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As Cloud Expenditure Increases, Prioritize Cost Optimization Strategies

With the increasing popularity of cloud computing, businesses are turning to cloud-based solutions to run their operations. However, this shift has led to a rise in cloud overspending. Many organizations are not fully aware of the costs associated with their cloud usage and are therefore overspending on cloud services, resulting in a significant drain on their finances.

As Cloud Expenditure Increases, Prioritize Cost Optimization Strategies

To address this challenge, it's essential to focus on cost optimization. This involves analyzing your cloud usage to identify areas where you can reduce costs without compromising performance. It's crucial to ensure that you have a clear understanding of your cloud usage patterns, so you can make informed decisions about which services you need and how to use them efficiently.

Cloud cost optimization can take many forms, such as using reserved instances, scaling your resources based on demand, and optimizing your storage usage. By implementing these strategies and regularly monitoring your cloud usage, you can reduce your cloud costs and improve your overall cloud performance.

As the digital economy continues to rapidly evolve, organizations are facing new challenges in managing cloud spending in order to stay competitive and drive business value

While the cloud offers enhanced speed, agility, and efficiency, organizations sometimes fail to adapt and effectively manage this modern resource that works differently than the legacy environment it replaces.

The adoption of cloud computing has led to a decentralized approach to consumption. This means that IT departments no longer have complete control over on-site data centers and their associated costs. Consequently, the use of Shadow IT has become more frequent, with users having easy access to alternative technology platforms and IT infrastructure. In addition, wasteful cloud spending is often driven by complex billing structures, which can be compounded when multiple cloud services are used.

Organizations often make the mistake of not efficiently architecting in the cloud. Instead, they opt for simplistic ‘lift-and-shift’ migration programs that are inherently inefficient, as they merely replicate what exists on-premise. Many also believe that continuing to rely on their on-premise model is an appropriate strategy in today’s fast-evolving environment, which is a misconception.

According to research, enterprises are spending 35% more than necessary on cloud resources to meet their business objectives. This is mainly due to the failure of IT financial management processes to account for the variable nature of cloud spending. Key performance indicators (KPIs) are not focused on the right outcomes and reporting, leading to inefficiencies. Finance teams require technical expertise for cost-saving recommendations, while engineering and development teams need incentives to consider finances.

Having a proper strategy, tools and governance in place is crucial to enable effective planning, monitoring, reporting and decision making on cloud spending and performance. Without these, enterprises may end up incurring avoidable cloud spending time and again. It is important to ensure that the current environments are correctly sized and ongoing discipline is established to manage technical configurations, commercial levers and active financial management. This can help organizations save considerable costs and optimize their cloud investments.

Incorporate Governance Measures to Improve Spending Efficiency

Organizations have been in a rush to migrate to the cloud, however, this haste has often led to unnecessary expenses and lack of proper management. As a result, many businesses are now struggling to find a balance between the benefits of cloud computing, such as faster innovation and flexibility, and the need for better cost control and transparency.

Where to start when it comes to reducing costs and improving efficiency across the business? A cloud-first approach is key to fully leveraging the benefits of cloud computing. However, some businesses cling to their on-premise operating model, which often results in cost overruns and an inability to take advantage of cloud benefits like flexibility and scalability.

A successful cloud cost optimization strategy requires a comprehensive, enterprise-wide approach that considers people, processes, governance, data, and technology. When implemented strategically, it can enhance agility, streamline platform architecture, and reduce the total cost of ownership.

The key to success lies in embedding governance that can deliver significant opportunities for cost optimization. With built-in governance, businesses can become operational quickly without worrying about manual system controls. It is important to control costs, create hierarchies, and enforce a tagging strategy from the start.

Security professionals emphasize to clients on their cost-optimization journey: 

  • Establish clear spending objectives and implement cost controls to maintain policy compliance while enhancing team speed.

  • Efficiently manage access policies and compliance for multiple subscriptions using flexible hierarchies with management groups.

  • Easily identify system owners and business functions by using tagging. Furthermore, you can continually track your cloud expenses.

Consider Cloud Financial Operations (FinOps) for Enhanced Control 

Financial Operations (FinOps) refers to the strategic approach employed by cross-functional teams to manage the financial aspects of cloud resources. These teams typically include members from IT, finance and business units, and collaborate on data-driven spending decisions. The goal is to enhance financial control, predictability, and reduce friction while accelerating product and service delivery.

This is achieved through spend accountability and business-value optimization, where everyone takes ownership for their cloud usage. Transparency is prioritized, ensuring that all team members are informed and involved in the decision-making process.

To ensure success and avoid potential obstacles, we recommend that our clients pursue these five objectives.

Improve and maintain cost predictability:

Improve cost predictability by identifying and tracking cost and usage metrics, using financial modeling and cloud-based tools to predict costs and set targets.

Optimize total cost of ownership:

Optimize cloud costs by designing architecture, right-sizing resources, reserving capacity, and leveraging pricing models to improve ROI.

Increase ownership and accountability:

Incentivize a culture of financial responsibility, and track and report data around cloud usage and costs to hold employees who manage cloud environments accountable for their spending.

Improve governance efficiency:

To enhance the efficiency of governance, it is advisable to establish clear policies that dictate the process of provisioning cloud resources.

Improve monitoring and reporting capabilities:

Boost continuous monitoring, automate controls and reports, create data pipelines, and use machine learning to identify opportunities and irregularities for cloud optimization metrics.


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