How to Manage Cloud Costs

Organizations often choose to use public cloud services in part because they are hoping to save money. But if organizations don’t implement the right governance and cost optimization measures, they often find that their cloud costs are skyrocketing out of control.

In the newly released RightScale 2018 State of the Cloud report, 92 percent of respondents said that they were utilizing public cloud services, an increase from 89 percent who said the same thing in 2017 and 2016. Many of those organizations aren’t just using the cloud — they are using more cloud. Seventy-one percent of enterprises said that they were planning to increase their public cloud spending by 20 percent or more, with 20 percent planning to more than double their 2017 spending.

But enterprises aren’t always getting what they pay for.

On average, the organizations surveyed estimated that about 30 percent of their cloud expenditures are wasted, and RightScale said that most have 5 percent more waste than they realize. Similarly, a separate white paper written by Enterprise Management Associates (EMA) said that its research showed that “40-50 percent of cloud CAPEX and OPEX are wasted.”

It’s no wonder then that the RightScale survey found that optimizing cloud costs was respondents’ number one initiative for the second year in a row. In fact, 58 percent of respondents picked cloud cost optimization as their top priority, up from 53 percent in the prior year’s survey. And 76 percent of those surveyed said that managing cloud spend is a top cloud challenge; it was second on the list of challenges behind security, which was selected by 77 percent of respondents.

That begs a question: what can enterprises do to reduce waste in their cloud spending?

To understand that, you first need to understand the factors that lead to cloud waste.

Cloud Computing Cost Challenges

By their very nature, public cloud services are very easy to deploy. Anyone with a credit card number can get started in about 10 minutes (or less). But that easy deployment often leads to situations that escalate cloud costs:

• Running instances when they are not in use. In the same way that people turn on the lights when they enter a room but forget to turn them off again when they leave, many customers turn on cloud services and never turn them back off. These “zombies,” as unnecessary cloud instances are often called, may continue running 24/7 even though no one is actually using them overnight or on the weekends.
• Choosing the wrong type of instances. Because developers aren’t always exactly sure what kind of computing resources an application will need, they may overprovision, perhaps deploying a large compute instance when a medium or small will do the job adequately. This type of overspending can be harder to spot and may require specialized cost optimization software to find.
• Failing to use discounts. Developers who are in a hurry to get their applications up and running may configure the standard or “on demand” cloud instances without considering whether reserved or spot instances or another discount program could save them money.
• Lack of centralized management. The early adopters of public cloud were often individuals or small teams within organizations that deployed cloud services without IT’s knowledge or oversight. That ad hoc adoption, sometimes referred to as “shadow IT,” made it difficult for enterprises to know how much they were spending on the cloud, let alone manage that spending.
• Multi-cloud strategies.Because it’s so easy to deploy public cloud services, many organizations use more than one cloud vendor, matching each application or workload to the vendor offering that provides the best match. According to the RightScale report, 81 percent of organizations are pursuing a multi-cloud strategy, and on average, respondents were using 4.8 different clouds. But using more than one vendor makes the environment more complex and more difficult to manage — and that can lead to higher costs.
• Poor storage management. Cloud storage is very inexpensive — but it’s not free. Organizations that store cold or archive data longer than necessary may unnecessarily increase their cloud costs. Another common mistake is storing too many snapshots for backup and recovery purposes. And organizations also need to make sure they are tiering their storage correctly and not paying higher active storage fees for data that is rarely accessed.
• Selecting the wrong vendor. The leading cloud vendors’ pricing charts look very similar. But if you read the fine print, one vendor may have a dramatically lower price for certain types of workloads. Organizations need to make sure they thoroughly understand public cloud pricing before committing to a vendor.
• Vendor lock-in. In theory, it should be easy to move workloads from one cloud vendor to another. But in practice, it’s often just the opposite. Organizations sometimes end up paying higher prices than necessary because they didn’t do their homework upfront, and it is too difficult to migrate applications or workloads after they are in production.

