How To Right-Size Your Cloud Budget

How to right-size your cloud budget.
4 steps to making sure you’re getting what you actually need—and you aren’t overpaying.

Many CIOs are struggling to keep their cloud costs from spiraling out of control. Whether running their businesses on single- or multi-cloud environments, organizational leaders have come to realize that cloud architectures and operations, if not optimized for business needs, could prove to be more expensive than on-prem deployments. However, many leaders still struggle to strike the right balance between leveraging optimal resources and not overextending their budgets.

It is pivotal that organizations be intentional and strategic in their cloud decision-making process. By selecting an inappropriate pricing model or not adequately vetting the best-suited subscription, technology leaders can unknowingly sign themselves up to pay more than is necessary. Moreover, it is imperative that businesses migrating to the cloud have a clear understanding of the transition from a traditional Capital Expenditure (CapEx) model to a more complex commitment plus on-demand Operational Expenditure (OpEx) model. Attention must also be paid to other challenges such as forecasting usage, cost allocation and shared resources; tracking sub-optimal resource usage; and managing architecture patterns, diverse resources and more. 

With a crystallized understanding of the operating and pricing models involved with cloud migrations, leaders can confidently make the best decision for their business. Here’s a four-pronged approach that will help technology leaders realize the value from cloud and balance their cloud budgets:

1. Think Strategy, Governance and Accountability

Most cloud adoptions fail, delay or overrun their budget due to limited involvement from businesses. It is essential to establish sponsorship from business owners with a framework that clearly outlines the cost versus business value. Organizations should invest in strategic partnership with a primary hyperscaler with well-defined pricing, discount programs and commitments aligned to business needs. Investment in a secondary hyperscaler could help leverage specific differentiated platform capabilities and/or distributed workload management.

Business leaders must also implement governance models and protocols to enhance cloud budgeting and cost strategies. In doing so, they can develop financial operations (“FinOps”) strategies, which synthesize technology, finance and business to drive financial accountability, accelerate business value and support responsible decision-making.

Establishing clear accountability with businesses through a structured multi-cloud account and resource management and tagging ensures showback and chargeback of dedicated and shared usage at the unit level. This should be supported with an ongoing budgetary tracking process that supports policies for choosing purposeful adoption of cloud services (e.g., percentage of on-demand instances versus percentage of reserved instances, decommissioning policies for unused resources, autoscaling, subscription management, etc.).

At every level, leaders should be aware of the organization’s total cloud spend, with visibility into the overall budget and the value being delivered. By fostering an environment of visibility around cloud costs, technology professionals can significantly curb cloud spending and better allocate resources. As part of a long-term strategy, the goal of every organization should be to establish a FinOps cloud center of excellence (CCoE) to direct business toward cost management best practices, clear accountability and predictability.

2. Think Full Stack Observability

Leaders must accelerate observability by investing in a FinOps platform with integrated multi-cloud budgeting, planning, tracking, forecasting, alerting, cost categorization, chargeback and showback mechanisms. In doing so, they effectively enhance cost efficiency and maximize ROI on cloud. Implementing predictive capabilities on the unit-, platform- and application-level underscores effective cost management.

3. Think Cloud-Native Architecture

Cloud-native architecture, with its inherent capabilities of providing a scalable and flexible infrastructure, can help to further optimize cloud usage and minimize cost. Businesses should consider modernizing legacy workloads, which carry huge technical debt and result in high cloud resource usage, before moving to cloud to leverage the right economies of scale. Event-driven architecture, container-based microservices and serverless deployments, cloud-native COTS alternatives, and IaaS/PaaS adoption will help create independently manageable and scalable business platforms and optimize overall cloud cost.

4. Think Automated Operations

Automation becomes paramount for ensuring consistency across FinOps processes as organizations lean toward multi-cloud environments with a cloud-native posture. Automation improves reliability. Automating SOPs for various standard recommendations (e.g., rightsizing, decommissioning unused and unallocated resources, and optimizing storage) ensures adherence and compliance. Businesses should also consider operational workflow automation, integrating it with ITSM tools and DevOps/DevSecOps.

Business and technology leaders must think strategically when weighing their cloud options. By choosing the right vendors, tools and teams, as well as implementing governance models and conducting internal audits, organizations can ensure they right-size their cloud budgets. With a long-term approach, leaders can make the best decision for their business to drive continued success in the cloud.

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