Getting and maintaining control over cloud costs

By: Wilfred van der Schaaf

More and more organizations are using the cloud. The costs for cloud services have increased over the past years and continue to rise. Alongside the benefits of the cloud, such as scalability and flexibility, the expected cost savings in ICT are often mentioned. However, the assumption that the transition to the cloud will automatically lower costs and align them better with demand is not a given. The risk of costs spiraling out of control is real. Therefore, in my opinion, gaining control over cloud costs should be a top priority.

Cloudkosten onder controle: Tips voor efficiënt beheer en kostenoptimalisatie

In this context, I mean unnecessary, unplanned cost growth that does not provide any direct business value. Of course, additional costs can occur due to increased ICT security and the quality of delivered cloud services. However, I'm concerned about costs that do not contribute to business value. In other words, cloud costs that disappear into thin air.

You wouldn't leave your lights on at home all day and night

The question is how to gain control over cloud ICT costs. Managing cloud costs is easier said than done. The cloud is often described with the metaphor "ICT as electricity from the wall." The next logical step is to use the cloud efficiently. To extend the electricity analogy: you wouldn't leave your lights on at home all day and night, so why would you keep certain cloud services running when they're not in use? For example, in the case of test and development environments, such environments are probably not needed year-round.

In nearly every organization, there are fluctuations in demand compared to what was anticipated in terms of ICT supply. With on-premises ICT or dedicated hardware in a provider's data center, where costs are strongly related to depreciation, it's difficult to make adjustments. At least, in the short term. In an ideal ICT world, the cloud allows demand and supply to be aligned on a short-term basis, depending on the pricing model used. This can be on a monthly level or even daily, hourly, or other units. I see that organizations don't always apply the flexible scalability of the cloud. Often, more ICT is "purchased" than is actually needed, consciously or unconsciously. Or the necessary amount of cloud services is not downscaled due to a (temporary) decrease in demand. This leads to unnecessary costs.

Tips for gaining control over cloud costs

When organizations acquire cloud services, they should carefully consider how to maintain control over costs. The cloud can provide ICT cost savings once you understand how the cost structure works and implement measures within the organization. New pricing models and services from cloud providers, such as "on-demand/reserved pricing" and "cloud containers," contribute to gaining control over costs and are positive developments. The inability to manage demand for cloud services and the lack of cost control result in ICT costs that are not being utilized, making the benefits of scalability and flexibility less pronounced due to the unnecessary costs incurred.

To avoid unnecessary costs, continuous insight and control over the use and costs of cloud services are required. How can you achieve this? Here are four tips that can contribute to gaining control over cloud costs.

Tip 1: Use Cloud Management Tools.

Such tools provide an overview of unused cloud resources across the entire (hybrid) cloud environment (private and public clouds). These tools offer features from simple monitoring (e.g., in real-time) to automation and automatic optimization.

Tip 2: Form a Central Cloud Team.

Cost optimization should be one of the core tasks of such a team. A central cloud team reduces the risks that can arise from decentralized procurement and use of cloud resources.

Tip 3: Systematically Work on Optimizing Cloud Usage.

Billing for cloud costs is complex due to various pricing models, changing prices, and more. This requires a systematic approach to maintain control over ICT costs, consisting of the following steps:

  1. Analyze the demand for cloud resources.
  2. Monitor actual cloud costs or actual cloud usage. Analyze whether there are any deviations or potential deviations from predictions or the established budget.
  3. Take action on unused and persistently unused cloud resources.
  4. Improve the process of monitoring and optimizing cloud consumption based on lessons learned.

Tip 4: Choose the Optimal Pricing Model.

Sometimes, you can choose between on-demand or reserved instances/pricing. Make this choice based on the expected usage of cloud resources.

Related insights