by Joseph Angeles
In the world of cloud today, bang for your buck is rapidly becoming the name of the game.
With Gartner forecasting total 2023 cloud spend at $591.8B, up 20.7% from $490.3B in 2022,1 cloud spend as a percentage of total IT budget continues to climb and the corresponding need for optimization is rapidly gaining attention as a key challenge.
In fact, according to the recent 2023 State of the Cloud Report released by Flexera, 82% of cloud users surveyed highlighted cloud spend management as their #1 challenge in the cloud,2 for the first time surpassing other critical issues such as security, compliance and governance as the top cloud challenge faced by IT organizations today.
Many of these cloud users may be tightening their belts to weather a potential recession. Others may be hunting for savings opportunities to fund key initiatives, or simply looking to optimize their financial profile. Whatever the case may be, cloud users undeniably have a multitude of incentives to invest in better cloud financial management and governance.
Perhaps most significantly, cloud users self-estimate that 28% of organizational cloud spend could be considered waste due to inefficiency and poor governance (down from 32% in 2022).2 If you applied that estimated waste percentage to Gartner’s 2023 spend forecast, total waste in cloud spend would amount to $165.7B, a mind-boggling number by any standard.
Technology leaders clearly see the massive business benefit of cloud as outweighing the downside of cloud waste. However, an increasing number of companies are stepping up their efforts to improve cloud governance and maximizing their bang for their buck. In fact, 62% of respondents in Flexera’s survey highlight cloud cost optimization as a key priority in 2023.
Knowing where to start or where to dig deeper isn’t always clear-cut for technology and finance leaders tackling deeper cost optimization. Fortunately, there are a number of best practices to help move the needle. Which practices are most relevant and impactful will vary depending on maturity in the cloud. That being said, the timeless items below are the core practices that I would recommend businesses focus on refining, based upon my previous experiences as both a buyer and seller of cloud services.
Key Cloud Optimization Best Practices
Implement Stronger Financial Accountability Up and Down the Org
The core components of financial accountability are: (1) knowing who your budget owners are, (2) knowing how much those owners or their resources are actually spending, and (3) knowing how much they are allowed to spend. Simple enough, but these components frequently are not all present during early stages of cloud adoption. Comprehensive resource tagging and budget/cost allocation should be heavily utilized to tie owners to budgets and actuals. Financial dashboards/reports should be developed and incorporated into recurring Finance reviews to measure spend against allocated budgets. Failing to adequately provide any of those key components is a recipe for cloud financial overruns.
Develop and Strengthen a Cost-aware Culture
With development in the cloud, architects and engineers control the bulk of the spend drivers, but frequently are not aware of cloud budget allocations and are not usually included in leadership’s financial reviews. Focus on getting the right data to the right builders, managers, and decision-makers with the goal of getting everyone across Technology and Finance aligned to the same financial roadmap. Make financial efficiency a non-functional requirement for new builds. Reinforce all of the above with consistent communication cadences.
Dive Deeper into Cost Optimization
Ensure that all parties understand the relevant levers available to be more cost-efficient, such as: pricing models and purchasing options; resource right-sizing; instance scheduling to reduce downtime; intelligent use of managed services. Know that there are technical levers such as instance type selection, and strategic levers such as data retention policies, and so many more. If you’re already pulling all those levers, figure out how to do so with more regularity. Conduct regular reviews with cloud users until continuous optimization becomes embedded in your engineering and finance culture.
Maximize Usage of Cloud Financial Operations Tools
Ensure your teams are aware of the cloud-native and third-party tools available to them to enable robust financial management and optimized resource utilization. In AWS for example, tools like AWS Cost Explorer, AWS Budgets, and AWS Cost & Usage Report enable rapid drill-down insights, alerting functions when budget overruns hit, and granular data for deep dives. Additional tools provide optimization recommendations to help reduce unnecessary expenditures.
At Avalanche Growth Partners, our domain experts can help you tackle your biggest cloud financial management challenges and minimize waste across your cloud footprint. With cloud, as in life, time is money. So, there’s no time to waste!
References
1 Rimol DeLisi, Meghan. (2022, October 22). Gartner. Gartner Forecasts Worldwide Public Cloud End-User Spending to Reach Nearly $600 Billion in 2023. https://www.gartner.com/en/newsroom/press-releases/2022-10-31-gartner-forecasts-worldwide-public-cloud-end-user-spending-to-reach-nearly-600-billion-in-2023
2 Adler, Brian. (2023, March 8). Flexera. 2023 State of the Cloud Report. https://info.flexera.com/CM-REPORT-State-of-the-Cloud