I had the privilege of attending the leadership connection event at Alliance 2018, and engage with Higher Education IT leaders in discussing a variety of topics related to cloud computing. A striking observation for me was the universal acceptance that “Reduction in IT spend” is not significant in their cloud goals. Reason it was surprising was that “Reduced IT spend and restructuring it from Capital to Operational expenditure” has been touted as a key driver for cloud computing all along. For majority of them, the journey to cloud has only begun and so early in it, there is a realization on the perceived lack of cost benefits in moving to cloud.
Followed by that, I recently reviewed the “2018 State of the cloud report from Rightscale”, and the section highlighting the challenges in cloud once again got my attention. Shown below is snippet from the report.
“Managing cloud spend” is the 2nd most mentioned challenge in cloud computing and is only marginally behind the top item ‘Security’. While challenges like security, compliance, etc. have been well known for years, the rise of ‘Cost’ as a significant challenge is alarming and reaffirms the conversations from the leadership event. This got me thinking on the following questions,
What are some of the key factors influencing cloud spend?
- Ballooning Migration Costs – For most organizations, migrating to cloud is seen as a ‘fresh-start’, providing opportunity to review/redesign architecture, security etc. While it is an opportune time to get the house in order, it could also mean significant unplanned costs.
- Network and Bandwidth – Establishing high-speed network connection between on-premise and cloud data centers is critically important for a successful IaaS and PaaS adoption. This could add significant cost to your cloud spend.
- Integrations – A highly under-estimated portion of cloud spend. Integration of cloud services with on-premise and other hybrid cloud applications is a significant cost factor and in most cases, true value of your cloud services can only be realized via effective integration.
- Security, Governance and Regulatory Needs – For many industry sectors, cloud migration comes with a variety of security, governance, compliance and regulatory requirements. Addressing them sufficiently and staying compliant over time could be a significant cost factor.
- Wasted Cloud Spend – For those who are already using cloud services, optimal utilization to keep the costs down, is seen as a challenge. Industry estimates puts close to 30 – 35% of cloud cost are wasted due to ineffective utilization. Factors like accurate sizing, automated DevOps, effective resource management are of high interest to reduce wasted cloud spend.
What can you do about it?
- Be aware – While evaluating cloud services, get to know and factor in various direct and in-direct costs (It is not just your subscription fee!). If you have ‘cost savings’ as key driver for cloud migration in your business case, you may have to revisit it 😉
- Try before you buy – Cloud computing and everything around it is evolving at a rapid pace, so test the waters with various cloud offerings and options before making any long term commitments.
- Ongoing cost management – Unlike your capital spend on on-premise infrastructure that involved one-time decision making, cloud expenses are on-going and so is the need for on-going cost management, a continuous improvement process aimed at cloud usage optimization and cost reduction is highly recommended.
I have been keenly following the evolving trends in cloud computing, and this rise of new challenge ‘cloud cost management’ is intriguing to say the least. I wouldn’t be surprised if ‘Cost Management’ tops the list as most significant challenge for managing clouds, in a year or two. Of course the intention of this post is not to discourage cloud adoption, but to shed light on things you may need to focus for being successful on your cloud journey.
I for one believe, global scale cloud transformation is happening now and it is irreversible, so shying away from it is only delaying the inevitable.