Controlling the cost of cloud

Under pressure from COVID-19, many enterprises are frantically developing virtual operations for employees and online experiences for customers. Cloud-native applications give businesses the agility they need to meet customer and employee expectations, which is also why legacy on-premise applications are migrating to and modernizing in the cloud. As a result, cloud usage is rising dramatically.

Though on-premise applications traditionally operate within a fixed capital expenditure model, organizations adopt a pay-as-you-go operating expenditures (OpEx) model for cloud. However, if you're not careful, this occasional spending can quickly become overspending, also known as cloud sprawl.

The benefit of an OpEx model is that you can readily adopt, adapt, and scale applications as the needs of your business, employees, or customer evolve. So, instead of avoiding an OpEx model, you need to know how to control it.

Find the cause

Overspending on cloud, or cloud sprawl, is a challenge shared by many enterprisesregardless of their maturity and experience with cloud technology. In fact, a survey of 750 global cloud decision makers found that 56% would rank understanding cost implications of licenses as their top cloud software-related challenge.¹ The survey respondents also reported to being over their budgets by an average of 23%, and that they'll likely even increase spending by 47% over the next year.

Understandably, many enterprises are anxious about the growing costs. To continue to provide the cloud services employees and customers want and need in an increasingly remote world, they must recognize and control the causes of cloud sprawl.

From our work helping global businesses manage and optimize cloud solutions, we've found that the following are the four major causes of overspending:

1. Oversized infrastructure: Oversized infrastructure is one of the most common sources of overspending. When enterprises directly map and move on-premise infrastructure to the cloud, this leads to overprovisioned and underutilized computing. In other words, you spend more than you should on more than you need.
2. Unoptimized architecture: Legacy applications require some rearchitecting as you move to the cloud. If you overlook this step, the costs of data transfer and storage can quickly spiral out of control. You should also consider redesigning applications as microservices – in which you develop an application as a collection of small services – or outsourcing managed services – to make them more cost effective.
3. Inefficient control and tracking: The speed and ease of building cloud applications allow you to quickly demonstrate proofs of concept and establish a culture of innovation. But without proper tracking, you can easily drive up your cloud spend in unexpected places. For example, as you move data from on-premise to the cloud, you might copy a large amount to Amazon Elastic Block Store (EBS) along the journey. However, if you don't delete the EBS after the move to the cloud, it'll still incur a cost even if it's not in use. And, as cloud initiatives grow, it becomes increasingly difficult to track these costs.
4. Lack of financial governance: Because an OpEx model is based on consumption, it's harder for finance teams to keep track of spend, especially in large organizations. To avoid overspending, they need visibility into the current and expected spending to forecast and plan effectively. There should also be better alignment between the IT and finance teams so they can work together to prevent overspending and unauthorized use of cloud services.

Take control

Now that you know the common causes of cloud sprawl, let's look at some ways to control it. Perhaps unsurprisingly, it's all hinges on visibility:

• Right-size: Periodic data collection and analysis of your cloud service usage and performance are essential. This approach will help you to ensure your infrastructure is the appropriate size for your required computing capacity and workload. Over time, you'll begin to spot usage patterns and trends to modify your infrastructure accordingly
• Optimize: The more insights you have, the more easily you can optimize your architecture. Look for intelligent tools that show the cost implications of moving legacy applications to the cloud or building cloud-native applications. You'll clearly see how to effectively manage data transfer and storage costs and where you can reduce the total cost of ownership through managed services
• Monitor: You can't manage what you can't monitor. Real-time reporting and dashboards will keep you up to date on cloud usage across every aspect of your business. Alarms and advisory notifications can also help you proactively control usage so your organization can stay agile, connected, and innovative, but without overspending
• Govern: With enhanced visibility over your cloud operations, you can better understand the connection between costs and usage. Accurate spending forecasts, trend analyses, and optimization recommendations will empower your IT and finance team to make better, more informed, and cost-effective decisions

So what does this look like in practice? We helped an oil and gas company rearchitect and migrate its on-premise quality control applications into a cloud-based microservices system and tracked current and future costs every step of the way. This gave the company the confidence to develop an intuitive, cloud-based experience for employees at scale in a matter of months. Because our world is continually changing, this kind of agility is increasingly important to keeping pace with your competition.

Explore endless possibilities

As cloud usage continues to rise, every enterprise needs to control the associated costs. If you need help with this task, look for a partner that can give you real-time monitoring of service usage and cloud spend, along with reports and tools for cost optimization. Then, your employees and customers can continue to reap the full benefits of cloud – reliability, scalability, and exceptional user experience to name a few – within budget.

Also, because Amazon Web Services (AWS) is a major cloud player, make sure that your cloud partner has an advanced partnership with AWS. For example, if a Genpact client needs to migrate an application to the cloud, we can directly engage with AWS solution architects to agree on a project plan and outline associated costs.

Just as cloud computing is transforming the way businesses run, it's also transforming the way businesses manage spending. You need to act now to prevent cloud sprawl from a pay-as-you-go OpEx model. When the costs are under control, you can begin to explore and enjoy the endless possibilities of cloud technology and prepare for a new normal with confidence.

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