By Aman Aggarwal
Did you know that the global public cloud spending is expected to total $679 Billion in 2024 as per a recent report from Gartner? Furthermore, a recent survey by Everest Group revealed that 82% of global organizations struggle with more than 10% of their cloud spend getting wasted, out of which 68% experience more than 20%. It further found that 38% of organizations experience more than 30% of their cloud spend getting wasted. This waste is often due to overprovisioning of resources, inefficient usage of resources, and a lack of cost optimization measures. With the sheer magnitude and the accelerated use of the cloud as a business enabler, Cloud waste is the next big problem companies may be looking at in 2024 and beyond.
“Companies identify the absence of clear insight into cloud usage and ineffectiveness as the main cause of excessive spending on cloud services. This absence of clarity poses difficulties in monitoring and enhancing the utilization of cloud resources, resulting in inefficiencies and avoidable costs.”
Cloud waste has a significant impact on a business, impacting both its financial health and operational efficiency. Excessive cloud waste leads to unnecessary spending on unused or underutilized resources, which directly affects the company’s bottom line by reducing profitability and increasing operational costs. Wasted cloud resources also result in an inefficient allocation and utilization of computing power, storage, and other services, hindering the company’s ability to scale effectively and allocate resources where they are needed most. This significantly diminishes the return on investment (ROI) on cloud services, preventing the company from fully benefiting from the advantages of scalability, flexibility, and agility that the cloud offers.
Excessive cloud spending resulting from waste forces the business to reallocate funds from other critical areas, impacting planned budgets for innovation, research, or other strategic initiatives such as innovation and research. Furthermore, wasted cloud resources contribute to an increased carbon footprint and negative environmental impact due to unnecessary energy consumption in data centers.
By addressing cloud waste, businesses can optimize their cloud usage, reduce costs, improve operational efficiency, and minimize their environmental impact.
The Usual Suspects of Cloud Waste
Understanding the underlying factors that contribute to cloud waste is paramount before initiating mitigation strategies. This serves as the foundational step toward effective cost optimization within cloud environments. Such knowledge not only highlights where resources are squandered but also enables tailored and targeted approaches to address these issues. Let’s dive into a quick guide on identifying the usual suspects for cloud waste:
- Idle or Underutilized Resources: Organizations often provision more resources than they need, leading to idle or underutilized instances, storage, and other cloud assets. These unused resources continue to accrue costs, contributing to unnecessary spending.
- Inefficient Usage Patterns: Organizations fail to optimize their cloud usage patterns, leading to inefficient resource consumption. For instance, running instances at full capacity when they only require occasional usage can result in wasted resources.
- Lack of Visibility: Organizations often lack visibility into their cloud usage patterns, making it difficult to identify and address areas of waste. Without proper visibility, organizations may not realize the extent of their cloud spending or the opportunities for optimization.
- Complex Pricing Models: Cloud pricing models can be complex and intricate, making it challenging for organizations to accurately predict and manage their cloud costs. This complexity can lead to overspending or missed opportunities for discounts.
- Shadow IT: Unauthorized cloud usage, often referred to as shadow IT, can contribute to hidden cloud costs. When employees procure cloud services independently without IT oversight, these costs may go unnoticed, adding to the overall cloud bill.
Strategies for effectively reducing cloud waste
To gain greater control of their cloud spend, top-performing enterprises focus on developing three capabilities – Visibility, forecasting, and optimization. Organizations should adopt a proactive approach that combines cloud cost visibility tools, a culture of cloud cost awareness, and a collaborative FinOps mindset. Microsoft identifies these as tools, accountability and action. The strategies listed here are advised by FinOps professionals who have helped save over $100 Million in cloud costs:
- Proper RI Management
Committing to specific cloud resources for a set period allows organizations to unlock significant discounts compared to on-demand pricing. This commitment encourages efficient resource utilization, preventing idle instances from draining budgets. Additionally, careful RI selection and automated RI management tools can further optimize usage, ensuring your resources align with actual needs. The ability to sell unused RIs on the AWS marketplace additionally helps curb wastage. When done right, RI management is one of the best mechanisms to reduce cloud waste.
