Introduction

The business world will hit a major milestone within the next year, when more than half of all enterprise IT workloads will live in the cloud.1 As businesses in every sector race to take advantage of the potential and power of cloud computing, many CFOs and CIOs are beginning to see a significant problem emerge: Unchecked cloud usage that leads to highly unpredictable costs. These costs are on a sharp upward trend that can quickly exceed IT budgets. It’s estimated that the typical business is wasting as much as 45 percent of its cloud spend on unused instances, sub-optimal pricing and ineffective planning.2 However, even as awareness of this problem grows, most businesses lack the tools, resources and expertise to effectively reign in cloud spending and optimize cloud usage.

Businesses Race to Capture the Great Promise of the Cloud

Most companies are aware of the great cloud transformation occurring in the business world. By 2018, IDC predicts that 60 percent of all IT workloads will live in the cloud. Cisco projects that 83 percent of all data center traffic will be cloud-based by 2019—the majority (56 percent) residing in public clouds.3 Amazon Web Services (AWS), the public cloud gorilla, will hit 15 billion users in the next year (a 50-percent annual growth) and is expected to reach 50 billion users in the next five to 10 years.

While experts agree that businesses have only scratched the surface of what’s possible with cloud computing, there are already powerful bright spots. Cloud-empowered businesses have the agility to quickly create systems and procure infrastructure, enabling them to respond in real time to market demands and opportunities as never before possible. Access to unlimited computing power—on-demand, without high upfront investment—is transforming growth and innovation paths.

Yet, even as businesses begin seeing their cloud strategies bear fruit, they are increasingly struggling to understand and control the costs.

Businesses have only scratched the surface of what’s possible with cloud computing.



Cloud Pains Create a Tug-of-War in the C-Suite

CFOs and other executives are starting to see the results of unchecked cloud usage and spending: eye-popping monthly bills from AWS and cloud spending that is surging beyond what they previously spent on infrastructure—and well beyond any hoped-for cost savings. “Organizations are surprised by where all the money is going, watching the money flow out the door associated with various cloud solutions,” says Scott Crowder, CIO at BMC, an organization that has earned recognition for its mature cloud strategy. “It always starts out very small—and then it starts to grow exponentially.”

This creates a tug-of-war in the modern digital business: Everyone from the C-suite down to the IT administrator feels pressure to shift more business workflows into the cloud. They recognize “cloud-first” as critical to remaining competitive and positioning a business with agility for the future. But without a sure way to control cloud usage and spending, there’s a looming risk that cloud computing will become a runaway expense that kills budgets—and bottom lines.

Why Cloud Costs Quickly Spiral Out of Control

Cloud Can Offer Too Much of a Good Thing
The very feature that makes cloud computing most attractive—its instant, on-demand scalability—can also become its greatest flaw when not managed properly. Scaling up happens easily, and the relative price savings of spinning up a single cloud instance, compared to traditional on-premises infrastructure, are incredible. Because both “cloud” and “easy” are perceived as “cheap,” businesses—and more specifically, their users—tend not to worry about controlling or limiting the expansion of cloud instances. AWS enables anyone with a credit card to spin up a cloud server in seconds—this is “disaggregation of IT”—and in many organizations, this means cloud usage expands largely unchecked.

Unchecked Cloud Growth Leads to Huge Spending Waste
Unchecked cloud growth leads to another problem: Most organizations do a poor job of turning the lights off when they leave the room, so to speak. Without controls or visibility into their cloud usage, non-critical cloud infrastructure is left running overnight and all weekend long, even though it’s not in use. Cloud instances spun up for temporary workflows or targeted projects are left running for weeks or months beyond their shelf life.

Unpredictable Usage Spikes Leave Business Paying the Premium Cloud Price
The basic cloud story says you pay only for the computing power you use. But the more complicated truth is that cloud providers have complex, variable pricing structures based on basic supply and demand. Planned usage or reserved instances can yield significant cost savings. But most businesses lack the visibility to accurately understand and predict future needs. Moreover, unchecked expansion of cloud instances leads to unpredictable spikes in usage. These spikes leave the business paying the premium cost for on-demand cloud resources, quickly eliminating any costefficiencies of cloud infrastructure.

