Most IT teams migrating their systems to cloud computing will reluctantly admit that managing expectations for increased cloud spending has become a problem. To explore this growing issue, we talked to some of our customers to find out more.
By now, most companies of all sizes are moving significant workloads to cloud platforms, and many spend large and growing amounts of their IT budget on cloud services. This may be challenging to the IT Finance teams, who have limited visibility to current spending, and minimal ability to forecast future spending.
In our discussions, we learned that IT teams enthusiastically embrace the latest technical innovations from AWS, Azure, and GCP. But if you ask how they optimize their growing cloud costs, you will likely be greeted with uncomfortable silence. Some cloud adopters say they just try to make sure they don’t have more servers or storage than they need. Most IT engineers would rather discuss how they are deploying exciting new cloud features and capabilities.
When moving to cloud, it can be a challenge to know “how” to optimize cloud spending, and what process controls can ensure costs are kept in line with expectations. Keeping expectations in line requires regular communications among teams about actual and planned cloud spending. IT teams today, however, are mostly avoiding the issue, and focusing on technical design and deployment, not cost optimization.
Some of our recent observations:
- Executives expect cloud to be “cheaper” than on-premise IT – but that may not be true
- The CFO either doesn’t focus on cloud spending, or doesn’t know how to start
- “If the CFO doesn’t complain, it ain’t broke.”
- If the budget isn’t exceeded, IT staff doesn’t highlight cloud spending
Without more proactive policies to align cloud costs with management expectations as spending increases, difficult conversations will result.
What to Do?
Managing expectations can be as simple as putting reporting procedures in place to check billing accuracy, and regularly re-aligning spending with budgets. It is critical to regularly review your cloud spending to make sure it is both accurate and reflects your current needs. As new cloud spending increases, internal and external mistakes can be more common.
Recently AWS erroneously over-billed customers by up to 300% – a potentially unpleasant surprise. Many IT teams work with their vendors and tools to optimize cloud usage – and spending – to tune cloud services for the technical requirements of applications. However, many IT groups need to put in place the cloud cost management “guardrails” – necessary policies, procedures, and staff — to actually implement important spending controls and safeguards.
We have found that investments in cloud cost governance can quickly generate savings and cover its costs. Most organizations migrating to cloud benefit from a dedicated cost management function with specific process to optimize their cloud costs. Savings of 25% or more can be achieved with the addition of basic governance processes and tools.
Managing Expectations with FinOps
Cloud cost management and governance is a new specialization, and a valuable addition to IT engineers’ skill set. It’s natural to put architectural discussions first, but new controls processes are needed to highlight where cloud spending is concentrated. A new “FinOps” methodology has recently been developed to address this growing need (www.finops.org).
Using these new disciplines, designing cloud architectures with cost optimization in mind is an “easy add”, with the right guardrails in place. In our experience, well-crafted cloud cost governance “FinOps” processes are the best way to keep management’s expectations in line, to enable the rapidly growing use of new cloud services.