The last six years have seen a rapid acceleration in the use of cloud computing. Enterprises of all sizes and across industries are now turning to cloud infrastructure and pursuing cloud-first strategies. As IT departments increasingly shift workloads into public clouds while they simultaneously convert existing on-premises virtualised environments to support cloud-like capabilities, optimising cloud spending has become an intense focus for many organisations.

In the RightScale 2019 State of the Cloud Report from Flexera, cloud users who were surveyed on their adoption of cloud identified two top priorities that, not surprisingly, correlate: moving more workloads to public cloud and optimising cloud costs.

As the use of public cloud has grown, so has the amount of spend. Public cloud spending is quickly becoming a significant new line item in IT budgets, especially among larger companies that typically run more workloads in cloud. More than 50 percent of enterprises are spending in excess of $1.2 million per year on public cloud in 2019.

Total annual revenue for the top public cloud providers Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform exceeded $30B last year (the exact number is unknown because only Amazon breaks out revenue for its cloud infrastructure unit separately from its other cloud services). Much of that revenue comes at the expense of cloud users not understanding how they can prevent wasted cloud costs.

Cloud users can do more to optimise cloud spend

Even though managing cloud costs is a top initiative for cloud users in 2019, they continue to underestimate the amount of wasted cloud spend. Respondents estimated 27 percent waste, while Flexera has measured actual waste at 35 percent.

One reason there is so much waste in public cloud is because of the complexity of cloud pricing and billing: Cloud providers offer hundreds of thousands of price points, and bills often have millions of line items. Add to that the constant change in pricing and introduction of new features plus the decentralisation of cloud use and it becomes apparent why it’s difficult to get a handle on cloud costs.

There are four key ways to address the problem of overspending on cloud:

Identify wasted cloud spend

Common areas where companies waste cloud spend include:

• Running instances 24×7: Rather than running instances when they are not needed, implement auto-scaling for production workloads as well as automated scheduling for development environments to run only during working hours or when needed
• Overprovisioning instances: Typically about 40 percent of instance spend is on VMs that are running at below 40 percent of CPU and memory utilisation, with the majority of those running under 20 percent utilisation. By downsizing, you can significantly reduce costs
• Neglecting to clean up old storage data: Deleting storage volumes that are no longer attached to instances as well as deleting old snapshots that are beyond your snapshot retention policy can save you money

Take advantage of discounts

Another significant area for cost savings is to leverage discounts from the cloud providers by committing to instance usage. Each cloud provider has different rules and approaches to its discounts, but the basic principles for using discounts is the same and can result in significant savings.

Collaborate to save more

Because centralised cloud governance teams aren’t the owners of the cloud resources, the biggest challenge they face is taking action on areas of waste. Once they have uncovered possible savings opportunities, they need to collaborate with the resource owners to take action. A typical collaboration process would include several steps by various stakeholders:

• Cloud governance team identifies recommendations for savings and shares recommendations with resource owners
• Resource owners can then identify recommendations that should be ignored (a recommendation to downsize an underutilised instance may not be appropriate if it is used for a disaster recovery scenario, for example), take action on recommendations, and share recommendations with other team members.
• Cloud governance team then reviews the results of the actions and reports on savings

Leverage automated policies for cost control

The agility offered by cloud results in resources often being provisioned with no delays for approval processes, so costs can quickly escalate if there are no governance processes in place to uncover waste and ensure efficiency. If your enterprise, like many, is manually managing your cloud costs rather than using automated policies, you could be missing opportunities to significantly reduce wasted spend.

The key is to remember that cloud cost optimisation is not once and done. By using automated policies to continually optimise for both the quick fixes such as identifying idle and underutilised instances as well as tackling more complex scenarios like Reserved Instances planning, you can reduce wasted spend over the long term.

Optimising cloud costs delivers instant savings

Enterprises in virtually every industry are adopting cloud to transform their IT organisations to help them accelerate innovation, expand market reach, and drive IT costs down — all while unlocking investment capital that was previously tied up in costly data centres.

The variable cost model of cloud with monthly billing cycles enables you to immediately realise savings the minute that you turn off a resource or scale it down. But ongoing management of cloud costs must be more than a one-time event or once-a-quarter focus. Companies that become proficient in continuous, automated processes to monitor and optimise cloud spend will save the most over time.

For more information, please download the RightScale 2019 State of the Cloud Report from Flexera.

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