All of this creates an incredible amount of wasted cloud spending. RightScale found that nearly half of all cloud spending in the typical organization is wasted or unnecessary—falling into one of the use cases just described. ParkMyCloud, a provider of cloud management services, used numbers from Gartner to estimate that companies waste nearly $6 billion in inefficient or unused cloud services every year.4

Most Businesses Ill-Equipped to Control Cloud Spending

Rapidly growing cloud costs are not news to most business executives. In fact, optimizing existing cloud usage ranked as the most common top priority among enterprises for 2017.5 But even those with focused cloud spending initiatives struggle to gain and maintain control for two key reasons. The first barrier is visibility. The cloud transformation has dramatically increased the complexity of IT environments. A recent survey found that only 1 in 3 IT administrators feel they have the modern tools necessary to gain visibility and control cloud usage.6 But even with visibility, managing cloud computing resources is fundamentally different than the way IT professionals have managed IT infrastructure and spending for the past 30 years. Whereas pre-cloud IT solutions were simple one-time investments with static maintenance agreements, cloud solutions demand constant oversight and control across hundreds or even thousands of instances—lining up supply with demand in real-time to optimize usage and costs. That level of sustained vigilance is unlike anything IT teams have ever been required to do before—and it’s something most IT teams are neither funded nor equipped to manage today.

Some leading organizations, such as the aforementioned BMC, have successfully implemented cloud spend optimization internally. However, most others quickly recognize that the relative novelty of cloud computing means they lack the internal spend analytics expertise to effectively tackle the cloud spend optimization challenge. Instead, they’re engaging partners such as Advocate™—trusted names with proven records of helping businesses control and optimize their technology spending.

Only 1 in 3 IT professionals feel they have the modern tools necessary to gain visibility and control cloud usage.



Best Practices for Cloud Spend Optimization

Whether launching a cloud spend optimization initiative on their own or engaging an expert partner, more businesses are adopting a new set of best-in-class tools and strategies to truly make the most of the cloud transformation. These cloud spend optimization best practices fall into four categories:


  • Visibility
    Before cloud usage and spending can be controlled, it must be understood. And to be understood, it must be visible. Cloud usage optimization platforms offer a purpose-built tool designed to monitor cloud usage. Best-in-class cloud usage optimization platforms enable an even more detailed level of disciplined and comprehensive cloud spend tracking. This includes capturing all cloud instances across all environments, providing the core data necessary to optimize costs, as well as creating a critical accountability mechanism. Businesses can track cloud usage back to specific users, teams, departments or projects, thereby enabling accurate calculation of total cost of ownership (TCO).

  • Optimization
    Seeing cloud usage and spending is one thing; making sense of reports and creating action plans requires a much greater level of understanding and expertise. This is where many businesses’ internal cloud spend optimization efforts sputter and stall. To be effective, optimization must effectively hone in on the signal amid the noise of cloud usage data, recognizing instances of waste—from lingering temporary workloads to the over-provisioning that plagues almost 40 percent of all virtualized machines.7 Optimization also includes effective forecasting and strategic planning to take advantage of tiered cloud pricing. Critically, it requires an understanding of how the elasticity of various workloads relate to their defined infrastructure requirements. In practice, this means a more balanced approach weighing the benefits of cloud against those of existing private infrastructure. As BMC CIO Crowder explains, “The first question to ask is: Can it be run internally? Because private cloud is still usually the cheapest option.” Predictable, inelastic workloads will almost always be cheaper when run on internal infrastructure; volatile and seasonal workloads, or those targeted for growth, are best suited to yield benefits on cloud infrastructure.

  • Control
    Preventing the “too much of a good thing” problem requires policy that is both easy and enforceable. Controls must strike a delicate balance, providing a check on the creation of unnecessary or redundant cloud instances, without impeding the innovation, agility and growth of the business. Those tasked with creating CSO policy must have an interdisciplinary understanding of everything from regulatory and compliance requirements, to cloud security best practices, to procurement and contractual considerations, accounts payable and more. Navigating this complexity presents another major barrier to many internal CSO efforts.

  • Real-Time Governance
    Given a focused, supported effort, most IT professionals will find that executing a point solution for CSO is achievable. But the cloud landscape evolves on a minute-by-minute basis in the modern digital business, and that single point of optimized operations is quickly replaced by new waste and new sub-optimal usage. If the promise of the cloud is instant scalability, then effective oversight and governance must also be instant. As mentioned, this requires a level of vigilance and dedication of resources that most IT teams are unable to achieve. Best practice is to monitor cloud usage in real time, establish a design process that controls and addresses issues daily and conduct optimization workflows on a weekly basis.



The Cloud Dream: All the Power, None of the Waste

With the help of experts like Advocate, businesses in every sector are leveraging these new best practices to realize the full potential of their cloud computing strategy. Implementing intelligent policy and controls can reign in unchecked cloud expansion and wasted spending, while real-time transparency into cloud utilization can both optimize existing cloud usage and strategically plan for the future. Most importantly, with the resources and expertise necessary to sustain a vigilant, real-time CSO effort, businesses can gain the agility, scalability and computing power to drive innovation and growth—without losing control of costs.
For more information on Advocate Cloud Spend Optimization services or to schedule your free Cloud Spend Assessment, visit advocateinsiders.com.

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