Platinum linings: how to rein in cloud expenditure

Cloud ser­vices are gob­bling up an increas­ing­ly large share of cor­po­rate tech­nol­o­gy bud­gets as busi­ness­es rush to dig­i­talise. The search is on for ways to keep costs in check and extract max­i­mum val­ue for mon­ey from the cloud.

Gart­ner cal­cu­lates that expen­di­ture on pub­lic cloud ser­vices will surge from 9% of glob­al enter­prise IT bud­gets in 2020 to more than 14% in 2025. Its researchers have esti­mat­ed that glob­al spend­ing in this area rose by 23% year on year in 2021 to $332bn (£249bn). They’re expect­ing a fur­ther 20% increase this year.

“Human­i­ty is gen­er­at­ing ever more data,” observes Max­im Melame­dov, co-founder and CEO of Zesty, a provider of soft­ware designed to opti­mise cloud util­i­sa­tion. “It’s inevitable that we will see infla­tion in the costs of run­ning, stor­ing, man­ag­ing and get­ting insights from this tremen­dous amount of data.” 

Busi­ness­es have been updat­ing their IT infra­struc­ture for more than a decade as they keep pace with dig­i­tal­i­sa­tion trends in their indus­tries, but the process in many sec­tors has been accel­er­at­ed by the Covid cri­sis. Indus­tries rang­ing from retail and enter­tain­ment to finan­cial ser­vices and trav­el have been going dig­i­tal-first. They have moved their com­put­ing pro­vi­sion from small-scale, in-house data cen­tres to the big pub­lic cloud providers, such as Ama­zon Web Ser­vices (AWS), Google Cloud and Microsoft Azure. 

With providers car­ry­ing the risk and cap­i­tal expen­di­ture of run­ning data cen­tres and rent­ing out stor­age and com­put­ing capac­i­ty, this already offers busi­ness­es con­sid­er­able effi­cien­cy sav­ings. But, even with these improve­ments, busi­ness lead­ers are start­ing to become sen­si­tive to the scale of the invest­ment required. 

“Cloud costs are becom­ing more vis­i­ble to the C suite as a grow­ing recur­ring expense,” notes Mar­tin Hosken, chief tech­nol­o­gist for cloud ser­vices at VMware. This top­ic is “mov­ing up the food chain in most organ­i­sa­tions because it is so out­come dri­ven – and CEOs care about out­comes”.

Mov­ing from in-house data cen­tres to out­sourced cloud pro­vi­sion can actu­al­ly prove more cost­ly at first, because it may take sev­er­al months to trans­fer every­thing over. In that bimodal inter­im, com­pa­nies are pay­ing to use both sys­tems. A cost-sav­ing tip from Hosken is for firms to ratio­nalise the use of their apps dur­ing the migra­tion rather than doing a ‘lift and shift’, in which the apps are moved en masse. 

While busi­ness­es will want their move to the cloud to be quick and effi­cient, they should first care­ful­ly assess each app they use to ensure that it isn’t con­sum­ing an unnec­es­sary amount of pro­cess­ing pow­er and stor­age space, he stress­es. 

Com­pa­nies should keep their wits about them and beware of pub­lic cloud costs that can quick­ly esca­late as appli­ca­tions scale up to mil­lions of users. Providers offer the abil­i­ty to cap usage and there are ways of reduc­ing waste, so that an app will con­sume com­put­ing resources only when nec­es­sary. 

A cost-sav­ing method that many com­pa­nies have adopt­ed is to use mar­ket forces and play com­pet­ing ven­dors off against each anoth­er, Hosken notes. Rather than depend­ing on a sin­gle provider for all their cloud needs, which would give them less bar­gain­ing pow­er, they are using two or more in order to angle for dis­counts.

“We are see­ing a lot more of the delib­er­ate use of mul­ti­ple clouds to reduce cost and improve bar­gain­ing pow­er,” he says, adding that nego­ti­a­tions with ven­dors are typ­i­cal­ly man­aged by the chiefs of IT, finance, pro­cure­ment and any direc­tor with the abil­i­ty to strike a good deal. 

This under­lines the fact that pub­lic cloud pro­vi­sion has extend­ed beyond a con­cern for the IT team to become an enter­prise-wide issue. With the entire C suite focus­ing on bal­loon­ing cloud costs, there is pres­sure on the whole organ­i­sa­tion to ensure that its use of the cloud is effi­cient. 

The great­est cloud usage usu­al­ly occurs on the cus­tomer-fac­ing side of a busi­ness, but all oth­er func­tions need to be aware of the costs they can con­trol in this area. Some com­pa­nies are set­ting up ‘cloud cen­tres of excel­lence’, bring­ing togeth­er lead­ers from across the busi­ness to assess expen­di­ture and decide where cut­backs can be made. 

The main pub­lic cloud ven­dors offer soft­ware enabling com­pa­nies to analyse the costs of run­ning indi­vid­ual appli­ca­tions. A com­pa­ny run­ning a food deliv­ery ser­vice can track the cost down to a spe­cif­ic app and estab­lish the appro­pri­ate usage, for instance. In the same way, HR, R&D, app devel­op­ers and every busi­ness unit can mon­i­tor the costs of their activ­i­ties in the cloud and see where any wastage is occur­ring. 

Melame­dov is a pro­po­nent of “right-siz­ing”, which entails using soft­ware that can pre­dict how much stor­age and com­put­ing pow­er a com­pa­ny is like­ly to need over a giv­en peri­od, enabling cloud pro­vi­sion to be dialled up or down to ensure opti­mal effi­cien­cy. 

Sid Nag, vice-pres­i­dent in Gartner’s tech­nol­o­gy and ser­vice provider group, agrees that com­pa­nies need to keep a tight rein on their cloud usage. The holy grail of cloud com­put­ing is self-ser­vice, enabling end users to use the cloud under their own steam through self-ser­vice appli­ca­tion pro­gram­ming inter­faces. 

“But that approach has its haz­ards,” he warns. “You also need to have over­sight so that you don’t have run­away costs and rogue and shad­ow clouds being stood up by your end users. You want to have a curat­ed envi­ron­ment, such as a por­tal where you pro­vide the end capa­bil­i­ties for your users to con­sume.” 

Data cen­tres are mas­sive guz­zlers of ener­gy, the cost of which is spi­ralling at present. But the big providers are all aim­ing to reach net-zero car­bon emis­sions – Ama­zon, for instance, is the world’s largest cor­po­rate buy­er of renew­able ener­gy – and enter­pris­es can use their cloud con­tracts to off­set their own emis­sions. 

It’s clear that, as long as the costs of access­ing trans­for­ma­tion­al cloud tech­nol­o­gy keep ris­ing at such a remark­able rate, the issue of how to con­trol them will climb the C suite’s agen­da at much the same pace.