The Interface

The cloud pay-as-you-go myth – why cost savings aren’t guaranteed

The drive towards the always-on, digital enterprise has been underpinned by the rise of cloud computing. As new technologies have been developed, cloud environments have matured in tandem and, in many cases, with growing complexity. As such, statistics on cloud usage make for interesting reading and highlight the different strategies businesses are taking, as well as where some of the complexity lies. For instance, 43 percent of organisations are using hybrid cloud, 12 percent are using multicloud, and 30 percent are using both.

Beyond digital transformation, if we think about why businesses are adopting cloud, one of the main reasons is cost savings – 45 percent of respondents to a survey by Accenture said cost savings are one of the main benefits they expected from cloud. However, saving money by using cloud isn’t a given – many organisations end up spending more than planned and missing out on potential savings. With this in mind, we have put together some tips on how improved Governance, Risk and Compliance (GRC) alongside more accurate estimation of consumption can help organisations realise cost savings from the cloud.

It’s just a cloud, right?

The complexity of cloud compounds the challenge that businesses face. From public to private alongside hybrid and multicloud, many solutions exist to deal with specific use-cases, and most businesses will need to juggle most of them at the same time. This makes it harder for them to manage cloud resources across the organisation. Part of the issue is that there is a prevailing myth that many cloud services are pay as you go – especially public cloud – giving businesses the impression that they will only be charged for what they use.

However, rather than being consumption based, businesses actually pay for what they ask for based on their own estimations of usage. There are high fees for using more than expected – it’s the same dilemma many mobile users face. Consumers choose contracts where they get a certain number of minutes, texts and data. If they don’t use all of it every month, those allowances just get reset and they lose anything unused, if they go over them, they are stung with high charges. In fact, overspend on cloud services has been estimated to be up to $14.1 billion in 2019, meaning huge amounts of money is being spent needlessly.

Learning to estimate

The first step towards savings should be ensuring businesses not only use the right cloud for the right workload, but also learn to estimate usage more accurately. In many enterprises, there is a focus on yearly budgets, with IT often looking to use as much of their budget as possible in order to ensure it isn’t cut in future years. This actually leads to overprovisioning of cloud services, as well as the under-provisioning referenced above.

To counteract this, IT needs to be able to access all data about which clouds are being used for what – as well as ongoing and historical usage data – in a single centralised platform. This will allow them to better manage the entire cloud infrastructure that the organisation is using. It will also help IT to manage and provision cloud more effectively leaving them to invest excess budget into other areas if necessary. Not only do businesses need to work out how much they are using, but they should also be focusing on how they are procuring cloud in the first place – this is where GRC comes in. 

Leaning on compliance

GRC is often seen as a stumbling block to agility, the associated processes are often considered a tick-box exercise that adds little value, but it can be an enabler of cost savings by guiding employees to make the right choices. For one, GRC can help in terms of defining roles, workflows and tools etc., for instance applications can be made available through central service catalogue or application library.

These ensure that employees are directed by company policy to choosing the right cloud for the job, as the system won’t allow them to make a wrong choice. If GRC is implemented carefully, it can also stop employees from going ‘rogue’ and causing overspend by buying too much capacity or procuring a blacklisted app. This is achieved by building in realistic and accurate estimated usage for each service, and stopping users from selecting too much capacity for a given use case.

For many organisations, part of the lure of cloud is that it could be a great way of saving money, but many businesses are failing to manage their clouds, which leads to increased costs. As such, businesses should look to embrace Governance, Risk and Compliance alongside a better understanding of how to estimate usage more effectively to realise the cost savings that cloud can make possible.

Stuart Hasking is Cloud Architect at the DXC ServiceNow Practice

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