Ways to Cut Cloud Costs

What can organizations do to counter all those factors? Experts have suggested quite a few different measures that can help optimize cloud spending:

• Turn on autoscaling. The leading cloud vendors have recognized the problem of cloud “zombies” and have offered a solution: autoscaling. These features automatically scale use of resources up or down as the demand ebbs and flows. While this can be very helpful, experts caution that configuring autoscaling can be very tricky, and it may require some trial and error before organizations get the results they are looking for.
• Take advantage of the cloud vendors’ management tools.In addition to autoscaling, the cloud vendors also offer a variety of management tools designed to help organizations get a handle on their cloud spending. Most offer services ranging from simple monitoring to automation and optimization services that can help organizations reduce spending.
• Create a central cloud team. The RightScale report found that 57 percent of organizations surveyed have a central cloud team or center of excellence, and another 24 percent are planning to create one of these teams. Cost optimization is typically a key role of those groups, with 64 percent of those surveyed saying their centralized group is responsible for managing or optimizing costs of cloud. This approach is in keeping with advice from Gartner, which said, ” Enterprises that tend to be successful with cloud management tooling (particularly CMPs) are those with strong central governance in place . . . They realize early on that cloud services must have policy enforcement to reduce the risks and sprawl that inevitably come from decentralized acquisition of cloud services.”
• Implement chargeback reporting.A simple management strategy that can help cut costs is to make sure each business unit is paying for cloud costs out of its own budget. Organizations can use third-party services or the vendors’ own reporting tools to make sure that every instance is mapped back to the business unit using it. That provides incentive for the business units to reduce waste on their own.
• Take advantage of discount programs and pre-purchasing. As already mentioned, all of the leading cloud vendors offer discount programs. For example, both AWS and Microsoft offer reserved instances, which cost less but require a longer-term commitment. And the big three vendors also have spot instances, which offer a reduced fee for workloads that don’t have to be run at a particular time. In addition, the vendors also have some specialized discounts for customers that fit into certain categories, as well as free tiers for many of their services. According to a 2017 report from 451 Research, these discount programs can reduce costs by an average of 29 percent.
• Use serverless services. Serverless computing services, such as AWS Lambda, take away the need for developers or other IT staff to configure or manage cloud instances. The developer simply writes the code for the application, and the cloud service handles all the details of infrastructure deployment. That saves a tremendous amount of time, which in turn, reduces operating expenses. According to the RightScale survey, the number of organizations using serverless has increased from just 12 percent in 2017 to 21 percent in 2018. Another 21 percent are experimenting with the technology while 19 percent plan to use it in the future. In fact, serverless was the fastest-growing cloud service covered in the report.
• Deploy containers. Another technological solution that can help reduce operating expenses is containers. Often used by IT teams taking DevOps approaches, containers package applications together with all their dependencies, making them easier to deploy, manage and/or migrate from one environment to another. The RightScale report found that container technologies have become very popular. Seventy-eight percent of those surveyed were using or planning to use Docker, and 63 percent of those surveyed were using or planning to use Kubernetes.
• Implement automation solutions.Automation is also very popular with DevOps teams, and this technology too can help bring down operating expenses. Automation reduces or eliminates manual processes, streamlining IT operations processes so that staff can become more efficient. In the RightScale survey, all the leading configuration automation solutions saw usage increase between 2017 and 2018.

• Use a cloud cost management vendor. Many organizations decide that tackling these cost optimization chores on their own takes too much time and skill. Instead, they leverage software and/or services from one of the many cloud cost management vendors. 451 Research noted, “Enterprises manually looking to reduce costs face an uphill challenge – tools and expertise are needed, which can be provided by MSPs as part of their value propositions.”

Cloud Cost Management Vendors

Organizations that decide to use a cost management vendor have a large number of choices. The list below offers an overview of some of the available options:

• Apptio
• BMC
• Cloudability
• CloudCheckr
• CloudHealth Technologies
• Cloudyn (Owned by Microsoft)
• Densify
• DivvyCloud
• HPE (Cloud Cruiser)
• IBM
• Logicworks
• Nuvola Analytics
• RightScale
• RunMyProcess
• Scalr
• Tangoe