Much like a millennial showing their baby boomer parent how to use social media, cloud-native companies are often perceived as having the edge over their legacy rivals due to their familiarity with the cloud. This isn’t without reason as the benefits that being born in the cloud has given these companies are clear, but their reliance on the platform could also be their undoing.
This familiarity can lead to overconfidence and in turn, uncontrollable cloud costs. With more traditional rivals now well up to speed on how to use the cloud to their advantage, cloud-natives need to avoid saying ‘okay boomer’ and falling back purely on the cloud.
There is no doubt that leveraging the cloud has driven advantages for digital businesses. This is borne out by the litany of digital-first firms who have disrupted traditional players in their industries. However, this cutting-edge technology doesn’t always support effective cost management. These young upstarts must take desperate action to maintain their edge, or they are in danger of becoming victims of their own success.
The reason many cloud-natives are facing challenges is multifaceted. With unswerving faith in the cloud, it’s highly likely that this group will make continued investments in this technology without effective analysis. Paired with the ‘move fast and break things’ mantra that many young companies have, this can lead to cloud usage and costs escalating out of control – wiping out the business value derived from cloud-based applications.
In some organisations, a cloud-first mentality can result in a lack of accountability and an overall reckless approach to managing the cloud – whoever requires it first gets it first, with zero concern paid to costs. This unintentional spending on cloud is called ‘cloud sprawl’.
All too often this situation is fostered because cloud-native players lack both visibility around resources and effective inter-department communication. This means it’s impossible to link the business strategy to cloud usage. While digital players must capitalise on the benefits of the cloud, they must also understand its impact on budgets and business goals.
Strategic business targets and the balance sheet have suffered because the goal for many cloud-native businesses has been to scale quickly, unencumbered by the liabilities of their legacy competitors, or even being profitable. This isn’t inherently a problem, but the rules of business dictate at some point in time a firm must turn a profit, which can be challenging for cloud-natives when they have ploughed everything into growth via cloud and struggle to claw spending back.
Spiralling cloud costs are a threat. Cloud-native businesses need to consider how they remove that threat – take a step back, consider the wider businesses objectives and how the power of the cloud can be bridled to meet them.
Controlling the cloud
In order to tackle a hubristic approach to the cloud, CIOs and CFOs of cloud-native players need to start with a holistic snapshot of cloud spending. To achieve this, they must leverage data, drive transparent inter-department communication and continually optimise their platforms to eliminate cloud sprawl. In this way they can build an informed strategy anchored in realistic spending.
Running workloads in the cloud can be expensive if not managed properly. This makes it necessary to also understand how using more cloud will impinge on networking, storage, risk management and security expenditure. Analysing the costs in this helps businesses to decipher the total value that is being driven by cloud usage and then link it back to the strategic requirements of the business.
With cloud being carved up among business units, from marketing to IT, a cloud-native player can’t develop the total picture of usage or cost. Departments leverage multiple clouds for various requirements, and, over time, this results in increased usage. This happens even when there is no actual demand on a ‘just in case’ basis.
The regular communication between IT and the other various business units still isn’t happening – 41 per cent of IT decision makers say that decisions on cloud are made in siloed departments, with either IT or a business unit deciding without communicating with each other. Each department has different needs and it’s down to IT to collaborate with them to make informed decisions.
To manage this issue, cloud-native players should adopt a Single Source of Truth (SSOT). An SSOT involves structuring information models and associated data so every data element can be edited in one place. With this centralised system of record, all cloud data and costs can be viewed transparently and communicated to any part of the company.
Without an SSOT, cloud usage can become split between business units or devolved to different applications and software or compute power and storage. Again, this creates a situation where it’s almost impossible to see what is being used, paid for and what cloud capacity is required.
There’s not always a silver lining
One of the main triggers of cloud sprawl is the assumption that the cloud is the solution to every business requirement. Not every business unit should go all in on the cloud. In some instances, on-premise is a better option, because it enables more direct control over workloads. Nearly half (41 per cent) of IT leaders say that on-premise offers more agility in workload control than cloud
Moreover, on-premise offers greater control over rewriting and refactoring costs. This can be crucial for guaranteeing more efficient operations, especially when benchmarked against the cost of complete cloud migration.
A hybrid approach is seen as striking the right balance by many in the industry. One survey found that a 70/30 split of cloud to on-premise was the perfect balance, enabling specific mission critical applications to stay, but most of the compute power to move into the public cloud. However, a shift towards hybrid cloud needs to be accompanied by a culture shift throughout the business which enables communication around, and understanding of, hybrid IT.
Once these considerations have been decided on, it’s important for cloud-native players to continually optimise. This can be as straightforward as analysing whether an instance would be more efficient if it is managed on a pay-as-you-use cloud model versus a reserved spend. Or, perhaps calculating the value that can be gained from migrating depreciated servers to the cloud. Optimisation helps to support improved decision making, but also managed cloud usage and expense.
The rocketing cloud usage and costs of the ‘okay boomer’ attitude that some cloud-natives have embodied is leading them into difficult territory, often resulting in cloud sprawl, careless investment and missed business goals. However, this situation can be remedied with a more considered approach and a realisation that the silver lining does not always lie in every cloud.
Henrik Nilsson, Vice President EMEA, Apptio