Why are so many enterprises failing at cloud cost management? Let’s find out

Public cloud continues to grow in popularity, and top providers such as Google, Amazon Web Services (AWS), and Microsoft Azure offer competitive prices to attract enterprises.

Nowadays, we all know that organizations are moving their workloads to the cloud, but the first thing that comes to consumers’ minds is the sting of cost overruns. After budget planning and initial sizing, costs are the reason to start headaches for IT managers. Seeing the current situation, enterprises soon will need a structure to integrate cost-effective measures.

For instance, Jeff DeVerter, CTO at Rackspace Technology and Official Member at Forbes Technology Council, commented, “Many businesses have found out the hard way in 2020 that their IT systems, resources and spend tracking weren’t ready for COVID-19.” Further, he added, “With a 59% increase spend on IT tools, businesses have been forced to adapt quickly to a changing environment.”

When businesses start their journey with the cloud, they often miss putting a cost management framework in place. Further, that results in a situation usually termed as the “cloud sprawl.” These lead to cost overruns.

Cloud infrastructure offers many advantages for enterprises and presents some challenges too. It’s easy to get benefits such as security, scalability, and control. Still, it is equally important to understand how cloud impacts your enterprise—in that case, the cost is the most important thing.

For instance, as per the SoftwareONE Managing and Understanding On-Premises and Cloud Spend report, about 37% of respondents said erratic budget costs were one of the key cloud management pain points. And about 30% faced difficulties with a lack of transparency and visibility.

What is cloud cost management?

Cloud cost management is an idea to manage all the cloud expenses of businesses efficiently. The process primarily includes understanding the costs related to your cloud and removing the unnecessary ones. In short, it means finding the most cost-effective ways to maximize your usage at the lowest price possible. Thus, it involves network traffic, managing memory, instances, storage, and several other expenses.

Some of the key challenges identified are as follows:

1. Billing complexity 

  • It refers to the complexity of most cloud service providers’ continually varying billing practices and the invoices they provide.
  • If you don’t have an idea about your bill, your cost optimization efforts will go in vain.
  • As per the RightScale report, enterprises waste about 30% of the money they spend on the cloud.
  • So we safely can say that enterprises can save a lot of money by using advanced solutions to track their usage and cut down on cloud costs.
  • One can use cloud costs management tools such as autoscaling features, automation, serverless services, and cloud vendors’ containers.

2. Lack of visibility

  • It masks security threats and leads to various network and application issues that directly impact costs. For instance, as per the “The State of Cloud Monitoring” report, about 95% of individuals said visibility problems led to a network or application performance issues.
  • Thus, lack of a dashboard gives enterprises no way to organize, optimize, and monitor their cloud-activities, impacting the overall costs.

3. Budget forecasting

  • Numerous cloud platforms, such as Amazon Web Services (AWS) offer auto-scaling features to control cloud costs by adjusting capacity. However, when new apps/services are introduced, forecasting gets complex and needs deep expertise, setting up workflows and processes, and the right data. Thus, posing a challenge for enterprises to manage cloud cost.

4. Poor application architecture design

  • Software architects, while developing a cloud application, think about the cost associated with specific application features. For instance, the price of a particular query for a widget installed in a web application might cost thousands of dollars.
  • Thus, lack of experience and skills often leads to poorly designed applications for cloud-based platforms, hence impacting the overall cost management.

5. An approach toward methodologies and policies

  • When each team of an organization tries to follow its own methods for managing cloud costs and resources, the result is more focused on organizational change than technology implementation.
  • If teams are not on the same page, then it gets tricky to manage cloud costs.

6. Lack of accountability

  • If the cloud platform is not well-managed by an enterprise administrator or well equipped, the data may get leaked via pen drive or email. Thus, it gets difficult for the administrator to find out who leaked the information. Further, it poses a major challenge in cost management.

When we talk about cloud cost management, how can we forget the biggest name in the industry, i.e.,  “Amazon Web Services (AWS).”

As per AWS, there are five recurring challenges to cloud cost control – take a sneak peek!

  • Forecasting complexity – is a complex process that needs the right data and skills; therefore, it is a fundamental challenge to cloud cost control.
  • Oversizing – is one of the most common reasons for overspending and even the easiest to crack.
  • Sub-optimal architecture – selecting this for your workload will lead to higher cloud costs.
  • Software inefficiency – results in challenges such as it cannot measure efficiency of software and cloud cost control. For instance, software inefficiency leads to reduction in IT service opex and scosts between USD 3.3 million and USD 0.3 million per year.
  • Inelasticity – another challenge which is inelasticity and it takes longer to warm up, thus it does not auto-scale quickly.

Once these challenges are solved, you are good to go and will have a right-sized, optimized, and efficient cloud in place. For instance, to track your AWS cloud spending across various projects, departments, and business groups, CloudSpend solution is the best for cloud cost management.

Google Cloud depends on three primary tools for cloud cost optimization:

  • Pricing efficiency – includes capabilities such as per-second billing, sustained use discounts, flat-rate pricing, committed use discounts, or other volume discounting features that enable one to optimize rates for a specific service.
  • Cost visibility – includes data regarding how one spends in detail, how specific services are billed, and the ability to display how/why one spent a particular amount to achieve a business outcome.
  • Resource usage optimization – it implements a specific set of standards that draws an appropriate intersection between performance and cost within an environment.

Summing up –

There are many reasons why enterprises have failed to optimize their cloud spending. Thus, a lot of it has to do with unavailable or faulty cloud strategies. Also, the inability to highlight cloud cost management importance to the employees. Therefore, leading to a massive hole in the management’s cost budget plan.

When enterprises use cloud services, they must make sure that they have cost management strategies to control their spending as they continue to migrate services to cloud providers.

Cloud waste is getting severe these days, and the numbers are awe-striking. If neglected, trash will only increase and will keep deepening the hole that has already burnt our pockets enough.

Thus, cloud cost can be managed by planning your cloud resource utilization, optimizing cloud performance, and selecting smart cloud features. Additionally, collaborating with the right managed service provider can further contribute to significant cloud cost savings.

“Always do more than just slashing costs — manage your cloud spend to get teams together and fuel innovation.”

For much such facts and insights, explore our latest whitepapers on cloud.