Cloud cost management

Every enterprise is migrating to – and modernizing with – the cloud. Under immense pressure to deliver better experiences for employees, customers, and partners, many businesses have frantically developed cloud-based solutions and services.

Though these services provide business agility and flexibility, they all come with a cost. As a result, cloud cost management is a hot topic.

If your cloud spend management strategy isn't working, we have some advice to help you take control.

Why is cloud cost optimization important?

Cloud cost management is a big concern – especially for finance and accounting (F&A) teams.

Though on-premises applications traditionally operate with a fixed capital expenditure model, many organizations adopt a pay-as-you-go operating expenditure (OpEx) model for the cloud. Sounds good, right? After all, you only pay for what you use. But occasional spending can quickly lead to overspending – also known as cloud sprawl.

Through our work in helping global enterprises with cloud cost optimization, we've identified four leading causes of cloud sprawl:

1. Oversized infrastructure: You're spending more than you should on more than you need.
2. Unoptimized architecture: You've moved legacy applications to the cloud without rearchitecting, so data transfer and storage costs quickly spiral.
3. Inefficient control and tracking: You can't control what you can't track – the more cloud services you use, the more difficult this becomes.
4. A lack of financial governance: Your finance team doesn't have visibility of cloud spending across your organization to monitor costs effectively.

We're not suggesting you move away from an OpEx model. But whatever model you're using, you need to know how to manage it.

How do you control cloud costs?

There are three main ways to approach cloud cost control – cost avoidance, cost optimization, and cost saving. Let's take a closer look at each.

Cost avoidance

To avoid costs in the long run, sometimes you need to spend more in the short term. For example, while many businesses look for the easiest and quickest path on their journey to the cloud, it's rarely the most cost-effective. You'll want a cloud partner to help you make the right spending calls at the right time.

You can also avoid unexpected costs by adopting a zero-tolerance approach to usage. The cloud is like a vending machine: There are many choices, but the price is always on display. Applying this mentality to the cloud can make employees rethink when – and if – they need to put money into the cloud machine in the first place.

Lastly, don't forget governance. If you don't have control over who has access to the data within your cloud solutions, you could wind up paying compliance-related penalties. You can avoid these with a robust cloud governance strategy.

Cost optimization

Cloud spend management is especially difficult when employees still behave like they're in an on-premises environment. Typically, requests for more capacity often took months, so people would ask for more than they needed upfront. But with cloud, you can start with a low capacity and quickly add more as needed. Making your employees aware of this benefit will support cloud cost optimization.

If you need to spend, consider tagging spending by department, user, process, and more to identify spending trends. Tagging will give your F&A team a better view of where costs are getting out of control and where they may need to allocate more budget in the future.

Bring your cloud providers into the cost optimization discussion too. Providers usually offer models where you "reserve" what you need – you may pay a premium upfront but less in the long run. Many cloud providers even offer spot pricing – pricing that varies depending on the supply and demand in the market. Spot pricing is usually cheaper than the on-demand price for the same thing – and your F&A team will thank you.

Cost saving

The best cloud partners work with companies to avoid, optimize, and reduce costs.

A shared accountability model is worth exploring with your cloud advisor. If they can save you money through effective cloud spend management and hit a particular cost-saving target, you can invest in innovation in other areas. This partnership will allow you to cut costs and strengthen your digital transformation strategy.

A partnership between analytics and cloud experts is crucial to identify cost-saving opportunities on your own. Consider how these teams can work together to develop the following:

• Data and analytics tools to assess cloud usage and ensure your infrastructure is the right size
• Intelligent spending tools to show the cost implications of moving legacy applications to the cloud or building cloud-native apps
• Real-time reporting and alerts as well as advisory notifications to help you spot and tackle spending risks
• Spending forecasts that empower your IT and F&A teams to make more informed and cost-effective decisions about future spending

The results speak for themselves

Let's look at an example of cloud cost management in practice.

In its rush to improve the employee and customer experience, a global energy leader implemented over 100 different cloud accounts with various setups. This approach created a disjointed cloud experience with disparate policies and frequent outages. And controlling costs was almost impossible.

By applying the avoid, optimize, and save mentality – using Genpact's CloudSmart Manager solution – the energy leader has reimagined cloud cost management and seen a 30–40% cost reduction across cloud spending. While the F&A team enjoys greater control of costs, the wider business also benefits from better cloud experiences, standardized policies, and fewer outages.

Looking to the future

Cloud usage will continue to rise. So, every enterprise needs to take control today to prepare for tomorrow. Only then can your business continue to modernize and reap the full benefits of the cloud – within budget.