Cloud cost management is the process of managing cloud expenses to minimise costs and maximise the return on investment.
The cloud has revolutionised business operations in recent years. Most companies use services like AWS (Amazon Web Services), Microsoft Azure or Google Cloud as a regular part of their business processes to store massive amounts of data and to be able to utilise it at any time or location. Cloud operations have changed the way business works, but cloud services also cost businesses money.
Since cloud computing and storage costs money, businesses need to make sure their cloud investments are being utilised properly and that they are not overspending. That is where cloud cost management (or cloud cost optimisation or cloud spend management) comes into play. Cloud cost management is all about helping companies spend the least amount of money possible for the highest return on their cloud investments.
Historically, cloud cost management focused on purely cutting costs whenever possible. Now cloud cost management is more focused on optimising cloud usage to minimise spending when possible and maximise the return.
Cloud cost management can help companies reduce what they spend on cloud services, but what are the other benefits of cloud cost management?
The main benefit of cloud cost management is the cost savings it provides for companies. Companies that actively work to be proactive in their cloud cost management can avoid overspending on services that the company does not need or use. They can also avoid the underutilisation of cloud services that could be helping the company get more for its investment.
When companies are more aware of how cloud money is spent, they can optimise their cloud architecture. Cloud cost management can help optimise the current usage by making a shift or by indicating better approaches to the current architecture.
Ideal cloud usage requires choosing the service that is right for the business without overprovisioning or underprovisioning. Overprovisioning leads to overpaying while underprovisioning can reduce performance. With cloud cost management, cloud usage is carefully planned. That means companies can avoid these problems to ensure that business performance improves without overpaying.
Cloud cost management involves taking a close look at how cloud services are being used. Doing so reduces waste and increases efficiency. Companies can make the most of the resources they do pay for with automatic scaling and load balancing.
Cloud cost management helps organisations know how they use their resources now, which can help with predictability. Organisations that take the time to plan and understand their cloud costs now will not be surprised by a sudden increase in costs down the road.
To help companies manage their cloud spending, many organisations create cloud cost management tools. Cloud cost management tools are software platforms companies can use to manage all costs associated with their cloud resources, management and optimisation. These tools are focused to help maximise cloud usage while also minimising costs across the board. By optimising cloud costs, these tools can also help organisations improve their operational efficiency with cloud resources.
There are many cloud cost management tools available, but great tools include these key features:
Unlimited scalability is one of the benefits of turning to the cloud and one reason why so many companies utilise cloud computing and resources. As scaling occurs though, there is a risk for planning for maximum utilisation of resources all the time, and that leads to unnecessary costs—since few resources need to be at 100% all the time for operational success. Cloud cost management tools help mitigate that by providing automating scaling capabilities. With automatic scaling, resources are available and can be used at any moment they are needed, but they are powered down while not in use. This helps companies avoid spending lots on unutilised resources while also providing the benefits of unlimited cloud scalability.
When a company purchases cloud services, there are often instances that are not needed or in use. A key cost driver of cloud services is these unused instances that a company opts in for. A cloud cost management tool will provide instance management to mitigate this cost problem. With instance management, the tool will identify instances not in use and alert the company that there is no need for the instance. This tool can also find discount instances that could be used to accomplish tasks at cheaper costs. With either approach, the tool can save companies money.
Alerts are a powerful tool to notify the company that there are ways it could be optimising cloud costs. A cloud cost management tool can have alerts set up to be automated, so the company is notified anytime there are authorisation failures, sudden cost spikes or untagged infrastructure, and when budget limits are crossed. These notifications can help the company act and begin reducing unnecessary costs and optimising spending.
One key way a cloud cost management tool can help save companies money is by showing them exactly how money is being spent on cloud services and computing. Cost allocation helps companies track how much money is being spent on aspects of cloud services or the team spends. Tracking team spending helps users create appropriate future budgets that consider actual spending. Tracking costs helps companies plan appropriately for future needs and expenses.
