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Keeping a lid on SaaS & infrastructure costs

According to Gartner, the cloud services industry is growing more than five times faster than other IT categories, as more and more companies move away from internal hardware toward greater use of public cloud infrastructures.

In fact, cloud adoption is growing rapidly at a 26 per cent annual rate, and 50 per cent of enterprises are expected to be using a hybrid of the public and private cloud by 2017.

A cloud-based Windows or Linux server can cost less than $1 per hour. Even after a year, the cost of that server is less than $9,000. Considering that cost in contrast to the hardware, space, power and cooling and other costs that the cloud service is replacing, $1 per hour is quite inexpensive. The same comparison applies to Software as a Service (SaaS) applications, like Customer Relationship Management (CRM) apps, that cost as much as $65 per user, per month (or about $2 per day).

You can have your CRM application in the cloud with no hardware and software maintenance or upgrades to worry about. The benefits of SaaS do seem significant. Everything is contained in the subscription price, and there are no licensing concerns. You subscribe to a capacity, and simply use the software.

The cloud is certainly enabling enterprises to shift costs away from purchasing hardware, services and running their own data centres. However, are companies actually saving money and spending wisely on their cloud infrastructure? The massive spend shift identified by Gartner underscores the need for enterprises to start tracking, managing and optimising cloud services usage – essential for eradicating waste, controlling costs and improving utilisation.

Software as a Service

Most businesses have virtually no insight into whether they are spending too much on cloud services, or are efficiently utilising their investment. Most have multiple cloud accounts, often purchased in a decentralised fashion by different departments and business units, with no single adoption and usage view across the company.

They need a way to automatically import usage and billing data from several accounts to deliver a centralised view across the enterprise. In addition, as companies continue to adopt cloud services and create even more complex, heterogeneous IT environments, their asset management tools must evolve and expand to optimise on-premises hardware and software assets, and cloud infrastructure services.

Costs for cloud infrastructure services and software running in the cloud need to be managed whether they are SaaS applications or Bring Your Own License (BYOL), whereby companies host existing enterprise applications in a cloud environment. The cloud presents license compliance risk in BYOL instances, as well as risk of substantial over-spending on subscriptions for SaaS applications and cloud infrastructure services.

In fact, costs can easily spiral out-of-control if not closely managed. However, organisations can keep a lid on these costs with the right Software Asset Management (SAM) processes and tools.

Infrastructure as a Service

Infrastructure as a Service (IaaS), offers the option to only incur infrastructure costs when needed, which works great for test workloads since there is no need to buy a permanent piece of hardware and have it sit idle most of the time. Simply turn on virtual machines, which are computer files that behave like an actual computer, for the amount of time needed. When the virtual machines are off, payment stops.

However, most people are not used to turning virtual machines off – which means oftentimes organisations pay for more cloud service than they need. The cost of the wasted usage appears insignificant at pennies per hour. However, because a large enterprise may have thousands of idly running virtual machines, the pennies add up rapidly.

For numerous production loads, the virtual machines always need to be on – so, is there a way to save money here? Absolutely. Depending on the cloud provider, subscription pricing, may be an option, meaning lower prices for “reserved” instances. The savings compared to pure, on-demand pricing can be quite significant – 40-50 per cent over time!

SaaS Challenges

However, with SaaS, the challenges come when you closely examine the vendors’ rules regarding how the software is used. Most Business to Business SaaS software can be purchased at different levels – but buyers do not really know what they need, so they purchase the most expensive option. Do all users really need the expensive license?

Unless you have a SAM tool to track their usage – you do not know, and therefore you are likely overspending. Since you need to provide power users the ability to do their jobs, this results in subscriptions being under-utilised by other, casual, users. Even if you have different levels of access, how do you make sure the right subscription level is associated with the right user?

After all, users will complain if they do not have access, but will rarely let you know when they have too much access.

Tips for SaaS Migration

Organisations migrating to the SaaS delivery model should:

  1. Carefully assess the licensing, contractual and spend management implications.
  2. Remember that the deal you negotiate now will be the baseline for many future contract renewals, so it is best to invest concerted effort and get it right the first time.
  3. Know up front that managing ongoing costs and selecting the optimal subscription plan level for offerings such as Office 365 are more than doable, but can be challenging.

IaaS Optimisation Tips

On the other hand, organisations can optimise cloud infrastructure services by: 

  1. Utilising a dashboard providing an executive-level view of the use of cloud resources, presenting aggregated consumption patterns and total spend across all cloud subscriptions. Enterprises can analyse data and view consumption reports and breakdowns based on instance sizes and types, subscription models (on-demand or “reserved”), assess consumption rates by departments and perform various trending analysis.
  2. Tracking cloud services spending and usage across all departments to eliminate over-buying and underutilisation of cloud capacity and instances.
  3. More effectively negotiating volume discounts and rationalising usage of cloud instances.
  4. Enabling IT’s transition to a service-based organisation by centralising management of cloud services – minimising overhead, managing costs and facilitating chargeback of cloud services.
  5. Optimising usage of pre-paid capacity (reserved instances) to minimise costs.

Businesses are quickly subscribing to public cloud services to decrease infrastructure costs and provide flexible computing resources that can be quickly scaled upward or downward, depending on demand.

However, real cost reduction and efficiency will only occur with visibility into, and control over, cloud services spend. SAM processes and technology need to be able to account for, track and manage cloud infrastructure services.

Cloud services can provide real benefits. However, regardless of the type of cloud services used, companies must consider employing software license and subscription optimisation processes and technology to optimise their investment in cloud services and software.

These tools will help identify idle and under-utilised instances and subscriptions, and identify license compliance issues. This will help maximise return on cloud services investment, whether in SaaS, IaaS or other types of cloud services.

Vincent Smyth, General Manager for Flexera Software’s business in Europe, Middle East, Africa and the Indian Subcontinent 

Image source: Shutterstock/TechnoVectors 

Vincent Smyth
Vincent Smyth is Senior Vice President EMEA at Flexera Software, responsible for driving increased revenue, market share and customer satisfaction in the Enterprise, Government, ISV and Intelligent Device marketplaces.