Rightsizing Your Public Cloud Spend

Due to a lack of planning, management oversight, and operational processes and controls, organizations are wasting an estimated 35 percent of their spend on public cloud computing resources such as those provided by Amazon Web Services (AWS), Azure, and Google Cloud (GCP).1 This wasted spend can negate or exceed the cost savings realized by switching from on-premises to cloud services. It is imperative that enterprises evaluate their cloud consumption and deployment strategies and develop plans to stem this wasted spend so that they can realize the expected financial benefits from migrating to the cloud.

IT asset management (ITAM) managers are uniquely placed to implement and execute cloud cost management and optimization programs as part of their overall portfolio of responsibilities. As more organizations inexorably migrate more workloads to the cloud, ITAM managers’ current responsibilities for managing and reporting on-premise investments will need to expand, if they have not already, to include cloud usage and costs.

The rush to the cloud

The cloud can provide numerous benefits to companies including improved access to the latest technologies and increased solution flexibility, while minimizing capital investment and total cost of ownership. Given the rapidly improving offerings by cloud providers, consumers can also quickly access the latest hardware and software technologies without significant up-front capital investments. The cloud allows developers and end users to quickly and seamlessly request and access compute and storage assets. The cloud centralizes the management of computing resources across multiple companies, yielding economies of scale. Due to these benefits, an estimated 91 percent of organizations are using the public cloud.1 However, many enterprises have rapidly moved workloads to the public cloud without first designing and executing strategies and controls to effectively minimize costs, optimize resources, and reduce risks. Based on these factors, optimizing cloud use for cost savings is the top initiative for cloud consumers for the third year in a row.

Drivers of cloud spend waste

Uncontrolled IT spend has always been an issue for many organizations where it is not visible or properly authorized from central Procurement. Cloud models can quickly compound this issue. In theory, anyone with a credit card and credentials can quickly purchase and deploy cloud resources with minimal oversight. Since product orders are fulfilled over the internet, centralized purchasing may be circumvented resulting in suboptimal spend. In addition to uncontrolled procurement, other specific causes of cloud waste include:

— Complex monthly cloud bills that can be millions of lines long and difficult to understand and analyze

— A constant stream of new instance types and services, which limits standardization

— Variable payment schedules complicate existing spend management practices

— Complex discounting structures such as reserved instances or spot instances confuse users

— Cloud consumers who often have little to no visibility into what their applications will cost in the cloud

— Lack of tools to deploy automated policies and controls to systematically minimize cloud waste

— Use of multiple public clouds, which compounds the challenges associated with a using a single cloud provider.

Where to start

Optimizing cloud spend can be a daunting task. The disparate groups utilizing cloud resources can be overwhelming. The actual needs for developers can be difficult to ascertain. As cloud consumption grows, the level of complexity involved with getting a handle on cloud resources increases. Acting to efficiently prevent or detect and correct wasted cloud spend can be difficult without adequate investments in people, processes, and technology.

The best way to start is to complete an assessment of your cloud cost management maturity level combined with a historical cloud spend analysis. These assessments will help you identify options to quickly stem some of your wasted spend as well as facilitate long-term strategies to help optimize the value you receive from your cloud spend. A maturity assessment should include the following questions:

1. Sizing: What is the process for sizing instances prior to procuring them? Do requestors have an understanding of the financial impacts of their sizing decisions?

2. Environment reductions: How are instances identified for decommissioning? How quickly are they decommissioned?

3. Storage: Are unattached volumes quickly identified and decommissioned? Is the storage class requested and deployed matched to the actual need?

4. Pricing model strategies: Is your organization planning for and executing nonstandard pricing models? A good example is purchasing and deploying AWS reserved and spot instances (which can have a significant cost savings over on-demand deployments). Similarly, are you preserving sustained instance discounts by continuing to use GCP assets that have been deployed long enough to qualify for them? Critically, are you using a centralized billing model so that the entire organization can benefit from prepurchased instances?

5. Monitoring: what processes, people, and technology investments has your organization made in monitoring cloud purchases and deployments? Can you, for example, quickly quantify cloud spend by business unit and project? What level of automation do you have to provide this reporting?

6. Metrics: what benchmarks for cloud spend does your organization have? Are financial targets understood in the context of group and project success? Most importantly, are the financial projections made for your migration to the cloud coming to fruition?

Solutions

Based on the results of your internal assessment, you can effectively build your optimization program to maximize the benefits from your cloud spend. Sample areas to focus on include:

1. People 

Effective accountability, teaming, and personnel are key for any cost optimization initiative to succeed over time. For example, without proper oversight from individuals with the authority to mandate and drive change and to hold cloud users accountable, cloud cost optimization programs have a reduced chance of success as teams often revert back to their status quo operating model.
ITAM managers should focus on ensuring that teams across the organization work collaboratively to drive cloud optimization. For example, ITAM managers should work with their teams to proactively identify opportunities to reduce waste and optimize cloud spend, such as through reserved instance planning.
Adding experienced cloud cost managers or third-party providers who have a deep understanding of the complexities of cloud cost optimization can empower ITAM managers to be successful in these initiatives. In fact, Forrester has found that “The complexity of managing cloud spend has forged a role dedicated to this challenge,” the Cloud Cost Manager role.2

2. Processes 

Developing consistent, enterprise-wide lifecycle processes to effectively request, deploy, manage, and report on cloud resources is key. These should be robust enough to minimize any unnecessary and uncontrolled cloud spend while maximizing the agility that developers and users gain from using cloud deployments. A good example is building prepopulated cloud instance templates (to reduce deployment times).

3. Tooling 

Most organizations lack effective tools to report on and proactively manage their cloud resources. Many organizations utilize native cost management tools provided by each cloud vendor. The result—IT staff ends up using multiple native cloud management tools, none of which effectively help them to make decisions about the most cost-effective resource available for their needs. Tagging assets across multiple platforms can also be very inefficient. For these reasons, an integrated platform that reports on spend and simplifies cloud management across the major vendors can be an especially worthwhile investment. These tools can help solidify gains by automating policies and controls that prevent future overspend. They also prevent overspend by driving accountability by reporting which groups and individuals are purchasing and consuming cloud resources.

Conclusion

Cloud spending and deployment is forecasted to take an ever larger share IT spend in the enterprise. This growth, coupled with the sizable waste of cloud spend that occurs at most organizations, creates the need for a cloud spend optimization and management function. This function naturally fits into the existing responsibilities for ITAM managers. By proactively seizing this opportunity, ITAM managers can quickly create significant value for their organizations.

About Todd Greenwell

Todd Greenwell is a partner at KPMG LLP.