Insights

How to Manage and Optimize Cloud Spend

November 30, 2022

Is cloudification a boon or bane? Businesses are moving to the cloud to embrace and adopt new technologies. The existing applications move from on-premises into cloud. Businesses use these applications actively in the day-to-day operations. The others are in the development or design phase. To ensure minimum disruption, enterprises take a decision to “lift-n-shift” model to deploy into cloud. The other applications that are in the development phase use IaaS or PaaS platforms, taking into account resource requirements and usage patterns. In most cases, enterprises continue to have physical infrastructure and operate in a hybrid cloud model. 

Enterprises start seeing the of moving to the cloud in the first few years with substantial cost savings. Most of the investment costs are converted into opex and cloud service users get accustomed to the flexibility and on-demand nature of cloud fulfilment. 

Common Solutions

Over time, IT and the finance department observe a steady increase in cloud operations costs that exceed budgeted expenses. Common analytics and remedies include stopping unused and unresponsive server instances, creating better alerts, leveraging the cloud provider’s auto-scaling, monitoring cloud traffic, buying spot or spare instances, switching to serverless computing and more.

All of these are viable options that you can use to reduce your expenses. But is it sustainable in the long run? Enterprises must take a systematic approach to cost reduction by categorizing and analyzing the various operations within the stakeholders. So, what can you do to make it sustainable?

Study Context

According to a report from Gartner, companies need to develop financial management processes. These processes involve multiple roles and departments, including Infrastructure & Operations (I&O), the Cloud Center of Excellence (CCOE), Finance and first-hand users of cloud services. Ultimately, these processes lead to new management requirements and require the introduction of new tools.

A cloud cost management structural framework provides a guide not only for operational aspects, but also for architecture, application development, and DevOps. Applying this methodology can initiate a culture change that makes cloud users more accountable for their IT spending. Ultimately, it can help you learn how to manage costs in relation to the business value that cloud services generate.

Managing cloud costs requires the development of capabilities in five distinct areas:

This framework is provider-neutral and can be applied to all major cloud providers including the hybrid cloud offerings. For this model to work, technical professionals must complete some fundamental prework:

• Determine stakeholders
• Appoint ownership of the cost management practice
• Define cost accountability
• Select governance model

Key Areas

The 6 disciplines are

• Governance – To define policies that govern the cost management practice
• Architecture – To design architecture based on cost optimization principles
• IT Operations – To enforce policies that reduce cost on an ongoing basis
• Product Owners – To define the KPIs that represent the value of applications
• App Development & DevOps – Responsible for provisioning and managing cloud resources
• Finance – Consumes cost reports to produce forecasts and implement chargeback and show back models

Owning the cost management process doesn’t mean having to execute first-hand each of the listed practices. Distribute the execution among the stakeholders. Define and enforce the cost policies. Define the policies transparently and in collaboration with the identified stakeholders and let CCOE make the “final call” on it.

Solution Approach

When implementing cost management, companies can leave responsibility for spending to the I&O team for an initial – and limited – period of time. This approach will help accelerate the implementation of potentially disruptive processes, such as resource release or decommissioning. Applying this guide in its entirety will decentralize and distribute responsibility for cloud spend across all teams responsible for delivering cloud applications and projects in the future.

Approaches to governance model

• “In the way” model – The Central IT acts as a proxy between cloud customers and cloud environment. It helps hide complexities and maximizes central control
• “On the side” model – The centralized IT provides cloud consumers with direct access to native cloud services. IT configures interfaces with the right policies to implement guardrails and guidelines. This approach maximizes user autonomy but reduces control for the central IT.

Gartner recommends the use of “On the Side” governance model which provides flexibility to the Line of Businesses to plan and manage the cloud spend. All stakeholders employ the cost reduction techniques in the context of this framework to meet the intended goal. 

Where do we start and what are the next steps?

• Start with the bill received from the cloud service provider over a period of time 
• Evaluate the application requirements currently in use, the usage patterns, and the value to the business of using the cloud provider’s tools 
• Next, categorize the usage patterns of the various cloud service customers to identify optimization opportunities 
• Follow the Plan, Track, Reduce, Optimize and Evolve guide with a governance model to institutionalize the practices

At Grep Digital, we look at all the above parameters when suggesting a technology path. Contact us for more such fundamental decision points that need to be taken during a technology implementation.

Credits: Gartner Research Articles, Mckinsey Articles