In many ways, cloud spending is a lot like a game of Monopoly. It’s not just about rolling the dice and moving game pieces around the board; it’s about making strategic investments and managing your resources.
When it comes to cloud investments, organisations have limited resources to buy properties (in this case, cloud services), build houses and hotels (invest in cloud infrastructure), and pay rent (cover cloud costs).
With cloud adoption exploding over the past few years and cloud-flation looming, the stakes have never been higher. In fact, the majority of respondents in a recent Splunk survey predicted that more than 60% of their IT portfolio will reside in the cloud within two years. Furthermore, the Asia-Pacific public cloud services market is projected to reach a staggering US$165.2 billion by 2026, up from US$51.2 billion in 2021.
However, while organisations are seeing significant benefits from the cloud, 30% of cloud spend is going to waste. This means that if organisations spend US$3 million per month on the cloud, they could be losing up to US$1 million in wasted expenses.
With millions of dollars at stake, how can organisations uncover areas where they are overspending and optimise their cloud spending to make the most of their investments? After all, just like in Monopoly, success in the cloud requires more than just spending money.
Cloud growth or cloud chaos?
With the pandemic providing a strong impetus to accelerate digital transformation, many organisations swiftly transitioned their on-premises workloads to the cloud and enabled remote work, all while hoping to reap the benefits of cost savings. While the allure of cloud is undeniable, some were able to plan and execute the move optimally, whereas others had to resort to the classic lift-and-shift approach, with budget considerations taking a backseat.
Consequently, still, are still grappling with the challenge of effectively managing their cloud costs, leading to investments that have proven to be more expensive than initially anticipated. Several factors contribute to this issue, including the utilisation of multiple cloud providers for various systems and applications, the resources required to manage each of these platforms, a shortage of talent or skills, additional security or compliance requirements, and other related considerations. These challenges have given rise to what is now commonly referred to as “cloud chaos.”
Today, cloud chaos is manifesting in a number of ways. For instance, companies are increasingly relying on their engineering and ITOps teams to provision and manage their cloud resources. However, without effective management and coordination, this can lead to a common issue — cloud waste, which can further create scenarios where every team in your organisation starts demanding more cloud services.
To that extent, it is important for decision makers to recognise that solely relying on cloud vendors to track cloud expenses and usage isn’t a foolproof strategy. Although vendors can generate detailed reports and invoices, as well as offer budget overspend limits and anomaly detection, they lack insight and visibility into the organisation’s structure. This makes it difficult to map bills and identify the root cause or ownership.
Additionally, for many organisations, transitioning to the cloud has meant shifting away cloud computing expenses from capital expenditure to top operating expense. This further necessitates ongoing cost management and budgeting. It is therefore imperative for businesses to develop strategies and employ tools that can identify mismanaged resources and reduce overall costs.
FinOps to the rescue
The big ask is here: How can organisations curb escalating cloud expenditure, and reduce waste while being more intentional with their cloud investments to optimise both cost and performance?
One of the primary ways, which is increasingly gaining traction, is to implement FinOps — a practice that brings financial transparency and optimisation to cloud spending. In fact, IDC predicts that increasing complexities in digital businesses and mounting IT budget pressures will drive 60% of Asia-based 1000 organisations to increase FinOps maturity by 2024.
Much like a GPS system, FinOps helps organisations navigate through the complexities of cloud services and costs. By identifying areas of overspending or underspending, it enables organisations to adjust their cloud spending and eventually make informed decisions that balance factors like speed, cost, and agility.
FinOps solutions today put an emphasis on cross-functional teamwork, cost visibility, performance monitoring, benchmarking, and resource optimisation. To that end, features like a real-time view and alerts enable organisations to have a comprehensive and unified view of all their cloud spending. This helps identify resources that are not being utilised optimally, those that are over-allocated, and those that are overprovisioned.
In addition, modern solutions leverage advanced technologies, such as AI, to provide cost-saving recommendations by analysing public cloud usage on a per-instance basis and comparing pay-as-you-go pricing with longer-term commitment rates.
Not least, for organisations seeking a proactive approach to managing cloud costs and avoiding overspending, FinOps solutions offer the capability to implement self-service guardrails. These guardrails allow organisations to establish spending limits on their cloud usage, consolidate the offerings from major cloud vendors into a single catalogue, preselect configuration options, and identify spending spikes while selecting cost-effective options.
Overall, FinOps provides a structured methodology with a focus on accountability, transparency, and optimisation, helping organisations get more cloud for their money. As such, organisations no longer need to just roll the dice and hope for the best in order to win the game of cloud spending Monopoly.
