2020 saw a silver lining in the cloud as it emerged as the central pillar of digital transformation supporting business continuity in the time of unprecedented global disruption. The pandemic hastened the need to move to the cloud to survive a highly volatile market condition and be able to scale up to meet the unpredictable surge in business. Be it healthcare, banking or retail, businesses irrespective of their size and sector started exploring multi-cloud strategies to move their critical workloads without hampering the operations.
With this sudden boom came the ballooning costs of cloud computing. The Hyperscalers, AWS, Azure, Google list hundreds of products and services and have millions of configurations to choose from. Also, hybrid-cloud management can be incredibly complex for the IT teams. As a result of this complexity, almost 80% of organizations ended up receiving bills that overrun their budget two to three times. These trends highlight the criticality of adopting relevant cloud cost optimization strategies for growing organizations . .2
CIOs of both large enterprises and startups have already witnessed their cloud investments going through the roof. In fact, regulating the cloud costs through controlling spending and monitoring the ROI have become such a primary concern for tech leaders that other critical aspects such as security or process monitoring have been left on the back burner. While most businesses are breaking their heads over managing the burgeoning cloud costs, which is indeed a challenge in times of a global economic crisis, forward-thinking leaders are using cloud cost management as a strategic tool to bring agility and drive complete business transformation.
When appropriately deployed, cloud can drive organizational agility, visibility, scalability as well as resilience. To achieve these, businesses need to establish a cloud governance framework. The cloud governance framework includes design principles and standard practices that involve the three key pillars of an organization—people, process, and technology. This framework is the first step towards creating a lean cost culture.
Cloud Cost Optimization: What is Lean Cost Culture?
A lean cost culture is a practice of combining good governance and user behavior to manage cloud costs. Organizations cannot fully optimize cloud costs without transforming the existing traditional culture and way of utilizing IT resources. The modern cloud environment demands employees to adapt to the changes and develop a sense of ownership and accountability while familiarizing themselves with the best practices.
How Can It Help Gain Visibility, Control, and Agility?
This cultural transformation should ideally spread across the organization involving engineers, finance, operations, business development, and the leadership team. While the engineering team should be aware of the cost of deploying resources and hence implement the right architecture to optimize cloud costs, the operations team must make decisions based on the insights provided by the finance team that will effectively bring down the costs. For finance, it is essential to prevent overspending, which can be a challenge in pay-as-you-go models delivered by Global hyperscalers including AWS, Azure and GCP . Business development teams must be empowered with the right cloud cost optimization tools for tracking and tallying costs against budget and calculating the ROI. And for C-suite executives, it is important that they understand the true value as well as the impact of their cloud investments to make informed decisions for acquisitions, strategic planning, and divestitures. It is more like a football team in which all the eleven players need to join their unique abilities and strengths together to win a match.
To carry out the aforementioned roles and responsibilities effectively, organizations need to make significant investments into training employees, creating policies, and acquiring the best tools. And that is considered to be the stepping stone towards achieving visibility and transparency as a lean cost culture aims to turn every employee involved into a responsible cost-watcher.
Creating a lean cost culture in the cloud is much easier as compared to traditional data centers. Today, every enterprise cloud service, whether public or private, comes packed with in-built cost analytics and administration tools as well as easy-to-implement automation to help businesses with cloud cost management.
AWS, Azure, and Google have their unique dashboards, alert systems, and reports designed for separate stakeholders and users. These tools not only offer stakeholders the much-needed visibility into the cloud spends but also promote transparency. In today’s multi-cloud environment, cost watchers are not necessarily the same people who are incurring the costs. Hence, it is essential to have clarity on who is spending on what. Organizations can also take a step forward and incentivize employees to imbibe a shared sense of responsibility as well as opportunities to transform individual behavior.
