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Cloud Cost Management: How to Take Control of Your Cloud Costs?

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For years, cloud services have been advertised as a way to automate and optimize operations. Although it is true that cloud migration contributes to overall agility, makes your infrastructure easily scalable, you still have to set up, monitor and analyze the performance of the services. Your resources change, your business evolves, the market fluctuates, all these factors might influence your cloud usage. If you neglect to monitor and address these changing factors, your cloud bill will go up and place a large financial burden on your business. In this article, we will discuss cloud cost management challenges and highlight a few best practices that will help you keep the costs under control. Our experts have been delivering DevOps consulting services to enterprises and ISVs globally and have put together a set of recommendations that will help you establish an effective long-term cloud cost management strategy.

Why Do Companies Struggle with Cloud Cost Management?

So what is cloud cost management and why do companies still struggle with its proper implementation? Cloud cost management refers to a set of actions aimed at optimizing cloud spend across the organization. These actions include forecasting, allocating, monitoring and reporting the costs, as well as ensuring their visibility and transparency for every department. Although some basic cost management solutions are usually provided by the cloud vendor, most companies require more advanced tools to adequately optimize their expenses. In this section, we will explore the main reasons why more sophisticated tools and systems are needed.

Risks of Pay-per-Use

Cloud bills are notorious for their complexity and technical content that most financial managers cannot comprehend. Especially if a company works with multiple cloud providers or adopts a hybrid model, financial reporting becomes even more challenging and requires both advanced technical and financial skills. Moreover, the billing procedures change and additional services emerge which complicates the operations and leads to oversight.

For example, one of the main reasons for cloud migration is the flexible pay-per-use billing model that allows companies to only be charged for the instances they actually use. However, with no clear-cut cost management process, this model can backfire and lead to inadequate bills. Pinterest fell victim to this pricing structure and was billed an extra $20 million, in addition to their regular $170 million payments. Amid the high season, Pinterest’s traffic has significantly increased which caused the disparity and brought them way over the estimate.

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Lack of Governance

Cloud resources are way too easy to consume causing significant democratization in cloud services set-up and consumption. When companies utilize their cloud resources without a coherent cloud cost governance model, they often struggle to regain control over their spending. As a result, whenever an issue occurs, it might take days or even weeks for the development team to detect and recognize the source and eliminate the excessive spending.

Adobe also made a miscalculation in 2018 and racked up $80,000 per day in unplanned changes on Azure. Their team struggled to identify the source of the ever-growing bill for a week and by that time the bill has risen to over half a million. This can be attributed to the decentralization of the cloud that allows people to create additional environments and inefficiencies that gradually decrease the transparency of the assets.

Difficulty of Budget Forecasting

AWS auto-scaling is a primary example of a cost control service that helps companies to stay within budget. However, this function only works for existing services that have historic data based on which predictions can be made. With the introduction of a new service or app, you need to calculate how it would affect the costs in the future. But without tangible historic data, this task becomes increasingly more difficult and requires deep expertise. Especially if your organization employs several cloud service providers, building meaningful and realistic budget forecasts can be extremely challenging.

Inconsistency across Teams

Most companies cannot afford to assign a separate team to be in charge of cloud cost control. As a result, these tasks are usually delegated to DevOps and engineering teams that might not be well-versed in finance management. Moreover, these teams require resource flexibility to perform their duties best and often neglect cost-saving strategies. An effective approach is to facilitate collaboration among financial, business and IT departments and issue policies that prevent radical increases in cloud costs. However, reaching such agreements can be quite a challenge that requires months of discussions as well as long periods of trial and error.

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Why Is Cloud Cost Management Crucial?

Luckily, there are a few best practices that will help you take control of your expenses and enhance cloud spend management techniques.

Right-Sizing and Auditing

The most valuable tip is to ensure that your cloud instances match the organization’s needs. This step requires continuous communication across the departments as well as regular reevaluation and audits. Left untouched, cloud costs might go up and result in a large bill by the end of the period. Make sure you monitor the services and verify the actual usage of the instances. Sometimes, companies have multiple active services that perform the same tasks or completely unused instances that still contribute to the overall bill. Organize regular auditing sessions to identify and eliminate redundancy, underperforming instances and unused services.

Requisitioning and Decommissioning

If you notice that your company accumulates a large number of unused or inactive instances, you might be lacking proper requisitioning and decommissioning processes. To circumvent this issue, enforce necessary policies to make sure the resources are correctly decommissioned when they are no longer relevant. Creating such policies will allow you to maintain a more transparent system and reduce the volume of shadow instances in the background.

Organizational Changes

Continuous and open-channel communication among the departments is crucial for establishing a coherent and well-functioning cloud cost management strategy. Business, finance and IT departments might have different ideas about resource allocation and without proper communication, this will lead to high bills. Launching cross-functional teams might aid in avoiding communication gaps and will allow employees, including low-tier workers, to contribute their opinions. Non-executive employees are the ones who are more likely than executives to know where the resources are needed. Keeping your teams cross-functional and including specialists from various departments and areas of responsibility can help them make coordinated and efficient decisions.

Consider Multi-Cloud vs. Single Cloud

The reason for choosing multiple cloud providers is mostly vendor lock-in concerns. However solid the reason is, this strategy ads management overhead and might prevent you from taking advantage of exclusive discounts. For example, if you are spending $50,000 on AWS and $50,000 on Azure, you might be missing out on reaching a $100,000 tier at either platform and receiving a bonus or discount. On top of that, you are dealing with administrative issues of switching between the vendors and training personnel to use both platforms.

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Review Billing Information

Cloud services billing structure tends to be highly complex and requires financial acumen and technical knowledge. If you have a team of professionals who are qualified to review the billing information and identify expensive areas, challenge them with the task. Alternatively, you can employ a third-party service provider to make sure you lead a cost-effective strategy. DevOps specialists can help you identify problematic areas, optimize your strategy to maximize the output and generate a money-saving cloud cost management tactic. Understanding the resources you use and the costs you pay will help you make informed spending decisions and prevent unexpected jumps in overall bills.

How to Align Cloud Spend Management with Cloud Transformation?

The cloud cost management market size is growing and expanding while millions of companies are still struggling with lengthy and convoluted cloud transformation processes. The key is to align cloud spend management with the cloud transformation before you launch the migration. Especially in the current economy, shifting the focus to cost control and operational efficiency is incredibly important.

Try to involve project managers and business analysts in the IT strategy as early as possible to allow them to have up-to-date information. Cross-functional teams are a great help in this stage and create space for employees from various teams to share their objectives and align the company-wide strategy. Considering cloud migration as solely an IT project is a big mistake and can lead to misunderstandings, financial losses and failed objectives.

Another recommendation is to reassess your IT goals through the business lens. Common IT goals include automation, workload efficiency, agility, quality of service and others. However, if you reformulate these objectives using business vision, they might become more understandable and tangible for your non-tech personnel. Using parameters like customer experience, user retention and productivity may help you bridge the gap between the IT and business goals and consolidate them into a single strategy.

If you are ready to begin the transformation but require help from professionals, get in touch with Sigma Software. A certified AWS and Azure partner, the Sigma Software team can facilitate a smooth and cost-effective cloud transition. Their seasoned business analysts and software engineers work together to build custom cloud cost management strategies for their clients.

 

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