Keeping Cloud Computing Costs Under Control

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Cloud computing opens up a wealth of opportunities for businesses. Done well, a cloud-based app or a cloud migration can improve security and enhance performance.

The cost savings of cloud use can be considerable. A September 2018 study by Forrester, for example, found that moving to a cloud-based infrastructure offered a return on investment as high as 60 percent.

To realize these savings, however, an organization considering a cloud build will need to plan ahead. Build cost management into the project plan early to spot potential pitfalls and stay on budget.

 

Costs to Consider in a Cloud Build

The cost of a cloud app build includes a number of factors, including the cost of the software development itself, the cost of hosting it on the cloud, the cost of operations in general and the opportunity costs of foregoing other options such as hosting the application in-house.

Cloud computing often seems cost-effective at first because it does not involve capital expenditures. The tradeoff, however, is that a cloud build comes with operating expenses such as the costs of storage and software licenses.

For aging hardware or out-of-date software, a cloud migration may be an ideal way to bring the company’s work up to speed in a cost-effective manner. Likewise, an organization seeking to develop a new app from scratch may benefit from doing so in a cloud-compliant manner.

Research by Gartner indicates that “cloud services can initially be more expensive than running on-premises data centers,” writes Marco Meinardi, senior research analyst at Gartner. This may not be true in all cases, though. A transition to cloud-native technologies and serverless architecture may immediately reduce the cost of running services even in the short term, depending on the migration strategy.

On a longer timeline, cloud services can save companies money, whatever the migration strategy. The key is to ensure that those cloud services are used efficiently and care is taken to manage related costs.

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Managing Cloud Costs

Businesses spend about $26.3 billion annually on cloud computing, but not all of those dollars are spent wisely. Jay Chapel, CEO and cofounder of ParkMyCloud, says that figure was projected to be more than $17 million in 2020.

To avoid contributing to the cloud waste total, organizations will need to think about how to manage costs both during a cloud build and after an application launches in the cloud.

 

Refactor

Refactoring, also known as repackaging, involves making small changes to existing applications, in this case so they can function in a cloud environment. Refactoring can reduce long-term costs by making the application more easily scalable, Uros Pavlovic at Hentsu writes.

To weigh the costs and benefits of a refactoring, “consider how long are you going to be using the application, when is its end of life, and understand the amount of effort that might go into refactoring the application,” says Des Holmes, co-CTO of Hentsu.

All of these factors affect the value of refactoring, which is an element of the overall cost consideration. In some instances, building a new app that is fully cloud compatible may be a more cost-effective choice than refactoring an older application.

 

Set Spending Limits

For a long-term cloud cost management plan, set limits on cloud consumption related to your app or migration.

“For net new applications, cloud costs grow steadily. Developers and administrators spin up resources, and then spin up more as demand dictates,” write Owen Rogers, William Fellows and Jean Atelsek, analysts at 451 Research.

Because the initial resource use is low, your teams may feel they have room to play and innovate. While these innovations can be useful, they can also consume resources, driving up the cost of a cloud build.

To avoid the problem of increasing costs, set an overall cost ceiling for the project after it is launched, as well as one during the planning and build process. These boundaries give your teams a clear idea of how big the application or the project can get. Such boundaries can also spur innovation as teams try to improve the tools while staying within those limits.

 

Keep an Eye Out for Leaks

Also, look for places that your cloud build may lose money. According to Todd Bernhard, product marketing director at CloudCheckr, some of the most common sources of cloud spend waste include:

  • Unused or unattached resources accessed during a build or for a particular function, then left running.
  • Idle resources resulting in inefficient CPU use.
  • Failure to understand patterns of computing demand and failure to manage cloud resources appropriately.
  • Not using available tools to determine how large your organization’s cloud footprint should be, nor tailoring resources accordingly.
  • One more factor worth mentioning: Storage costs. These usually start out as smaller costs, relative to other expenses. Over time, though, storage needs can grow, and so will the associated costs. Be ready for storage to become a leading cost down the line.

Keeping these factors in mind can help an organization reduce its ineffective cloud use. This helps ensure any cloud spend goes toward things that generate value for the organization.

Finally, don’t hesitate to work cost containment into your overall governance strategy. Although many organizations have governance strategies that focus on security and compliance, not all incorporate cost management into the plan, says Kevin Epstein, senior solutions architect for CDW’s AWS practice.

Yet cost management is also vital to the success of a company’s digital strategy. “If we can’t make the economics work, the rest is almost inconsequential,” says Epstein.

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Project Planning: Balance Cost and Performance

Estimates of cost may arise during an inventory or assessment of the organization’s needs. The planning phase offers an opportunity to clarify exactly what each option will cost, writes Hemant Kulshreshtha, associate vice president at Temenos.

Because it focuses on the concrete details of the project, the planning phase is an ideal place to discuss the costs associated with the project.

As part of the project plan, forecast expected spending and set limits. To facilitate this process, “enlist all stakeholders who will be involved in the cloud migration at the onset and on a daily basis and establish rules, responsibilities and hierarchies to give control to those who need it when they need it,” writes Nick Smirnov, CEO at Hystax.

In a cloud environment, the power to control costs must often be spread among more teams and individuals than in an on-premises situation.

“The ability [of cloud computing] to scale up and down on demand has allowed resource procurement to transition from sole ownership of the finance or procurement team to stakeholders across IT, DevOps and others,” writes Yair Green, stealth startup founder and former CTO of GlobalDots. This scalability has also distributed the need to understand and control costs among a number of teams responsible for a cloud project.

Involve members of each affected team in an overall plan to manage costs. “A big mistake that many companies make is that they treat, particularly public cloud service, as though it is cable service, where you use it every month and pay a bill at the end of the month,” says Dennis Smith, a Gartner analyst whose work focuses on cloud management. “Many find they’re spending more money than they did before [using their on-premises service].”

That’s why organizations using the cloud will always need to look for ways to make that use more cost-efficient, just as they once sought ways to make on-premises computing more cost-efficient.

“Enterprises need to approach cloud computing as a tool that has the potential to save a great deal of money,” says David Linthicum, chief cloud strategy officer at Deloitte. “However, savings won’t materialize unless you come to the public cloud with clear objectives and a plan around what will be the cost savings and how you’ll get there.”

Cloud computing offers a number of advantages. The cloud can enhance an app’s accessibility, performance and data security, all while creating cost efficiencies for the organization. By considering cost throughout the planning process, teams can more easily address potential issues and develop a clear vision of the project’s scope.

 

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