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May 1, 2023 - by Ken Knox
Organizations that move to the cloud often do so because of the high costs associated with managing and maintaining their infrastructure on-premises. Yet, many are never able to realize those expected savings, and in fact, end up wasting a lot more due to cloud overspend. Our managed cloud services address this challenge, ensuring efficient cost management and optimization.
Flexera’s State of the Cloud Report suggests that 30% of cloud spend is wasted, meaning a whopping $180 million of waste on the cloud alone. When organizations witness cost spiral, they resort to reactive cost management solutions. While they might seem to help as a quick workaround, they fail to fully address and solve the complex business challenges surrounding cloud overspend.
In general, cloud efficiency refers to optimizing cloud resources to minimize costs, reduce waste, and maximize operational outcomes. It involves aligning people, processes, and technologies to achieve optimal results while utilizing the necessary resources. The specific benchmarks for cloud efficiency may vary based on individual, organizational needs.
What organizations need to do is invest in the right cloud management tools and practices in order to understand, measure and optimize spend. Listed below are 6 critical success factors for optimizing your cloud ROI:
Because of all the hullabaloo about the cloud being inexpensive (and the only way to run a business in today’s digital transformation era), organizations end up migrating all their business applications to the cloud – without really understanding the costs associated with implementing a truck-load of cloud instances.
However, the truth is – not all applications are suitable for the cloud. And even though cloud vendors have made it extremely easy for anyone to spin up a cloud server or instance in seconds, it makes sense to identify applications that will benefit the most from migrating to the cloud. Here’s how the sequence should be: Applications that are most expensive to run on-premises should naturally be moved on priority.
You should also consider low-risk applications, as well as ones that are easy to move to the cloud. Any application or workload that is highly customized, or needs massive investment in terms of rebuilding, or refactoring should be last on the list. The bottom line: starting with less complicated and less mission-critical applications gives you more control over the migration process.
Effective monitoring of cloud expenditure can go a long way to ensure you work well within your cloud budget. A robust monitoring strategy not only helps streamline various cloud resources, but it also provides alerts when you are about to reach your limit – thus allowing you to optimize your expenses.
What’s more, to ensure applications work properly, a monitoring strategy can ensure the instances are right-sized. With metrics available to measure and optimize actual CPU, memory, and storage usage, you can effectively reduce costs – without affecting the actual performance of your apps.
And for instances or workloads that need more resources as demand increases, you can upgrade resources to optimize the performance of the app and justify the increased cost associated with upgrading resources through additional revenue that gets generated.
In excitement, many organizations purchase far more cloud computing capacity than they really need: from extra instances to massive storage capacity, disaster recovery servers, advanced reserves and more.
The end result? An enormous cloud bill that takes years to recover from – in addition to lost employee morale, lost trust from the management, and loss of customers due to enterprise-wise cost-cutting that invariably affects customer experience.
Before investing, make it a point to choose only the resources and storage you need, so you don’t end up paying for space you don’t require. Many public cloud vendors offer different storage classes including standard scalable storage, long-term storage, storage for disaster recovery, zoned, and more – choose one that best fits the need of your organization.
Don’t overprovision with the fear of not having enough capacity; as your needs grow, you can always scale to meet the demands of your organization.
While businesses often prefer on-demand pricing models, there are alternative approaches to maximize cloud cost efficiency. Reserved Instances (RI) offer a substantial 75% discount on cloud services when you pay in advance for a specific capacity over a set period, which is ideal for stable workloads without anticipated scaling needs.
Opting for a reserved instance can save cost, particularly when dealing with a consistent workload and no expected need for scalability within a specific timeframe.
Another option is spot instances, where cloud providers auction spare computing capacity at reduced rates, allowing the purchase of discounted cloud services. By exploring these alternatives, businesses can optimize their cloud spending based on workload characteristics and anticipated resource demands.
Another reason for spiralling cloud costs is when organizations decide to take on the task of migration on their own. Manually moving to the clouds, with little or no knowledge of the right tools and strategies can be an expensive endeavor.
Choosing an experienced Cloud Managed Services Partner, who has the right knowledge of tools and processes can help you plan and manage cloud requirements better. With knowledge of the right cloud platforms, automation technologies, and resource management tools, a partner can help you keep a close tab on resources and costs while helping you identify issues and resolve them quickly.
With access to and knowledge of the right analytical and optimization tools, a partner can tick items off your cloud budget checklist, and identify resource-heavy assets, as well as under or over-provisioned resources as and when needed.
Another important way to keep cloud costs under check is by continuously and thoroughly assessing cloud usage, optimizing workloads whenever possible and necessary, and mapping dependencies. When done properly, these assessments can reveal several ways to optimize costs on your cloud investment.
Given that idle resources (that are charged by the hour or minute but aren’t actually in use), and oversized resources (that are being charged for a larger capacity than needed) are the two primary sources of wasted cloud spending. A thorough understanding of your workloads can allow you to avoid spending wasteful expenses and eliminate cloud-based assets that are no longer used or required.
With the right assessment, you can delete unattached volumes, terminate zombie assets, right-size your instances and optimize your cloud spend.
According to Gartner, public cloud spending is expected to reach $600 billion in 2023 with the promises of high scalability, flexibility, and cost benefits. However, for organizations looking to migrate their workloads to the cloud, the problem of cloud overspend is not uncommon. Therefore, it is important for organizations to understand critical success factors that help in optimizing cloud ROI.
Factors such as workload identification, monitoring strategy, resource estimation, using reserved and spot instances, partner selection, and continuous assessment are important to gain most value from the cloud, reduce cost, improve application performance, and drive efficiency – without over-extending budgets or IT resources.
Are you getting the proper ROI on your cloud computing system? Contact one of our experts for an assessment and discover how our cloud optimization services can maximize your cost-effectiveness.
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