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Digital Technology

How to Minimize and Manage High Cloud Costs

Here’s something you might have in common with Mark Zuckerberg: High cloud costs. 

His storage and compute costs are higher than expected. You may very well have the same complaint. But high compared to what? If you are comparing to how you operated on-premise, your assumptions may be skewed.  

As companies transition from on-premise to cloud-based infrastructure and services, a common assumption is that the cloud is cheaper. In some cases, it may be, but it is just as likely that costs are higher than on-premise. It is easy to panic and think you have made a terrible mistake. Costs may seem high, but how you operate in the cloud and how you pay for it are very different in the cloud vs. on-premise.  

What assumptions are coloring your perception of cloud costs? How has your operating model changed? Did you lift-and-shift your applications to the cloud without refactoring or redesign? Have you been taking advantage of services and tools that were previously unavailable on-premise? Has your organization become greedy with storage and backups because “storage is cheap”? These are just a few reasons why cloud costs are surprisingly higher. Let’s explore a few reasons why expectations may not line up with reality and what you can do about it. 

Pay Only for What You Use 

You are in a pay-by-the-drink world now. When was the last time you had to use quarters to make a phone call? Topped up your phone with minutes? If you can’t remember, you are probably not used to worrying about paying for what you useYour applications were likely not designed to be stingy with data transfer, uptime, CPU, or memory because it did not matter. You designed your application, ordered your kit, set it up, and tweaked it for data growth and evolving requirements.  

Now you are in a world where usage, ingress/egress, storage, and other charges are incurred by the minute, every day. Your application teams did not even know there was a faucet, but now there is, it is always running, and your costs are overflowing all over the CFO’s shoes. Until you clearly understand how your cloud provider bills you and until your applications are re-designed with efficiency in mind, you may be in for cloud costs than are higher than expected.  

Use Only What You Need 

What is the best way to reduce cloud costs? Turn it off! Only use what you need, when you need itotherwise, shut it down. If you cannot do that, you will be paying for every minute your servers are idle. What is the next best way to reduce costs? Redesign them to be “cloud-friendly” and take advantage of new technology available to run efficiently in the cloudThis will take some effort, but do not overlook the savings opportunities for applications that are expensive to run in the cloud as designed but run efficiently after refactoring or redesign 

Leverage Tools to Monitor and Control Spend 

The cloud is supposed to be cheaper. Why are my monthly cloud provider bills so high?  

Do you have a vigorous process in place to monitor usage? There may be zombie servers running that are not doing anything. There may be servers running 24x7 that are only used 12x5. You may have underestimated how chatty your applications are, and your ingress/egress charges may be blowing your budget.  

There are tools available to monitor costs and usage, and options to pre-pay for services that may offer additional savings. With the cloud’s numerous options come many ways to leave taps running you did not even know you had. Keep a close eye on usage to avoid surprises when the monthly invoice comes. Leverage tools that can alert you to higher usage than planned so you can get ahead of problems. Do not wait until your monthly bill comes in to monitor usage and spend.  

Minimize Waste with Processes and Controls 

Another important consideration is how your organization balances flexibility and freedom with necessary cost controls. How do you oversee your cloud design and infrastructure to ensure you are using cloud resources as efficiently as possible while still leveraging the benefits and cost transparency the cloud provides? It is very important to consider what your applications teams are allowed to do in the cloud. Leverage automation tools to use only what you need, when you need it. The more manual your processes, the more likely you will encounter waste. 

Understand the Impact to IT Cost Management 

The days of capitalizing IT infrastructure costs are gone. The good news is you can buy just what you need when you need it, but your operating expenses go up while capital expenses go downWhat does this mean for your business? Have you talked to Finance about it? This cloud transition period is a confusing time for Finance and Accounting teams; bring them into the strategy and planning discussions to avoid pain down the road.  

Your company may have a (very elaborate) scheme to transfer IT costs to business units. It may still apply after you make the move, but detailed IT cost transparency will be available to your business for the first time. Be prepared for lots of questions about why Jack’s quantitative model costs $10,000/month to run. It is worth that much? You have likely never been able to easily track IT costs at the server level, report at a daily grain, and associate those costs directly to the business service. Now that you can, what insights will it provide? 

What is an application, anyway? A service? A database? How have you accounted for these in the past? How will these be accounted for in the cloud? Cost accuracy is aligned with how your organization categorizes IT assets. There may be changes to the way you organize your applications that influence how IT costs are reported. Do not overlook impacts to your configuration management processes as you consider your cloud cost planning and tracking. 

In Summary 

Mark Z is surprised that AWS compute costs are so high. Other companies are finding their egress and ingress charges are more than expected. Still, others wonder why their storage costs seem so high. There are plenty of examples. Why? You have never had to monitor costs at this level before. You used to buy servers in bulk and contract with suppliers for everything you needed to keep your infrastructure and network up and running. You have benefited from shared infrastructure on-premise for applications, databases, and services that you are now choosing to keep separate to enable cost transparency and a DevOps model for your IT teams. In short, your teams are working in a completely different way and are dealing with numerous changes at the same timeIt is easy to lose sight of everything that needs to be managed in the cloud because so much more needs to be managed than ever before.  

We have discussed a few common reasons why many companies are surprised by their cloud costsThere is a lot an organization needs to take on when they decide to move to the cloud. It’s not simple, but a clear strategy and plan will get you where you want to goavoid surprises, and even save you money 

At Veritas Total Solutions, we are experienced in cloud transformation. We offer a range of technology solutions across the business spectrum including cloud planning and migration - including best practices around managing cloud costs. If you are interested in learning more about our specific capabilities, contact us to learn more or subscribe to our blog to stay connected!

Written by Janette Lindner

Janette has developed her experience through a broad set of roles ranging from developer, architect, business analyst, to project manager. Janette has led system integration projects that include numerous business intelligence (BI), data warehousing and custom development projects. She also has established the Program Management Office (PMO) of a global energy company, and helped design and develop the PMO best practices for a leading chemical manufacturing company.