Cloud computing has fundamentally transformed how businesses operate, offering unprecedented scalability, flexibility, and innovation opportunities. However, with the proliferation of cloud services, managing costs effectively has become a critical challenge for many organizations. Cloud cost management has emerged as a way to understand and control the cost and operations of cloud technology. Effectively managing these costs ensures that companies can maximize their investments in cloud technology while avoiding unnecessary expenditures.
The importance of cloud cost management has grown alongside the increasing adoption of cloud services across various industries. This trend has led to more complex and granular pricing structures. While these structures can offer significant benefits, such as tailored solutions and cost savings, they also require a deep understanding to be utilized effectively. Without this, companies may find themselves overwhelmed by options and potentially incurring higher costs than necessary.
While every company and team is different, some key considerations apply to everyone when it comes to creating a culture of cloud cost management. Let’s dive in.
What is Cloud Cost Management?
Cloud cost management is the strategic planning, analysis, and implementation of practices that allow an organization to understand and manage the costs associated with cloud computing. This management involves tracking and reducing expenses and optimizing cloud service and resource usage to achieve better alignment with business objectives.
At its core, cloud cost management aims to balance spending and performance, ensuring that every dollar spent on cloud services generates the maximum possible value. With cloud costs often varying by usage, time, and specific service configurations, effective management becomes a continuous monitoring, analysis, and adaptation effort.
Cloud Cost Management Best Practices
Adopting cloud technologies provides significant advantages, but it also requires a disciplined approach to managing costs effectively. Below, we outline key practices that can help organizations of all sizes optimize their cloud expenditures. These strategies ensure that your cloud investments align closely with your business needs and financial goals.
1. Understand Your Needs
Every organization is unique. The starting and final stages of cloud implementation will likely be different for everyone, and the fact that many teams are adopting some trendy technologies does not mean you need to follow exactly that path.
The first step towards building a cost management culture around cloud adoption is to analyze what your company really needs to accomplish its goals. A strategic mid- and long-term vision should always be considered, but having a clear view of what you need to achieve helps you narrow down the vendor and service options to evaluate in detail.
Do I need my applications to be highly available? Are there any clear usage patterns on the times my users access the applications I would take to the cloud? Will my users access my applications from all over the world? Can I go for a containerized approach? Could I introduce serverless components in the solution? Answers to these questions will help you define which cloud services make the most sense to your case when the context of your unique situation is added.
2. Aim for Elasticity… Or not…
One of the greatest benefits of the cloud is you just pay for what you use. You are basically moving from a CAPEX (CAPital EXpenditures) to an OPEX (OPerational EXpeses) model, and that means that the goal is to consume only what you need.
In the context of the cloud, elasticity is defined as the ability to grow or shrink your infrastructure as you need. There are multiple ways you can configure automatic scaling (up or down) rules that will enable your organization to add or remove cloud resources based on key execution events and pay just for what you used.
There are some scenarios where elasticity doesn’t add much value since you know for sure you will need the services to be up for long periods of time. The good news is that cloud vendors have seen that coming and have defined pricing methodologies that allow the reservation of resources for longer periods of time. In return for the reservation and commitment to consume, cloud vendors offer aggressive pricing options.
Once again, it all depends on what you need.
3. Understand the Pricing Models
Pricing is probably one of the aspects cloud vendors are more specific about in the documentation of their service offers. The pricing models vary from service to service, and costs might be calculated slightly differently for equivalent services delivered by distinct cloud vendors. No matter what your needs are, a good understanding of the pricing models will allow you to make informed decisions considering the relevant aspects of your specific needs.
Exploring and using the cost estimation tools offered by the vendors will help you get a general idea of the cost for your scenarios, but building a culture of continuous evaluation of the actual cloud usage and billing is key to optimizing the way you leverage the cloud.
Leveraging the resource tags to assign cost ownership (to teams, departments, etc.) will help you determine consumption & costs by the department in an automated fashion. Cost monitoring mechanisms and related alerts will help you catch cost leaks early on and plan for optimization cycles in a timely manner.
4. Look for Hidden Costs
Besides the OPEX costs described so far, cloud adoption brings some “hidden” costs you need to consider:
- Migration costs related to moving your applications or data to the cloud, which will very likely include refactoring efforts.
- Potential training for the technical teams that need to be addressed in the early stages of the adoption.
- Investment in infrastructure such as code, configuration management, and other modern practices will enable future savings in your operations.
- Finally, most organizations do not see this coming, but having some understanding of exit costs is extremely important. Major cloud vendors make exit an expensive proposition.
In summary, a cloud adoption process requires your organization to define a cloud enablement strategy that considers building a culture of cost management as one of its pillars. There are multiple benefits in moving to the cloud, but being strategic about it is key to really leveraging its real value.
Discover Cloud Services From Encora
Encora offers a comprehensive suite of cloud services designed to maximize value and optimize IT costs through innovative cloud-based solutions. By leveraging a cloud-native architecture, Encora helps businesses adapt more quickly to customer demands and scale their infrastructure efficiently. This approach facilitates rapid adaptation to market changes and supports the implementation of multicloud strategies, allowing the use of multiple cloud vendors to host applications, infrastructure, and other services.
For organizations looking to transition to the cloud, Encora provides robust migration and modernization services, enabling the seamless movement of data, applications, and business operations to a cloud infrastructure. Once migrated, Encora’s Cloud Operations and Cloud Center of Excellence (CCoE) ensure that cloud infrastructures are optimized, efficient, and compliant with industry best practices. Additionally, Encora’s focus on FinOps promotes financial efficiency and transparency, offering cost-effective cloud solutions that manage expenditure without compromising on service quality.
To learn more about the full range of benefits from Encora’s cloud solutions, speak with an expert today.
