At the beginning of each year, as IT departments outline their budgets, discussions about cloud service cost management and control intensify in most companies.

According to Gartner, cloud spending is growing by 20% annually, but not all companies have the same goals for migrating to the cloud. A significant number (40-50%) choose cloud computing to protect their IT budgets and benefit from a flexible and transparent cost model. Many others are migrating to the cloud for more flexibility, availability or security.

Lower costs with IT

Cloud computing services traditionally have an on-demand/pay per use pricing system, which is relatively more advantageous than in-house management of IT infrastructure or IT solutions. Both equipment and applications require space, energy, maintenance and updates to operate, and eventually need to be replaced because they have become obsolete. These operations generate relatively high costs that are difficult to predict from year to year to include in the IT budget.

The cloud, on the other hand, brings fixed, monthly or annual costs, as well as the possibility of paying only for the resources actually consumed. This means that organizations can scale their services for current requirements and allocate additional resources on demand when requirements increase. Thus, one of the most significant benefits of migrating to the cloud is the reduction of infrastructure expenses.

Migrating to the cloud also creates a dilemma, however; on the one hand, companies report significant benefits (Accenture found that moving workloads to the cloud leads to 30-40% savings at the CTO level), on the other hand, managing and controlling costs with cloud services is more complicated than they expected (49% of cloud-based companies have difficulty controlling cloud costs, according to Anodot).

What is included in the cost of cloud services?

Managing and controlling costs with cloud services can be difficult because there are so many factors that influence pricing, not all of which are very obvious. It is about the nature of the contracted services and the associated resources (computing power, storage, bandwidth), the type of instances (virtual machines, containers), the way of calculating the actual consumption, the volume of stored data, the automatic scaling facilities (automatic increasing and decreasing of resources according to load), etc.

Contracted support services, the related Service Level Agreement (SLA) or response time also matter. Availability or SLA-guaranteed support may be more expensive. However, not every cloud instance requires 99.99% uptime and 24/7 phone support. Such elements are generally specific to IT services and automatically generate an inverse complexity for cloud computing costs as well.

Cloud services cost management and control

Cost management is a necessary approach for companies that use complex services or from several cloud providers. IT managers can thus clarify if contracted cloud resources are underutilized or if they are actually paying more than they budgeted for.

Practical approaches to cost control include:

  • Setting strict rules for approving any cloud service expenses and setting fixed budgets for both services used and resources consumed.
  • Opting mainly for on-demand public cloud services that allow flexible allocation of processing power, storage space, etc.
  • Constantly identifying and removing unused resources, misconfigured instances, unnecessarily reserved capacity, etc.
  • Ensuring visibility of billed costs to better understand what type of resources/services/projects money is being spent on.
  • Allocate budget and set limits across teams and projects so that each entity is accountable for the cloud services it consumes.
  • Choice of cloud services with automatic scaling, provisioning and resource allocation capabilities.
  • Requesting consumption reports at regular intervals to better understand the history and create the most accurate forecasts.
  • Closer collaboration between the finance and IT departments for a better correlation between requirements and costs and timely operation of the necessary changes.

Why is it important to properly manage cloud costs?

There are many advantages to cloud cost management, the most relevant being control over the IT budget. Managers of technical departments will have more transparency on how cloud services are consumed, depending on the internal beneficiaries: teams, projects, business lines, etc. Thus, taking cost-cutting measures will become much easier and justified, since only those services that do not influence the smooth running of the activity, whether they are redundant, underutilized or simply not used, can be interrupted.

Also, unused resources can be reallocated to teams or departments that need them to accelerate their projects and generate value. After all, cloud cost management is not just about making savings, but rather about smart and efficient use of contracted resources and providing users with the desired level of performance.

M247 offers all customers a transparent system for management and cost control of cloud services. Our goal is for cloud migration to reduce pressure on IT budgets and become a source of innovation and development.

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