Forecasting cloud costs and impact: How to realise, measure and demonstrate the true value of the Cloud
Cloud computing was a huge topic at this year’s Digital Transformation Expo (DTX), with speakers and panellists discussing everything from migration strategies and business resilience to security in hybrid deployments. We look back at one of the key themes where M247’s Chief Portfolio Officer, Greg Hudson, joined a panel of experts to discuss the importance of forecasting cloud costs.
Today’s forecast: Cloudy with a chance of more cloud
The Cloud has seen monumental growth over the past few years. While the Covid pandemic prompted many businesses to embark on their cloud journeys as a means to enable remote working, most are now fully committed to building on the basics they already have in place.
According to Foundry’s Cloud Computing Survey, 72% of businesses now default to cloud-based services when upgrading legacy tech or buying new services. And the number of businesses with most or all of their IT infrastructure in the Cloud is expected to jump to 63% by the end of 2023.
Of course, the Cloud isn’t without its challenges, and many IT decisionmakers report difficulties around accurately predicting costs, and then controlling them once cloud services are deployed. Businesses need to reassess their migration strategies, weigh up the business case for new cloud services, and start making a concerted effort to forecast costs to ensure the environment is optimised.
Building the case for cloud
Cloud adoption offers numerous benefits, both tangible and intangible, that empower businesses of all sizes to thrive in an increasingly dynamic landscape. Some of the key advantages include:
- Increased agility and flexibility: The scalability of public cloud resources enables businesses to meet both long-term growth goals and short-term rises and falls in demand. The retail sector was given as an example, with the ability to increase server capacity during peak times like Black Friday, to ensure uninterrupted customer experiences.
- Enhanced collaboration: Cloud technologies foster better collaboration among teams, whether individual members are working from home or in the office. Communication platforms and cloud-based document storage mean teams can easily share and collaborate on projects, which, as Greg noted, further enhances the experience for customers as well as employees.
- Reduced IT infrastructure costs: Public cloud offers on-demand services and infrastructure on a pay-as-you-go basis, eliminating much of the need for upfront and ongoing investments in on-site infrastructure. This flexible cost structure helps businesses optimise IT expenditure at a time when budgets are already being squeezed.
- Total Cost of Ownership as a key driver: The scalability and PAYG nature of the cloud has been a primary driver of adoption for many businesses. There’s seasonality in business, and the cloud’s ability to expand and contract alongside demand is one of its greatest benefits. It’s been easy for businesses to spin up a new solution here, or add a bit of extra capacity there in order to remain responsive to customer, employee and market demands. The result, however, has been increasing levels of cloud complexity, with hugely reduced visibility of the environment and a complicated (if not sometimes invisible) TCO. However if businesses want to evaluate the impact of their cloud strategy and better forecast future costs, it is crucial they are able to understand and measure TCO of all cloud services being used across the environment. And this is where a Well-Architected review can help.
A Well-Architected review can improve cloud visibility…
A Well-Architected review is essentially a stock-take of your cloud environment. It’s a comprehensive assessment of cloud infrastructure, workloads and architecture, measured against best practices as defined by cloud providers like AWS and Azure.
Reviewing your business’s cloud environment against these Well-Architected frameworks, helps to increase visibility of ad hoc services and solutions that have been added on (and forgotten) over the years. Which in turn, enables better business decisions when it comes to optimising the environment for cost efficiency, performance, security, reliability and operational excellence.
… and help with forecasting costs
In terms of businesses being better able to forecast cloud costs and maximise the impact of migration, there are a few ways a Well-Architected review can help.
1. Cost optimisation: The review looks at how resources are provisioned, utilised and billed within the cloud environment, and helps businesses identify budget-bloating factors like idle resources, underutilisation, inefficient storage, over-provisioning and unnecessary data transfer costs. By identifying areas for potential cost savings, businesses can more accurately forecast future costs, ensuring they are only paying for the resources and services they need.
2. Right-sizing resources: The review assesses whether resources like compute and storage are being correctly sized for their intended workloads. This helps business spot instances of over-provisioning, where costs are being unnecessarily driven up. With this information to hand, businesses can right-size resources, more accurately forecast ongoing costs, and maintain optimal performance across the environment.
3. Reserved Instances and savings plans: A Well-Architected review allows businesses to identify opportunities for leveraging cloud cost-saving mechanisms like Reserved Instances, where they commit to using specific resources for a predetermined period for a reduced fee. This enables more accurate cost forecasting, reducing the incidence of pay-as-you-use spikes and falls.
4. Cloud governance and cost control: Many businesses lose visibility of overall cloud costs because individual departmental heads have the power to make purchases without wider approval or buy-in. A Well-Architected review assesses the business’s cloud governance practices, including policies, procedures and controls for managing resources and costs. It can help identify areas where governance can be improved to enforce cost optimisation measures, monitor spending and control resource usage, all helping businesses better forecast costs.
Cloud needs to work for everyone
With cloud costs rising, and more and more services being added to individual business environments, its crucial for IT decisionmakers to gain buy-in from all key stakeholders. Being better able to forecast and evidence the cost, as well as the efficient use, of all cloud services will help. As will highlighting any areas where cloud adoption has the potential to generate additional revenue, either through enabling innovation of new products or services, or opening doors to new markets, new talent, or new suppliers.
But it’s also important to ensure any migration strategy planning addresses the specific needs and concerns of each department within the business. The reasoning that drives buy-in from HR or legal teams won’t be the same as the ones that builds excitement on the shop floor, or in the boardroom, or even in the IT department. To make cloud work for the business, it needs to work for everyone within it.
Top-down or bottom-up decision-making?
The shift towards cloud services and initiatives is often being driven primarily by bottom-up forces; we saw that in the early days of the pandemic, as businesses scrambled to enable remote working. Now employees are demanding an improved experience – with a better work-life balance and more opportunities for flexible working – they continue to drive business cloud initiatives with solutions like CCaaS, UCaaS and deeper integration of platforms like Microsoft Teams. Hybrid working models and the demand for seamless tools have made cloud-based solutions essential for attracting and retaining talent. In the wake of ‘quiet quitting’ and huge talent gaps, this has been a major driver for managers seeking to gain stakeholder buy-in for cloud migration.
Gaining and maintaining business buy-in
Building a strong business case for further cloud integration involves identifying suitable migration approaches, phased milestones for review, accurate cost forecasting and an evaluation of current infrastructure based on the six Rs. Does it make better business sense to rehost, re-platform, repurchase, re-architect, retire or retain?
Aligning departmental demands with the wishes of key stakeholders and overarching business goals is vital not only for securing the necessary resources, but for ensuring a successful cloud migration.
Phase migration for more accurate forecasting
Cloud migration is a continuous journey, and a phased approach gives businesses more power to optimise, monitor, review and adapt their environment as they go. By making a concerted effort to deeply understand the key drivers, challenges and strategies at every phase of the process, businesses can better forecast costs, optimise workloads, refine processes and procedures, and position the environment, and the business, for long-term success.
Teaming up with an expert migration partner can help businesses ensure they are getting the best returns on their investment and are always optimising their cloud environment, with clear visibility and predictability of costs.