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Cloud overspend can have a major impact on a company’s bottom line. Here’s what organizations need to know
Cloud technology has reached the stage of mainstream adoption across multiple industries, be it finance, health care, manufacturing or retail. According to a Research and Markets report, the global cloud computing market is expected to grow further to $832.1 billion by 2025, at a compound annual growth rate of 17.5% during the forecast period. However, with the expected increase in cloud usage, cloud waste is bound to increase. According to a report by Gartner, cloud waste is forecasted to reach $21 billion by 2021.
Companies that are not aware of the factors that lead to cloud overspend will end up wasting a lot of money without even realizing it. This article discusses some of the reasons for cloud overspend and potential ways to optimize cloud usage and expenditure.
- Understand cloud better: One of the most prevalent reasons organizations overshoot their anticipated cloud usage is a general lack of understanding of cloud technologies. They often fail to make well-informed choices at the beginning of their journey to the cloud. Without truly understanding their business needs and the trends in their industry, they will opt for a one-size-fits-all approach, which frequently does not work. Gartner estimates that 70% of the global cloud overspend can be attributed to companies that do not have a defined plan for cloud cost management. An activity as simple as organizing data before a cloud migration can help organizations optimize cloud usage.
- Define a policy around cloud usage and associated expenditure: Organizations that do not have a defined strategy to navigate their cloud journey frequently end up with misaligned priorities that can lead to overspend. This lack of strategy manifests with different people and/or departments managing disconnected cloud initiatives that frequently are not aligned with the overall business goals or bound by governing policies, the result of which is typically out of control cloud sprawl. To avoid overspend due to a lack of governance and oversight, organizations should at the very least define these three controls at the start of their cloud journey:
- Financial controls at multiple levels of the organization.
- A project lead who coordinates, controls and manages cloud resources across the organization.
- Resource quota policies to help prevent unanticipated spikes in usage.
- Control overprovisioned resources: According to a report by RightScale, approximately 40% of cloud instances are larger than needed for their workloads. The widespread perception that cloud technology is economical and affordable makes companies worry less about controlling the expansion of cloud instances. This often leads to the creation of unnecessary or oversized instances, resulting in shockingly large bills.
- Decommission idle and orphan resources: Continuous and thorough assessments help to identify and eliminate assets that are no longer used or required. The right assessment helps identify unattached volumes and orphaned assets that can be deleted. Investing in cloud cost optimization tools can assist with these assessments and reviews. Without a regular review of cloud resources, companies will continue to pay for resources that are no longer needed.
- Track vendor contracts regularly: Keeping a close watch on your vendor contracts governing licensing and subscription services is a complicated but necessary step to reduce cloud overspend. This becomes more critical for companies dealing with multiple vendors for different cloud services. Vendor contracts should be re-negotiated and fine-tuned at regular intervals to reduce subscription costs. These savings could be substantial in the long run.
One of the most important steps on your journey to the cloud is finding the right partner that can assist you at every stage. Choose a technology partner that can help with not just implementation but also the management of your cloud instance. A strategic partner will help you leverage the cloud to drive business growth as well as scale your cloud usage and spend to suit your ever-changing business needs.
