One of the key advantages of the cloud is cost savings, and yet cloud costs are on the rise and overspending by as much as 70% is commonplace, according to Gartner. Much like gyms make their money off members who never actually use the equipment, cloud providers profit from those who underutilize their resources. That’s a problem for financial leaders and IT leaders trying to govern digital transformation costs and tighten their budgets in response to economic pressures. With cloud spending doubling every four to five years, it pays to cut cloud costs.
But how do you get a handle on your corporate cloud spending?
From Infrastructure as a Service (IaaS) to Software as a Service (SaaS) and Unified Communications as a Service (UCaaS), here are four leading strategies for cutting cloud costs.
1. Eliminate redundant cloud applications
This advice sounds basic, but it’s easier said than done. Getting the visibility to see both sanctioned and unsanctioned applications can be a challenge. Technology is key. Cloud expense management platforms help establish a centralized inventory of all cloud applications and infrastructure services currently in use. Cloud Access Security Broker (CASB) security technologies can also be helpful. Gaining deep visibility is the first step in reducing app redundancy and improving cloud security.
Those who do it best plan a cross-functional project tapping into data from Single Sign On systems, as well as financial expense systems. You’ll want to identify the most cost-effective app consolidations and rank your apps based on cybersecurity risk. This helps teams prioritize response efforts around app elimination and security polices for acceptable cloud use.
2. Reduce cloud infrastructure waste
With a centralized inventory, the next step is to reconcile infrastructure usage against ownership. The key is to know what you already pay for and how efficiently you’re using it. All too often, companies overestimate their needs and resources go underutilized. There are many examples, whether it’s an ambitious IT engineer wanting a big piece of infrastructure so he can sleep at night, data transfers triggering unnecessary charges, or virtual servers forgotten after their owner left the company. In some cases, servers will run for no reason at all.
Cost analysis efforts take on exercises in:
- Evaluating your IT environment over periods of time, creating usage benchmarks aiding the analysis of traffic charges and storage forecasting
- Understanding how and when to use pausing features to ensure you’re paying for IaaS services only when you need them
- Knowing when to remove or downgrade infrastructure — the same way you downgrade a phone plan from unlimited data to a lower tier
- Optimizing costs for direct network connections to cloud providers, as the provider’s service is not always the best option
- Exploring spikes in IaaS usage and knowing when retention plans create unnecessary backups burning a hole in your pocket
Software powered by artificial intelligence can “see” these types of inefficiencies instantly, bringing forward misappropriated tags and cost savings recommendations informed by normalized data and pricing information updated in near real time. Beware: Default dashboards from cloud providers will not deliver cost optimization insights. Nonetheless, the data is available. Simply plug in analytics tools to reveal savings. It’s not uncommon to immediately find 20% in savings and achieve a triple-digit ROI in the first year.
3. Improve cloud management productivity
When cloud innovation can mean the difference between winning and losing in the market, IT teams should be spending more time transforming and less time worrying about how their cloud resources are being used and managed, how expenses are reconciled or allocated to business units, and how needs are forecasted. IT staff efficiencies are cited as one of the most important benefits of moving workloads to the cloud, but those productivity gains can be undermined by manual vendor management tasks.
Outsourced services can offload the manual work of IaaS usage audits, application optimization, and expense management. They’re also helpful in bill pay, contract renewals, and integration projects following mergers and acquisitions.
4. Put checks and balances in place
Give a leader or team the authority to govern the cloud. Create initiatives to reassess assets with cost top of mind, understanding that the long-term strategy is to create thoughtful usage that allows room for more meaningful cloud adoption as innovation evolves. Allow this team to work beyond defined perimeters and identify cloud usage policies in addition to key risks in the areas of finance, IT, and security. If you have more than 50 applications and more than two cloud infrastructure providers, consider a dedicated resource or ongoing partner program.
The cloud triggers other reasons for oversight. Challenges include cloud application performance and reliable connectivity issues when increased cloud usage demands more of the IT network. With a team experienced in effective cloud expense management, companies are better guided through modernization initiatives, deploying SD-WAN solutions designed to manage 5G and internet service providers cost-effectively.
Payouts worth the investment
In the end, don’t expect to tackle all four steps at once. Prioritization is key. Investments in cloud cost management have a high likelihood of paying for themselves, as benefits materialize in dollar savings, productivity gains, and security. If companies spend 2023 evaluating cloud costs and ensuring their spending aligns with needs, efficiency, and innovation are sure to follow. Now, is the time to inventory and reconcile cloud assets. Right-sizing will help avoid cloud investment hangovers and empower companies to effectively govern the past three years of innovation run amok.
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