Platinum linings: how to rein in cloud expenditure

As businesses churn out ever more data, the costs of handling all this material have rocketed. Finding efficiency savings in this area is becoming a C-suite priority

Cloud services are gobbling up an increasingly large share of corporate technology budgets as businesses rush to digitalise. The search is on for ways to keep costs in check and extract maximum value for money from the cloud.

Gartner calculates that expenditure on public cloud services will surge from 9% of global enterprise IT budgets in 2020 to more than 14% in 2025. Its researchers have estimated that global spending in this area rose by 23% year on year in 2021 to $332bn (£249bn). They’re expecting a further 20% increase this year.

“Humanity is generating ever more data,” observes Maxim Melamedov, co-founder and CEO of Zesty, a provider of software designed to optimise cloud utilisation. “It’s inevitable that we will see inflation in the costs of running, storing, managing and getting insights from this tremendous amount of data.” 

Businesses have been updating their IT infrastructure for more than a decade as they keep pace with digitalisation trends in their industries, but the process in many sectors has been accelerated by the Covid crisis. Industries ranging from retail and entertainment to financial services and travel have been going digital-first. They have moved their computing provision from small-scale, in-house data centres to the big public cloud providers, such as Amazon Web Services (AWS), Google Cloud and Microsoft Azure. 

With providers carrying the risk and capital expenditure of running data centres and renting out storage and computing capacity, this already offers businesses considerable efficiency savings. But, even with these improvements, business leaders are starting to become sensitive to the scale of the investment required. 

“Cloud costs are becoming more visible to the C suite as a growing recurring expense,” notes Martin Hosken, chief technologist for cloud services at VMware. This topic is “moving up the food chain in most organisations because it is so outcome driven – and CEOs care about outcomes”.

Moving from in-house data centres to outsourced cloud provision can actually prove more costly at first, because it may take several months to transfer everything over. In that bimodal interim, companies are paying to use both systems. A cost-saving tip from Hosken is for firms to rationalise the use of their apps during the migration rather than doing a ‘lift and shift’, in which the apps are moved en masse. 

We are seeing a lot more of the deliberate use of multiple clouds to reduce cost and improve bargaining power

While businesses will want their move to the cloud to be quick and efficient, they should first carefully assess each app they use to ensure that it isn’t consuming an unnecessary amount of processing power and storage space, he stresses. 

Companies should keep their wits about them and beware of public cloud costs that can quickly escalate as applications scale up to millions of users. Providers offer the ability to cap usage and there are ways of reducing waste, so that an app will consume computing resources only when necessary. 

A cost-saving method that many companies have adopted is to use market forces and play competing vendors off against each another, Hosken notes. Rather than depending on a single provider for all their cloud needs, which would give them less bargaining power, they are using two or more in order to angle for discounts.

“We are seeing a lot more of the deliberate use of multiple clouds to reduce cost and improve bargaining power,” he says, adding that negotiations with vendors are typically managed by the chiefs of IT, finance, procurement and any director with the ability to strike a good deal. 

This underlines the fact that public cloud provision has extended beyond a concern for the IT team to become an enterprise-wide issue. With the entire C suite focusing on ballooning cloud costs, there is pressure on the whole organisation to ensure that its use of the cloud is efficient. 

The greatest cloud usage usually occurs on the customer-facing side of a business, but all other functions need to be aware of the costs they can control in this area. Some companies are setting up ‘cloud centres of excellence’, bringing together leaders from across the business to assess expenditure and decide where cutbacks can be made. 

The main public cloud vendors offer software enabling companies to analyse the costs of running individual applications. A company running a food delivery service can track the cost down to a specific app and establish the appropriate usage, for instance. In the same way, HR, R&D, app developers and every business unit can monitor the costs of their activities in the cloud and see where any wastage is occurring. 

Melamedov is a proponent of “right-sizing”, which entails using software that can predict how much storage and computing power a company is likely to need over a given period, enabling cloud provision to be dialled up or down to ensure optimal efficiency. 

Sid Nag, vice-president in Gartner’s technology and service provider group, agrees that companies need to keep a tight rein on their cloud usage. The holy grail of cloud computing is self-service, enabling end users to use the cloud under their own steam through self-service application programming interfaces. 

“But that approach has its hazards,” he warns. “You also need to have oversight so that you don’t have runaway costs and rogue and shadow clouds being stood up by your end users. You want to have a curated environment, such as a portal where you provide the end capabilities for your users to consume.” 

Data centres are massive guzzlers of energy, the cost of which is spiralling at present. But the big providers are all aiming to reach net-zero carbon emissions – Amazon, for instance, is the world’s largest corporate buyer of renewable energy – and enterprises can use their cloud contracts to offset their own emissions. 

It’s clear that, as long as the costs of accessing transformational cloud technology keep rising at such a remarkable rate, the issue of how to control them will climb the C suite’s agenda at much the same pace.