of cloud spending across an increasingly disparate range of suppliers and vendors. Cross-platform tools such as Datadog Cloud Cost Management, CloudHealth and Cloudability can provide more robust reporting and insights and typically pay for themselves, if used properly.

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Prioritize cloud spend optimization

Once a company evaluates their cloud spend data, it’s time to act on it. Remember: you can’t do everything at one time. Focus on the biggest bang for your buck. Be realistic.

“The sooner a leadership team accepts that they can’t fix everything right away, the sooner a company can start prioritizing projects and making progress,” Kforce Cloud Lead Strategist Jason Ashabran said. “Selecting a first step that brings immediate benefits and is simple to execute will help garner buy in and launch this process.”

Cloud cost management tools will help with a first-pass prioritization, but leaders need to apply their own business priorities and objectives.

Many companies have robust and complex change management processes. If that is the case, prioritizing low hanging fruit to obtain early cost savings may be the priority. For example, identifying and cleaning up orphaned and idle instances, particularly in development and test environments, could be easy, quick wins with minimal business disruption or change management approvals. Automated turn-off and turn-on of idle non-production workloads during non-utilized times, such as nights and weekends, could potentially cut cloud bills in half.

Companies that did a lift-and-shift approach when migrating to cloud likely sized their cloud environment to what they had on-premise, resulting in overprovisioned workloads. Gartner estimates that a low 30% utilization rate is common for these costly production environments. This has led to the creation of unnecessary or oversized instances, resulting in shockingly large bills.

Right-sizing cloud instances based on utilization metric data could be a huge cost-saving opportunity for these companies.

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Establish cloud financial management governance

Most companies lost control over their cloud spend because they didn’t have the right governance structure in place to start. Cloud sprawl infected their IT landscape.

Implementing cloud cost-management best practices isn’t the job of a single person. It requires a culture change and participation across engineering, operations, executives, finance and business managers. Each of these roles needs the right level of reporting for showback, or integration with finance tools for chargeback, to expose them to the financial impact of the decisions they’re making.

“The last thing a team wants is to go through all the time and effort of obtaining data, prioritizing projects and executing the work, only to have the same mistakes repeat and continue,” Schwartz said.

Establishing cloud FinOps best practices and wrapping a cloud financial management governance model, typically within a Cloud Center of Excellence, will help maintain your financial management posture. Developers don’t always have visibility into cost management factors, so the Cloud Center of Excellence needs to provide the appropriate insights and govern cloud resource selection.

Once cloud financial management governance controls are defined, cost management and reporting tools often have real-time monitoring and alerting features built-in to report and automate optimization tasks. Defining architecture standards and/or establishing provisioning review boards will ensure any new cloud instances are checked and verified for optimal requirements.

Cloud financial management governance also comes with a mindset shift to educate business, application and product owners on the guardrails and controls to manage cloud spend.

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