The Mechanics of Cloud Cost Management

Ted Kicey Cloud Governance

As enterprises move more apps to cloud services, managing cloud spending can be difficult challenge for any organization. It can be difficult for those just getting started as well as those with years of cloud experience. There is one key factor, however, that can make a big difference: organizations with strong Cloud Governance processes have significant advantages meeting the cloud spending challenge.

“Cloud Governance” is the general practice of defining processes and operational structures for aligning cloud planning, architecture, and deployments with business and financial strategy. It defines the capabilities, organizational structures, policies, mechanisms, and tools used to guide the cross-functional actions for purchasing, implementing, and operating cloud computing services throughout their lifecycle.

Cloud Governance: The Foundation for Cost Management

Cloud Governance mechanisms are designed to support cloud cost management. These mechanisms focus on several key areas where cloud adoption creates cost management challenges not seen in traditional IT management:

  • Cloud services are readily accessible, easily purchased and deployed, and inexpensive to initiate, allowing anyone with a credit card to start consuming resources…and incurring costs.
  • Traditional IT management and governance assumes most assets are “fixed costs”; this differing greatly from the cloud, which has an unlimited pool of variable resources that can be started and stopped at will. The variable cloud consumption model requires a shift from “fixed asset” lifecycle management to flexible-use resource management. Cloud now requires significantly different new “non- fixed” resource identification and tracking methods.
  • The “pay as you go” cloud computing model enables potential cost savings by invoicing only for resources that are used. However, resource consumption usually cannot be completely accurately predicted, and is dependent on usage patterns, application workloads, network traffic, etc. Many companies struggle with cloud spending forecasts for budget planning, and internal cost allocations.
  • Cloud services pricing/purchasing options are continually evolving. Provisioning new cloud services can be very quick and easy, but may have significant financial implications which may not be fully understood or planned by the business.

The Mechanics of Cloud Cost Management

Cloud Governance provides the foundations and mechanics to help ensure that cloud computing spending aligns with business objectives, and balances the priorities of business stakeholders, users, Cloud Engineering, IT operations, and Finance. Good Cloud Governance defines and enforces the organization’s cloud computing policies, to balance risks and optimize value. This requires implementing appropriate cloud governance roles and responsibilities, operating practices, and procedural activities and tools, providing guidelines for all cloud lifecycle activities, from design and procurement through implementation and operations.

A key focus of cloud cost management is establishing cost accountability. Clear cost accountability with services owners can have a tremendous impact on cloud cost optimization, when fully implemented and embraced.
This should include mechanisms such as:

  • Resource controls to govern processes for deploying cloud services, with appropriate personnel given entitlements to provision cloud services from a set of approved resources.
  • Processes for identifying, monitoring, and categorizing deployed cloud resources. This includes resource tagging enforcement to ensure accurate cost tracking, visibility and allocation across the organization.
  • Budget processes to establish spending forecasts and regularly review cloud spending, and investigate and respond to unexpected anomalies. This includes reviewing and optimizing purchasing options from cloud vendors.
  • Continually monitoring and adapting workloads and their corresponding cloud resources to be more cost-optimized while still delivering on business objectives.

Implementing Cloud Governance may require using certain cloud vendor cost tracking tools. These tools leverage cloud usage data and provide cloud cost reporting on who, what, when, and how cloud spending is generated. These tools report current cloud spending and bring the “science” to forecasting potential future costs, which is crucial for budgeting. There are several tools that take certain automated corrective actions based on defined policies, which can reduce spending inefficiencies.

Cloud Governance and Continuous Cost Management

Cloud Governance in action is a continuous and comprehensive mechanism which is “always on”. Cloud Governance is iterative and should be implemented as an ongoing program, not viewed as a one- time set of activities. As an organization’s cloud services adoption, footprint and capabilities change over time, its Cloud Governance processes and policies should evolve as well. As our clients grow and mature over time, they see significant gain from their cloud management activities, addressing many cost management challenges through ongoing Cloud Governance.