Managing cloud costs while accelerating innovation

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Over the past decade, organizations have migrated an increasing array of their applications and infrastructure to the cloud to boost agility and accelerate innovation. As this continues, IDC forecasts that global spending on public cloud services will reach $1.35 trillion by 2027. Despite the benefits that these services bring, the scale and speed of the shift have led nearly three-quarters of organizations to exceed their cloud budgets in 2023. This trend will only worsen as consumers continue to rely more heavily on digital services, and organizations push the limits of compute-hungry AI models such as ChatGPT.

Srinivasan Panchapakesan

Corporate VP & Global Head for Amaze® Business and Cloud Transformation Delivery at Hexaware.

The challenge to do more with less

Against this backdrop, organizations are again under pressure to innovate and grow at scale, but without additional resources. This is especially challenging with the growing use of cloud services, which can lead to unexpected and spiraling costs without robust management practices. The dynamic nature and complex pricing models of the cloud can make it difficult to forecast spend accurately. In addition, the scale of deployments and on-demand nature of the cloud often result in sprawl, with under-utilized resources running unnecessarily while new instances are continuously spun up.

Most organisations operate in hybrid, multicloud environments, making it incredibly difficult to maintain end-to-end visibility, optimise overall spend, and reduce waste. However, prioritizing effective cloud cost management can simplify this process, unlocking a 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, driving a surge in their cloud consumption and the associated costs.

Four key practices for effective cloud cost management

IT leaders are responsible for driving a strategy that incentivizes and enables their teams to align cloud provisioning with the organization's needs. To do so, they need to invest in tools that provide comprehensive visibility across all of the organization's cloud platforms. They must also remain informed about the intricate pricing models of various service providers so that they can make better decisions about spend and budget allocation.

However, while these measures provide 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 drive greater financial accountability while accelerating innovation and business value in the cloud.

1. Thorough resource analysis

Organizations must regularly analyze cloud resource usage to ensure their resources are rightsized. IT leaders therefore need to establish mechanisms that enable their teams to continuously monitor cloud consumption patterns, so they can anticipate fluctuations in demand and allocate resources accordingly. Regular reviews are essential, to ensure that teams identify unused or underutilized resources, enabling the business to scale down as needed. This eliminates over-provisioning and ensures applications perform optimally by matching cloud consumption to actual needs.

2. Adopt a savings plan

Organizations can leverage savings plans or reserved cloud instances from their service providers to achieve significant cost savings, particularly for predictable workloads. These offers allow organizations to capitalize on discounted rates for their steady-state workloads and reduce the overall 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 annual Black Friday sales in the retail industry, and reduce costs during low-demand episodes, without manual overheads. This capability is crucial in the face of the continued need to do more with less.

4. Categorize resource allocation

Another useful approach is enforcing tagging practices to accurately categorize cloud resources. This provides granular visibility into allocation and the associated costs, allowing IT teams to track cloud costs by project, department, or other criteria. Also, this makes it simpler for organizations to identify the biggest areas of excess cloud consumption to implement stricter guidelines 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.

Driving value from cloud investments

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

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Srinivasan Panchapakesan is Corporate Vice President & Global Head for Amaze® Business and Cloud Transformation Delivery at Hexaware Technologies.