There are various reasons organizations shift from traditional on-premises structures to cloud-based computing, including flexibility, scalability, security, and cost-effectiveness.
Though the cost of potential savings is one of the significant reasons for this shift, most companies are unaware of the actual expenses and the recurring costs that come with the cloud platform.
Cloud cost management assists businesses in gaining a practical and precise understanding of the expenses involved, allowing them to be proactive and make informed decisions to keep in check the cost of cloud computing and plan the budget.
This section will look at important aspects of cloud cost management.
What Is Cloud Cost Management and Its Purpose?
Cloud Cost Management, also known as cloud spend management or cloud cost optimization, is a process-oriented method of successfully controlling your cloud spending in order to reduce costs while enhancing return on investment.
The primary objective of cloud cost management is to enable organizations to function at peak performance while keeping costs under control, discovering unused or underutilized resources, and making well-informed decisions to drive business growth.
The process of cloud cost management includes tracking, quantifying, and controlling cloud expenditure to discover the most cost-effective techniques. One of the core activities involved in cloud cost management is managing the utilization and expense of various cloud components such as servers, storage, memory, network traffic, and instances, among others.
Migrating to the cloud infrastructure transforms capital expenses into operational expenses. However, the overall expenditure of cloud services is lesser than that of legacy infrastructure but inadequate planning and management can surpass the company’s cloud budget above estimation.
In today’s tech-driven world, most companies have become cloud-native, making it essential to implement cost management strategies to maximize their return on investment. Adopting cloud cost management techniques will provide better visibility into their cloud environment and help them make informed decisions regarding their cloud spending.
Benefits of Cloud Cost Management
A cloud cost management strategy can help organizations plan and manage costs effectively. Large organizations may find it challenging to see expenses due to decentralized decision-making.
For multi-cloud users, effective multi-cloud cost management is essential to account for costs from various public cloud providers. Improving cost and usage understanding enables businesses to enhance cloud technology’s accountability, performance, and efficiency.
According to a Gartner survey, “80% of companies unaware of their cloud adoption mistakes will overspend by 20 to 50%.”
Some of the significant benefits of cloud cost management are as follows:
Cost Reduction: It can assist businesses in saving money by lowering overspending on underutilized or idle resources and granting access to volume-based discounts.
Predictability: It assists enterprises in anticipating and forecasting cloud requirements, allowing them to prevent unexpected spikes in expenses. It enables firms to disperse resources across infrastructure more efficiently and effectively, resulting in better financial management and stability in the long run.
Efficient usage: Adopting cloud cost management helps enterprises optimize their resource utilization to minimize waste and increase productivity. Automatic scaling and load balancing can be employed to ensure that the available resources are being utilized optimally.
Performance improvement: Right-sizing is very vital in cloud cost management. Overprovisioning and under-provisioning adversely affect performance and increase expenses. Cloud cost management ensures smooth performance without additional costs.
Better visibility: It provides more detailed visibility into cloud usage and architecture for effective governance and security requirements.
These are some of the most prominent benefits of cloud cost management.
Strategies to Incorporate in Cloud Cost Management
The factors that need to be included in cloud cost management may vary based on size and type of organization.
One of the crucial strategies to implement across the organization is to develop a common cloud strategy that aligns with the overall organizational goals. This guideline should cover the cloud budget, objectives, benefits, risks, adoption criteria, etc.
Some common factors to be included in cloud cost management are Rightsizing, Automatic scaling, Power management, removing unused instances, organizational goals, etc.
Let’s see a few more factors to incorporate into Cloud cost management:
Choose a suitable cloud provider by assessing the technical feasibility and business value that can vary between providers and regions.
Create a centralized cloud governance team to manage cloud providers, policies, and best practices and share them across concerned teams and stakeholders.
Ensure that your teams include licensing cost management in their agenda to meet business goals and regulate necessary expenses.
Automation should be implemented by adopting standards, and auto-scaling will help to save resources and costs.
To achieve business goals, allow teams to manage their own cloud expenses and foster a cost-conscious culture. Granting responsibility helps manage risks and encourages reporting.
Regular assessment of cloud costs to understand its impact on top and bottom lines. Connect cloud cost with business goals to create a culture of cost optimization.
Identify unassigned costs by resource and assign them to cost centers responsible for cloud spend management.
Choose the appropriate resource size based on the required load. Re-evaluate resource usage to determine if a smaller, less expensive workload size can suffice.
Avoid overprovisioning by assessing the actual resources needed, considering both the environmental load and the application’s code.
