10 Nov 2022

Avoid cloud overspend: how to optimise before you migrate (Guest blog from Kainos)

Author: Joe McGrath, Cloud Economist, Kainos

One of the biggest motivating factors for an organisation moving existing workloads to the cloud, or creating new workloads there is that cloud is cheaper. At least that is what the marketing materials tell us.

The truth is that when organisations move to the cloud, but neglect to implement an appropriate cost optimisation strategy they can overspend by as much as 70% over their initial forecasts which were used as part of the original business case to support a migration. When in the cloud, it is also estimated that up to 30% of total cloud spend is waste, which is capital that could be redirected towards other activities.

So why does this 70% overspend happen?

Introducing Cloud to an organisation is often part of a wider Digital Transformation strategy, which requires changes to many aspects of the organisations working practices, however all too often these transformations are focussed on the departments that are closest to the technology side, such as the Central IT department or development teams.

Most organisations who start using cloud will also look to set up a Cloud Centre of Excellence / Enablement. This group will be responsible for settings standards, introducing new ways of working, facilitating team collaboration, and building out the initial services to support the cloud strategy, from a technology, security or product perspective. In many cases they will not even have access to the billing data until the bill shock moment arrives and they are tasked to find savings or explain why the bill is so high.

By not addressing how cloud will impact the wider organisation, you may see the following issues when it comes to managing your cloud bill:

Transition to from CapEx to OpEx model requiring a change in accounting practices, how forecasts are generated and calculations for amortisation, for example
Unable to map cloud spend to organisational objectives
Large bills & complex billing models
Lack of visibility into spend
No defined roles or responsibilities
Lack of communication between Technology teams and Finance Business Partners
Inability to allocate costs.

These challenges occur in very size of organisation, from SMEs right up to multi-national corporations, and the approaches to address them are equally applicable.

The sooner you start working to understand and optimise your cloud costs you will ensure that your organisation is less likely to experience a bill shock moment, and more likely to be confident in the use of cloud services

How can you address this?

1. Engage with your finance business partners early.

Align their requirements for cost allocation, budgeting and forecasting to the new operational expenditure model of the Cloud.
Could your finance teams complete foundational cloud training to help understand some of the concepts of cloud and how the new billing meters work?

2. Determine your KPIs.

Determine what is important to you initially you ensure that processes, structures and tools can be put in place to help you achieve your KPIs, and then iterate on these to drive future improvements. Examples include % covered by Committed Use Discount, % resources tagged or % of shared costs allocated.

3. Democratise the billing data

Engineering teams thrive on making improvements and finding efficiencies; however they cannot do this without access to the data. By ensuring that the right people can have access to the necessary data at the right time we can ensure that decisions can be made in a timely fashion.

4. Review Recommendations regularly

Review recommendations from cloud providers at regular intervals to ensure that every opportunity to optimise costs is taken. It should be noted here that not all the Cloud vendors’ services are covered here, and so you will need to leverage other tools, as well as manual reviews to fully optimise your estate.

5. Review Migration targets.

Migration tooling will have recommended a target VM for your workload based on data that it has gathered while in discovery mode, however you should review other VM types with different chipsets, as these may give cost and performance gains.
Review families that have been optimised for your workload, rather than general purpose VMs.

6. Consolidate your licences.

Ensure that you have reviewed your licencing position and rationalise these were possible.
Understand your Licence mobility and the implications of moving some services to a cloud-based workload.
You may be able to reduce licence costs through leveraging Cloud Native alternatives to your on-premises workloads, such as Firewalls, Database servers or monitoring platforms.

7. Leverage Automation.

Automating the starting and stopping of virtual machines can reduce your spend dramatically. For example, shutting down development servers outside of business hours and at weekends can save you up to 66% of the cost of the VM.
Automation can also be used to delete stale resources, manage data archiving and remove entire environments as part of your development process.

8. Implement budget alerts.

Budget alerts can be configured to track against your forecasted cloud usage. These will help to identify where you may have opportunities to optimise your costs, and will also help your organisation quickly respond to potential misconfigurations, or even security events.
Ensuring that the right people receive these alerts will help your organisation to action them well in advance of the monthly cloud bill.

9. Tag your resources.

This additional level of metadata is crucial for the success of your cloud cost management as this is how you can allocate costs, identify key stakeholders to discuss optimising workloads and determine unit costs of a service.
Agree what tags are needed for cost management and allocation and then apply a governance policy to ensure that they are applied.

10. Create a FinOps Team.

This can be a virtual team or dedicated individuals, ideally from both Technology and Finance with an executive sponsor.
To drive awareness of cost optimisation, define strategies, identify opportunities to reduce and optimise costs
To act as the interface between your Finance Business Partners, the Technology side of your organisation, product teams and the executive.
They will leverage the cost data provided by your provider and turn it in to actionable insights to optimise your cloud spend and get the most from your investment.

The actions above are not exhaustive, however understanding your cloud costs, and being able to allocate them appropriately will allow your organisation to determine the value for every pound spent on cloud services.

The sooner you start working to understand and optimise your cloud costs you will ensure that your organisation is less likely to experience a bill shock moment, and more likely to be confident in the use of cloud services to support success without spending more than you need to.