Title: Managing Cloud Costs: A Guide for Businesses
Introduction:
Cloud services have become an indispensable part of the modern business landscape, enabling companies to compete and innovate. However, the cost of these services can easily spiral out of control if not properly managed. According to a survey, a significant number of businesses experience budget overruns, with approximately 30% of global cloud spending going to waste. In this article, we will explore the challenges associated with cloud costs and provide practical tips on how businesses can effectively manage and control their cloud spending.
The Challenge of Controlling Cloud Costs:
1. The opacity of cloud billing:
Cloud billing can be exceedingly complex, with thousands of services and acronyms that make it challenging for businesses to understand what they are paying for. As a result, businesses often find themselves faced with unexpectedly high bills, eroding their budgets.
2. Lack of visibility and accountability:
Many companies lack visibility into their cloud usage and lack an established process for setting and enforcing budgets. This lack of oversight, combined with the absence of tools, prevents businesses from effectively controlling their cloud costs.
5 Tips to Control Cloud Costs:
1. Educate and raise awareness:
Start by creating awareness among employees about the magnitude of wasted cloud spending. Highlight the financial impact this has on the company’s overall budget and emphasize the benefits of cost reduction, such as the ability to invest in new products or expand into new markets.
2. Establish a FinOps team:
Form a dedicated finance operations (FinOps) team that includes senior financial executives and IT leaders. This team should create a framework that promotes accountability by assigning ownership of cloud spend to different business units. Each team should be responsible for their own budget and cloud consumption, enabling clearer tracking of costs.
3. Automate cloud cost management:
Leverage the growing number of tools available in the market to gain real-time visibility into cloud spend, detect overspending, and optimize resource allocation. Automate monitoring processes to identify spending anomalies and potential security risks. Additionally, take advantage of auto-stop tools to eliminate unnecessary expenses during non-utilization periods.
4. Incorporate cloud into procurement processes:
Implement cloud asset policies that require individuals to justify their cloud spending. Integrate cloud procurement controls into existing processes to align with overall procurement practices. Treat cloud expenses with the same scrutiny as any other major equipment purchase.
5. Regularly review and optimize cloud costs:
Managing cloud costs is an ongoing process. After addressing major cost inefficiencies, businesses should continuously monitor and optimize their cloud expenses. Use forecasting tools to reduce uncertainty and plan for future cloud usage, optimizing spend on an ongoing basis.
Expanding on the Topic:
While controlling cloud costs is crucial for businesses, it is equally important to understand the broader context and implications. Here are some additional insights and practical examples:
1. Cloud Cost Optimization:
Effective cloud cost management goes beyond simple cost-cutting. It involves optimizing resources and identifying areas for efficiency. For example, rightsizing resources to match actual workload requirements, leveraging spot instances for non-critical workloads, or adopting serverless architectures can significantly reduce costs while maintaining performance.
2. Cloud Governance:
Implementing robust cloud governance practices is essential to control costs. This includes establishing clear policies, procedures, and guidelines for resource provisioning, monitoring, and reporting. By implementing governance frameworks, businesses can ensure that cloud resources are used efficiently and in alignment with business objectives.
3. Cost-aware Development Practices:
Adopting cost-aware development practices can have a significant impact on cloud spending. By integrating cost considerations into the development lifecycle, such as implementing cost monitoring and optimization tools, developers can make informed decisions that result in more cost-effective solutions without sacrificing performance or functionality.
4. Cloud Spend Optimization Strategies:
Externalizing some responsibilities to specialized cloud optimization service providers can help businesses control cloud costs. These services typically offer a mix of technical expertise, cloud expense management tools, and cost optimization techniques to help businesses maximize their return on investment in the cloud.
Conclusion:
Managing cloud costs is essential for businesses to avoid budget overruns and optimize their cloud spending. By raising awareness among employees, establishing dedicated teams, leveraging automation tools, integrating cloud into procurement processes, and continuously optimizing costs, businesses can gain control over their cloud spending. Additionally, adopting optimization strategies and considering broader governance and development practices can further enhance cost efficiency. A proactive approach to managing cloud costs will not only drive savings but also enable businesses to invest in innovation and growth.
Summary:
Cloud services are essential for businesses to stay competitive in today’s market, but managing cloud costs can be challenging. Many companies experience budget overruns and waste a significant portion of their cloud spending. However, by educating employees, establishing dedicated teams, automating cost management, incorporating cloud into procurement processes, and continuously optimizing costs, businesses can regain control. Additional strategies like cost-aware development practices and outsourcing cloud optimization services can further enhance cost efficiency. With effective cloud cost management, businesses can redirect savings towards product development, customer acquisition, and innovation.