Importance of Having a Cost Allocation Structure – Replace with “Defining the Cost Allocation Structure as per Your Cloud Provider”
Apart from enabling access to accurate cloud spends data, organizations are also depending on cost allocation structures to derive optimum value from the cloud without adding to the wastage. Cost allocation structure is usually designed based on the business pattern and may vary from organization to organization.
Let us take a look at cost allocation structures/services offered by three leading cloud providers:
Amazon Web Services (AWS)
AWS services such as AWS Organizations, AWS Identity and Access Management, AWS Control Tower help businesses create unique individual and/or group accounts with desired policies. Organizations can leverage these services to manage access and permissions to different users/accounts, govern the accounts, design key configurations, enable resource sharing across accounts and consolidate billing and reporting.
For Microsoft Azure users, managing the ever-growing subscriptions often remains a key challenge. Azure Cost Management comes in handy in organizing that multitude of subscriptions as it allows users to create several management groups, apply role-based access control, tag policies as well as cost analysis. Those management groups become a shared context across the environment, which makes it easier to access additional management and security services.
Google Cloud Platform (GCP)
GCP users have tools such as Cloud Deployment Manager or Cloud Identity and Access Management to create projects, associate billing accounts, and control user access. One can also set an Identity and Access Management policy to maintain the hierarchy at organizational, folder, project as well as service level. Unlike others, projects are the key pillars of the cost structure on GCP. Whenever you use a service, it creates resources as per the project. Every project acts as a container for the relevant resource groups with separate settings and permission for different workloads.
Tagging for Cloud Cost Analysis
But is it possible to derive granular information about your cloud spends just by implementing a cost allocation structure? The answer is no. For that, you need to tag your resources to add context and improve the cost analysis.
A tag (AWS) or a label (GCP) can be assigned to a resource. The number of tags that one can assign varies as per service providers. Currently, AWS users can assign up to 50 tags per resource, whereas GCP allows up to 60 tags. For Azure users, the maximum number is 15.3
While tagging resources, organizations must ensure that the resources are tied to the right cost center, application, and individual or team. It is also important to have a definite timeline set for the product.
Tagging is an easy way to generate usage reports and analytics based on different business roles, functions, applications, and projects. For example, AWS users can leverage the Cost Explorer to analyze their cloud costs by tags. It is imperative for organizations to set up a common taxonomy right from the beginning as it enables accountability and offers control over costs. At the same time, it also allows organizations to track untagged resources to keep track of and manage unallocated costs.
2021 is going to be an important year for businesses across industries as the future tech experts have been talking about for a decade, is already here. The current business landscape is markedly different than what it was just a year before. Remember the financial boilerplate warning label: “past performance may not be indicative of future results?” Well, that never sounded truer before. Though it can be said that the worst is behind us, we must always be prepared to absorb and bounce back from any similar disruption in the future. Hence, it is critical for businesses to assess and ramp up their cloud cost strategies to build resilience and become future-ready.
But resilience, control, agility, transparency can be dynamic and might vary upon different situations. Hence it is crucial to optimize your cloud spending every few months to monitor current spending and predict future costs. Cloud economics should also be a part of your culture. Also, organizations must learn ways to evangelize the power of artificial intelligence, machine learning, and automation to take control of their cloud spending and build a continuous oversight mechanism to prepare for whatever comes next and thrive in a post-pandemic era. All this can be made easier by having a Cloud Managed Services Partner (MSP) by the side. Based on the organizations infrastructure goals, the Cloud MSP assess & recommends solutions to optimize cloud costs, frees up the internal teams by managing and over-seeing the cloud infrastructure allowing them to focus on core business objectives, performs periodic audits to identify cost leaks etc, and takes appropriate measures to manage cloud resources efficiently.
Cloud4C is world’s Largest automation-driven cloud MSP, and has been helping organization reap maximum ROI from cloud investments, with right solutions, services and strategies for over a decade. Contact our Cloud Experts to maximize returns on your cloud investments and deliver sustainable business outcomes.