How Cloud Cost Management Helps Businesses to Make Better Decisions?
An inadequate understanding of cloud expenses can have serious financial consequences, especially as the cost of cloud services rises. Failure to appropriately manage cloud spending can result in unexpected expense spikes, overpayment for excess resources, or insufficient cloud performance.
In today’s rapidly evolving business landscape, cloud costs have become increasingly dynamic. The challenge is amplified by the decentralized nature of decision-making in larger organizations, which makes it difficult to gain full visibility into expenses. Undoubtedly, cloud computing’s ability to scale rapidly is a significant strength.
Unfortunately, it can lead to services being rolled up by IT personnel without due consideration for cost implications. In this context, implementing a comprehensive cloud cost management strategy has become paramount for organizations’ survival. By doing so, businesses can proactively plan for consumption and costs, thereby optimizing their resources and maximizing profitability.
For organizations using multi-cloud architectures, effective cost management across various public cloud providers is critical. With the right insights into costs and usage, companies can promote accountability across different departments and business units.
Furthermore, this approach can enhance cloud technology’s overall performance and efficiency, leading to better business outcomes and decisive competitive advantages.
Challenges of Cloud Cost Management
Cloud cost management helps businesses manage and understand costs associated with the cloud. The goal is to optimize cost-effective use, which is challenging due to the complexity of cloud infrastructure and the fluctuation of usage-based pricing. Proper monitoring and management are critical but complex to achieve when distributed usage.
Some of the main challenges of Cloud Cost Management are:
Insufficient Visibility: Having detailed visualization and information will help in overcoming the challenges of cloud expenditure visibility. Inadequate visibility into cloud spending might result in hidden costs and expense misunderstandings. Using the correct cloud management tools can aid in identifying and eliminating hidden expenses associated with cloud services and optimize cloud expenditures by combining all usage and cost statistics.
Inaccurate Budget Forecasts: Cloud costs are unpredictable, making budget forecasting challenging. Only accurate predictions can help cost management efforts. Estimations are not reliable. A cloud cost management tool can provide insights into resource health and predict future usage based on historical data.
Decentralization: It is one of the major challenges due to no centralization of licenses, authority, decision-making, etc. It will hamper the cloud cost implementation goals. A common cloud goal across the organization that meets long-term objectives can overcome this challenge.
Billing Complexity: Cloud billing should be handled more than just by the finance team, and every department should understand its costs to prevent billing problems. Transparent chargebacks are necessary, and development teams should not overlook managing cloud costs while prioritizing speed and efficiency.
To overcome these challenges, a cloud cost management strategy will help create a budgeting framework.
#1. FinOps ebook
This ebook discusses everything from FinOps to proven cloud cost management and optimization. It goes over how to apply key FinOps ideas to gain insights into different cloud cost optimization strategies.
The book will assist you in building a sound financial management plan, understanding the significance of immediate optimization, and identifying cost-cutting possibilities.
#2. Azure Cloud Financial Management
The book focuses on practical ways of Azure cloud management and optimization. The book is a comprehensive manual that covers budget monitoring, cost control, and applying optimization concepts while avoiding pricey solutions.
It also covers cost optimization and financial management best practices using Microsoft’s Cloud Adoption. It also discusses several approaches, resources, and practices for efficient administration and cost optimization of cloud-related expenses.
#3. Reduce Cloud Computing Cost
The book is recommended for IT and finance professionals looking for effective cost-cutting solutions for public cloud services from leading providers like Amazon, Microsoft, and Google while minimizing any risks to their business operations.
It covers best practices, intelligent tricks, recommendations to optimize cloud utilization, suggestions for effective cloud budget planning and governance, etc.
Cloud cost optimization is the process of maximizing business benefits by optimizing cloud costs. Despite the challenges associated with it, many companies plan to optimize their cloud costs.
To optimize your cloud cost, there are several best practices that companies can implement to their advantage. Moreover, there is a need to shift from broad general-purpose cloud cost management to very peculiar based on your specific needs. It is also essential to provide the best tools for your teams to have deeper insights into cloud architecture to work cost optimization.
Above discussed, factors will help you to kick-start your cloud cost management successfully and achieve your organization’s goal related to cloud computing.
I have been in the IT industry for more than 20 years. I have served Fortune 100 company in a senior role looking after projects related to US Banking, BFS, Mortgage, Insurance, and FMCG. Apart from IT, I like to read books, especially spirituality… read more