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Many companies don’t give it much thought, but lurking in their books is a huge expense that can easily get out of hand. I’m talking about the cost of cloud servicesthat almost all companies need to compete in today’s world.
How volatile are cloud costs? It’s not a pretty picture. in a survey of 750 US companies Across a wide range of industries, more than a third had cloud budget overruns of up to 40%, and 1 in 12 exceeded that number. The global situation is equally shocking. Around the world, companies will invest nearly $600 billion in cloud spending this year. Conservative estimates indicate that almost 30% of that amount (around $180 billion) is wasted.
Most companies would not tolerate such waste in any other part of their business. But runaway cloud costs remain an exception, thanks in part to opaque billing. A typical scenario: A business finds out that its account with Amazon Web Services or another large cloud provider has increased from $100,000 to $150,000 in just one month. What gives? The cloud may be easy to buy, but good luck figuring out that bill, which may include thousands of services full of acronyms used by company software engineers.
Having worked as CFO for several technology companies, I have seen how quickly those costs can add up. Think of it like the Wild West of spending: massive, unpredictable costs with little to no accountability. That’s why it’s so important to have a strategy for managing cloud spend. For entrepreneurs and their companies, taming the beast means more money to invest elsewhere.
Here’s how cloud costs became such a big problem, plus five tips to control them.
Related: Three Ways Tech Companies Can Cut Cloud Costs
Why the cloud is so easy to buy and costs so hard to control
In the old days, companies bought and maintained their own servers. Upgrading meant buying more hardware, a time-consuming task. Then the cloud came along and changed all that, catering to the growing appetite of enterprises for on-demand computing resources. The good news: Software engineers could quickly buy what they needed without having to wait for long approval and procurement processes, which helped speed innovation. The bad news? Lack of control over spending, which continues to increase as offers become increasingly complex.
For most companies, the dirty little secret is that they don’t understand how much Cloud Computing power, storage, and other features they really need. There is often little visibility into what other teams are doing, plus minimal accountability, and no one sets or enforces budgets. This is compounded by the lack of tools to help them look under the hood.
How to save your business money on cloud costs
Working with Fortune 1000 companies, from large banks to airlines, I have seen up close how dramatic the cost savings can be. Here are five ways to take action:
1. Spread the word that everyone wins by reducing cloud costs.
Controlling cloud spending starts with education and awareness. Simply sharing with employees the true magnitude of the problem can be powerful. We’re not talking about saving a few bucks. For many companies, wasted cloud spending represents one of the biggest budget items.
Then, instead of taking a Big Brother approach, convince teams of the benefits of lower costs. The more a company can control cloud spending, the more money it will have to hire another software engineer to develop a new product or another sales representative to penetrate a new market. The message: everyone wins if they get it right.
2. Get FinOps on the case
FinOps (finance operations) may sound technical, but it’s just a name for the team that creates a process and framework for managing cloud costs. From sales to human resources, today almost every department has an experienced and dedicated operations team. As a major operating expense, the cloud needs the same attention.
The FinOps team might consist of just two or three people, for example, a senior financial executive and the CIO or CTO. Ask them to create a framework that encourages accountability by assigning ownership of cloud spend to different business units. To get a clear, detailed picture of costs, give each team responsibility for their own budget and how much cloud they consume.
3. When in Doubt, Automate Cloud Checks
Manually reviewing cloud bills each month for overages and inefficiencies may seem archaic, but many companies still rely on this ad hoc approach. A much better strategy: take advantage of the growing number of tools on the market that help enterprises gain real-time visibility into cloud spend, spot overspend, automatically optimize where resources are allocated, and even offer suggestions for economizing on spend.
For example, an alert system to detect spending anomalies should be a safe bet. In addition to detecting questionable purchases by staff, this alarm can detect intruders, for example, crypto miners enjoying company servers.
To avoid shelling out idle cloud computing power, organizations can also use auto-stop tools. Let’s say that every day, from 9 pm to 6 am, the usage of a subscription service drops to zero. Eliminating manual controls, Auto Stop eliminates that expense.
4. Make the cloud part of the procurement process
Automation of governance and approvals is also crucial. Would a company approve a large equipment purchase without asking questions? Any company that spends millions of dollars a year in the cloud should have procurement controls. With a cloud asset policy toolYou can set up security barriers that require people to justify their cloud spending.
5. Keep ‘taking care of the cloud garden’
Like a garden, cloud costs require constant pruning. After taking care of the biggest, wasteful expenses, keep taking care of the smaller ones or they will quickly spiral out of control again. Cloud Cost Forecast can help reduce uncertainty about future use.
All that yard work is well worth it, because the potential savings are huge, up to 30% to 50% for many businesses. This is real money better spent elsewhere: product development, customer acquisition, and teams for whom the cloud should be a means to drive innovation, not an expensive headache.
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