- Quarterly Well-architected reviews through expert consultants
Implementing Well-Architected Reviews (WARs) and partnering with WAR consultants for regular audits is a practical approach to slashing cloud waste. These reviews act as a deep scan, uncovering hidden inefficiencies like unused resources, misconfigured settings, and underutilized services that silently drain your budget. WAR consultants, acting as expert guides, then provide concrete recommendations for optimization, from right-sizing instances to automating scaling and adopting serverless solutions. By applying these insights, you gain control over your cloud spending, transforming wasted resources into cost-effective tools driving your business. Regular audits ensure this optimization persists, preventing waste from sneaking back in and keeping your cloud environment lean and financially efficient.
- Utilize cloud optimization services by FinOps providers
Engaging FinOps service providers for cost optimization can offer specialized expertise in managing cloud costs, optimizing resources, and eliminating waste. These providers offer tailored solutions and insights to identify inefficiencies and recommend strategies to maximize cost-effectiveness in cloud usage. Furthermore, they also provide additional savings through strategic partnerships with hyperscalers enabling discounts beyond the norm.
- Leverage cloud cost visibility tools:
Cloud cost visibility tools provide invaluable insights into your cloud usage and spending patterns. Utilize these tools to track cloud usage across different cloud providers, services, and resources. Identify areas of waste, optimize resource allocation, and make informed decisions about cloud spending. Recommendations and visibility platforms play a crucial role in this process by providing organizations with a comprehensive understanding of their cloud usage patterns and identifying areas for cost optimization.
- Foster a culture of cloud cost awareness:
It involves educating and empowering employees about effective practices in managing cloud expenses. By providing knowledge and tools, organizations enable staff to make informed decisions regarding cloud resource usage. Encouraging responsible cloud utilization and instilling a sense of ownership and accountability for cloud spending among employees is crucial. This culture encourages thoughtful resource allocation and usage.
- Collaborate between IT and Finance teams:
Siloed operations between IT and finance departments can hinder effective cost management. Establishing collaborative efforts between these departments is pivotal. This collaboration ensures that both teams understand and share responsibility for cloud cost management. By aligning financial objectives with technical decisions, organizations can make informed choices that optimize cloud spending while meeting budgetary goals.
- Adopt a FinOps mindset:
FinOps, a cloud financial management discipline, integrates various disciplines, including engineering, finance, technology, and business. Embracing FinOps principles enables cross-functional teams to make data-driven decisions about cloud spending. It emphasizes collaboration between different business units to balance the trade-offs between speed, cost, and quality in cloud operations. This approach enhances transparency, accountability, and efficiency in cloud expenditure
- Stay up-to-date on cloud pricing models and discounts:
Cloud pricing models can be intricate and subject to frequent changes by providers. Staying informed about the latest pricing structures and discounts offered by cloud service providers helps in optimizing cloud expenditure. By leveraging favorable pricing models and discounts, organizations can achieve significant cost savings.
- Monitor cloud spending against budgets and forecasts:
Establishing clear cloud spending budgets and setting realistic forecasts is vital. Regularly monitoring actual cloud spending against these predefined budgets and forecasts helps in identifying deviations. Analyzing these deviations allows organizations to take corrective actions promptly, ensuring spending aligns with financial plans.
- Continuously optimize your cloud investments:
Cloud optimization is an ongoing process that requires continual evaluation and improvement. Organizations need to regularly assess their cloud usage, identify areas for enhancement, and implement strategies to improve cloud efficiency. By consistently optimizing cloud investments, organizations ensure cost-effectiveness and maximize returns from their cloud services.
The roadmap to a successful IT Budget in 2024 lies in smart planning. By integrating cloud optimization strategies, leveraging cloud cost visibility and recommendation tools, and embracing FinOps practices, your organization can navigate the budget landscape effectively, optimizing resources while staying agile and innovative.
The author is head, CloudKeeper
