Manage cloud costs while accelerating innovation

Over the past decade, organizations have migrated an increasing number of their applications and infrastructure to the cloud to increase agility and accelerate innovation. As this trend continues, IDC predicts that worldwide spending on public cloud services will reach $1.35 trillion by 2027. Despite the benefits these services bring, the scale and speed of the shift has resulted in nearly three-quarters of organizations exceeding their cloud budgets by 2023. This trend will only worsen as consumers become increasingly reliant on digital services and organizations push the boundaries of compute-intensive AI models like ChatGPT.

The challenge of doing more with less

Against this backdrop, organizations are once again under pressure to innovate and grow at scale, but without additional resources. This is especially challenging with the increasing adoption of cloud services, which can lead to unexpected and skyrocketing costs without robust management practices. The dynamic nature and complex pricing models of the cloud can make it difficult to accurately predict spend. Additionally, the scale of deployments and on-demand nature of the cloud often results in sprawl, with underutilized resources running unnecessarily while new instances are constantly being spun up.

Most organizations operate in hybrid, multi-cloud environments, making it incredibly difficult to maintain end-to-end visibility, optimize overall spend, and reduce waste. However, prioritizing effective cloud cost management can simplify this process, freeing up budget that can be reinvested in initiatives that drive greater business value. This will be critical as organizations continue to invest in AI-driven analytics, leading to an increase in their cloud consumption and associated costs.

Four Key Practices for Effective Cloud Cost Management

IT leaders are responsible for driving a strategy that encourages and enables their teams to align cloud provisioning with the organization’s needs. To do this, they must invest in tools that provide comprehensive visibility across all of the organization’s cloud platforms. They must also stay informed about the complex pricing models of different service providers so they can make better decisions about spending and budget allocation.

While these measures are a good start, IT leaders must also enforce effective processes to support their teams’ efforts to manage cloud costs. Here are four essential practices to help organizations achieve greater financial accountability while accelerating innovation and business value in the cloud.

1. Thorough analysis of the resources

Organizations must regularly analyze cloud resource usage to ensure that their resources are appropriately sized. IT leaders must therefore establish mechanisms that allow their teams to continuously monitor cloud consumption patterns so that they can anticipate fluctuations in demand and allocate resources accordingly. Regular assessments are essential to ensure that teams identify unused or underutilized resources so that the business can scale out as needed. This eliminates overprovisioning and ensures that applications perform optimally by aligning cloud consumption with actual needs.

2. Create a savings plan

Organizations can leverage savings plans or reserved cloud instances from their service providers to realize significant cost savings, especially for predictable workloads. These offerings enable organizations to take advantage of discounted rates for their steady-state workloads and reduce the total cost of their cloud footprint.

3. Use auto-scaling

Organizations can implement auto-scaling policies to dynamically adjust cloud resources based on demand. This helps IT teams optimize the performance of their cloud applications during peak periods, such as the annual Black Friday retail sale, and reduce costs during low demand periods, without manual overhead. This capability is critical in light of the ongoing need to do more with less.

4. Categorize resource allocation

Another useful approach is to enforce tagging practices to accurately categorize cloud resources. This provides detailed visibility into allocation and associated costs, allowing IT teams to track cloud costs by project, department, or other criteria. It also makes it easier for organizations to identify the biggest areas of excessive cloud consumption to implement stricter policies and processes, such as automated shutdowns to prevent waste. As a result, organizations can make more informed decisions and optimize their cloud deployments with greater precision.

Generating value from cloud investments

Effective cloud cost management is critical for any modern business. It maximizes the value of cloud investments, reduces wasted spending, and improves operational performance. By following these four key practices, organizations can strategically plan their investments and realize the full potential of the cloud to drive digital innovation and business agility.

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