Overspending on cloud services can be avoided when appropriate planning is put into place. These are key cloud cost management strategies that can help organisations reduce costs while maximising return on investment.
There are organisational strategies that companies can utilise to improve cloud cost management. These strategies include:
- Regular reporting and reviews of current cloud service consumption to identify how the cloud is truly used from day-to-day
- Regular audits of billing and financial data to determine how budgets are used and the current level of spending
- Established policies for provisioning cloud resources to ensure compliance
- Governance and policy recommendations to limit utilisation and spending
Every company needs cloud services and instances that are the right size or fit for the organisation. Right-sizing is determining that the public cloud instances an organisation chooses are the right fit for the organisation’s needs and overall goals. Determining what instances are the right size for an organisation then empowers the company to ensure proper spending on that instance.
Maximum utilisation is needlessly expensive because almost no instance will need to be used at maximum capacity at all times. Instead of planning for maximum utilisation, companies can use automatic scaling to scale up resources when needed and scale them down (and potentially turn them off) when they are not needed. This scaling allows for better use of cloud resources.
Resources do not need to be used at all hours every day of the week. Even uses that are crucial to business operations do not need to be used at all hours. Power scheduling allows companies to turn down instances on days or during times when they will not be needed. For example, it can be cost saving to turn down instances after business hours or on weekends when the business is not open.
Paying for instances that are not being used isn’t optimising cloud cost spending. Instead, it is more powerful and more optimal to remove any instances that are not being used. Removing unused instances also comes with an additional benefit. Unused instances can create security vulnerabilities that pose a security risk. Removing these instances saves money and decreases security vulnerability.
Some business-critical instances need to run constantly for the business to operate, but not every instance is business-critical. For the occasional instance that does not need high levels of operation, it can be cost saving to use discount instances that do not necessarily guarantee availability.
While cloud cost management is a powerful way for companies to save money and optimise their use of cloud resources, there are challenges that come with it. These are some of the challenges businesses may come across.
Without a full understanding of spending practices, businesses cannot fully optimise their cloud spending. Because some companies lack the right tools to determine cloud spending, they may find hidden costs that are taking up valuable budget space. There is also a challenge when cloud users may not interpret cost reports in the right way, and then they may spend more than they need to.
It is challenging to accurately forecast cloud expenditure, especially when companies have numerous cloud resources at play. That can lead to inaccurate budget forecasts. This can be especially true when companies change their plans or the ways they perform specific tasks, which escalates cloud costs quickly.
An inaccurate budget forecast can be detrimental to the cloud cost management process. If you are under budget, you may jeopardise an active application. Over-budgeting your cloud costs means you are paying for what you do not use. Instead of relying on estimates, use a test environment to estimate what you will use in the future.
Cloud spending results in bills, but when companies do not interpret the complex billing, it is difficult to accurately estimate spending. Without understanding the bill itself, optimising costs is a challenging task since the customer cannot identify avenues for cost optimisation or where overspending is happening.
When resources are not architectured appropriately, there are many risks. Most AWS users do not architect their resources appropriately, which leads to unauthorised data access and data loss. That is a challenge that does not need to happen because AWS released the AWS Well-Architected Framework to help cloud engineers and developers to build secure, reliable and scalable workloads. This process makes reliable, efficient and secure apps. Without the AWS Well-Architected process, applications would be vulnerable to crashing and attacks by hackers.
To properly utilise cloud cost management, companies need a partner to help them optimise their architecture and usage. ServiceNow® provides Cloud Management services that allow your IT teams to provision cloud infrastructure and services, while providing consistent management and cost visibility. When Cloud Management is combined with IT Asset Management (ITAM), companies can gain full insight into how they can optimise their cloud usage and what their spending is—which empowers them to maximise their usage and minimise their costs.
Learn more about ServiceNow Cloud Management to begin optimising your cloud services and saving costs whenever possible.
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