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Cloud overspending: Three questions to ask before you bust your budget

(Image credit: Image source: Shutterstock/Omelchenko)

Managing cloud spend can be complicated, and as a result many IT departments overspend on cloud services. In fact, industries studies (opens in new tab) have noted that companies overspend on cloud resources by 35 per cent or more. And, rather than tackle the challenge of reducing or eliminating the overspend costs, companies often just budget for them. Understanding the complexity of cloud spend and appropriately budgeting for it is crucial to managing and optimising your IT costs. In fact, the average U.S. business predicts it will spend $1.8 million on the cloud in 2017, and organisations with more than 1,000 employees predict they will spend $10 million or more (source).

To help gain a better understanding of your cloud spend and in turn improve the management of it, there are three questions you should ask before purchasing or implementing new technologies.

How do I know how much I should spend on cloud?

If this is your initial deployment to the cloud, determine exactly what you are utilising in the on-premises data center both from an application and capacity standpoint. You want to make a consumption based shift to the cloud, so your cloud environment is utilised well and there is no waste from day one. To use an analogy, you are cleaning and getting rid of unused items before moving to the new house.

Set aside time to plan your cloud strategy and assess the goals and needs of your organisation. Evaluate the type of cloud resources and options available that best suit the needs of your workloads. Examine how the organisation’s environment will scale over time. Will the resources currently available meet the technology demands of your organisation or do you need additional assistance? Having a clear view of the strategy, roadmap and plan for the cloud will help your organisation take advantage of the full technical benefits of the cloud.

As your organisation adopts the cloud, establish a culture of accountability. Be proactive and make sure you have visibility into what cloud resources are being used, who is using it, and what the budget and spend is.

Once you have a better understanding of your requirements, what you want to accomplish and a sense of accountability, you are in a better position to accurately budget and track spend against it.

The common misconception is that cloud is lower cost and easier to manage. But, without upfront planning, governance and controls, the cost and management of your cloud environment could easily spiral out of control.  

What solutions and strategies are available to assist with cloud savings and cloud management?

As noted above, 35 per cent of cloud usage is wasted. Given this, how do organisations figure out where that 35 per cent is going? Quite often, organisations using the cloud have a multi-cloud environment and struggle with continuous tracking and optimisation. As a result, these organisations turn to third party solutions to gain the needed visibility. Generally speaking, third party solutions are at a layer above the native cloud provider functionality. The benefit here is that an organisation utilises a single User Interface (UI) to gain visibility into their multi-cloud environment instead of navigating the functionality of native cloud providers.

Three areas of focus - people, process and technology  - are also important to the governance and management of your multi-cloud environment. The technology will provide the levels of visibility and insights you need across your multi-cloud environment. But it is just as important to identify people as lines of business, stakeholders and IT teams that are accountable and can take action to optimise their respective cloud environment. A process is needed to keep the people engaged, so they can proactively plan, prioritise and optimise their cloud environment. 

With increased adoption of the cloud taking place, there is also a new role emerging – chief cloud officer (opens in new tab). Managing cloud spend can be difficult, overwhelming and easily spiral out of control, and chief cloud officers are becoming a popular role for organisations looking to scale and optimise their environments internally, while keeping their budgets in-line. Along with the solutions to help manage cloud spend, a chief cloud officer is the next step towards ensuring people, processes and technology are working together for a complete cloud strategy.

I’ve figured out that I’m overspending -- a lot -- on my cloud services. What do I do now?

Remember this: optimising and reducing go hand-in-hand. The next step to getting a hold on managing your cloud spend is to optimise. You’ve figured out what is driving up your cloud costs through proactive planning and tracking. Now, to optimise you must assess the tracking results and ask yourself key questions such as: What parts of my environment are underutilised? What resources can I consolidate? What resources can I turn off during non-business hours? Are there test / dev environments that are no longer needed? 

There is no one answer to optimising your cloud spend, but having the people in place that know their cloud environment and holding them accountable will make sure the right questions are being asked and answered. Digging into the tracking results allows an organisation to find the pain points that are contributing to surging cloud costs. This can lead to productive conversations with company stakeholders and the leadership team about where and how to deploy key resources.

When a business has a solid understanding of how to best optimise its environment, it can begin to reduce cloud spend. This ensures the monthly cloud budget isn’t being wasted on unnecessary resources and that the organisation reaps the full benefits of its cloud adoption. 

It’s important to note that since the cloud is always evolving, it’s critical to view cloud spend and management as a cyclical development. Failing to consistently and continuously monitor cloud usage and optimise resources leads to overspending. Work with your organisation's key stakeholders to determine an appropriate timeframe to assess resources -- on a monthly, quarterly, or yearly basis. An organisation’s cloud plans should be revisited as organisations grow and business goals evolve.

Lawrence Schwartz, CMO at SoftwareONE (opens in new tab)
Image source: Shutterstock/Omelchenko

Lawrence Schwartz is the CMO at SoftwareONE.