In the modern technology era, companies are — overwhelmingly — spending too much on cloud.
More than eight in 10 enterprises see spend management as a top cloud-related challenge, according to Flexera's 2022 State of the Cloud report.
“The cloud makes it ridiculously easy to spend money,” said Brian Adler, senior director of cloud market strategy at Flexera. This problem is an upgraded, cloud version of shadow IT: If enterprises don’t have a handle on what they have, and what they’re paying for, they’re going to spend on cloud they don’t really need.
It happens to everyone, Adler added. “It’s Day One for everybody in the cloud at some point,” he said.
Companies with a mature approach to cloud learned to control their spending, deploying strategies like guardrails on who can spend what, and using cost and optimization tools — even if it’s just the free options offered by vendors.
Otherwise, spending can get so big that on-prem seems like the cost-effective action. While an alluring option, on-prem systems don’t allow for the flexibility and speed that fosters innovation and makes cloud attractive in the first place.
Despite nearly a decade of cloud best practices, some companies are stuck in “lift and shift” mode, moving on-prem data and applications into the cloud as is.
“You take the sins of the past and propagate them into a brave new world that’s fundamentally different,” said Sean Baker, CEO of CloudEQ.
Plus, not setting up guardrails for developers is like letting kids loose in a candy store, Baker said. “It’s not really the fault of the infrastructure team because you’ve given them the keys to the kingdom. They’re just trying to get their job done.”
It's easy for developers to drive up unnecessary spending, which is why clouds need guardrails across budget, security and access controls.
The need for control is especially true for companies where developers were “used to hoarding resources,” said Tracy Woo, senior analyst at Forrester.
Previously they might have had to request services from IT, which could take weeks, said Woo. Now, “cloud is on demand and scalable and it can happen really quickly.”
Use built-in cloud discounts and optimization tools
Every cloud provider offers discounts and built-in free optimization tools, but not everyone uses them.
Only 36% of AWS users take advantage of reserved instances, and 31% use saving plans, according to the Flexera State of the Cloud report. Those numbers are down from 52% and 44% last year, respectively.
The savings opportunities are no brainers, said Adler. “It’s like going up to the cash register with coupons in your pocket and not using them.”
Companies can also use the free cost-management tools that come with the cloud. These can be especially effective for companies working with a single cloud vendor, said Woo.
“They all come with something that’s free at the base level. If you want to add in more extended capabilities, then you have to start paying,” she said.
Third-party tools have a range of capabilities, from low-cost add-ons that provide a dashboard view of how an organization is using multiple clouds, to more expensive services that completely rewrite an enterprise’s use of cloud.
Innovate spending while implementing cloud
Scaling back cloud ambitions to control spending can have long-term costs. Companies that turn back to on-prem systems risk missing out on cloud-enabled innovations.
“Seven years ago, nobody knew what a container was, and now we’re trying to do containers,” said Baker. “It will cost less to innovate than it does to waste money.”
But instead of wasting money in the name of creativity, enterprises can adopt cost-management tools alongside innovation.
Rethinking cloud as a big money saver is a necessary step in this evolution too, Woo adds. “Everyone thinks that cloud usage was supposed to save you money. It’s not going to save you money. It’s going to provide you with unlimited access to capabilities you wouldn’t be able to get otherwise.