Cloud spend is on the rise, and so is cloud waste. Here’s how to keep them down.
The sky’s the limit for public end-user cloud spending—a recent Gartner report projected worldwide spend will hit almost $700 billion in 2024.
That explosion in cloud-related expenditures is driving tensions between tech departments and finance leaders antsy about spiraling costs. A recent survey by cloud spend optimization platform Vertice found nearly one-half (44%) of finance leaders name their top concern as a lack of visibility into the cloud environment, while surveys have demonstrated a widespread perception that much cloud spending is inefficient or wasted entirely.
But CFOs worried that the “cloud” might be smoke from money being set on fire can take some practical steps to limit cloud waste, experts said.
Forecast, then charge it back. Organizations will find it hard to avoid wasting resources on cloud if they don’t have forecasts in place to estimate their anticipated needs and plan ahead for expansion, said Rob Zelinka, chief information officer at fintech and payment-processing services provider Jack Henry.
Zelinka advocated for accurate forecasting to avoid paying the premiums that strike when usage outstrips contracted quantity. To get there, organizations need to adopt a financial operations (FinOps) strategy that allows different departments to speak a common language when they measure, budget, and forecast.
“I would strongly encourage building in telemetry, or better yet observability, from day one,” Zelinka said.
Zelinka advocates an IT chargeback model. Under this approach, technology expenditures are attributed to the business units that used them rather than a central IT budget. IT chargeback models are intended to encourage business units to take responsibility for cost control, as they can’t simply punt expenses into a central budget.
Organizations should carefully consider whether certain legacy systems should remain on-prem, Zelinka advised, as their architecture is different to cloud-native applications. “Lifting and shifting” such legacy systems can get pricey over time, as they were usually intended for traditional client-server experiences with lots of operational components and low latency requirements.
Zelinka also cautioned that it’s not always worth paying for the fanciest tiers of cloud services: “Sometimes, fast is a better decision than faster or fastest, if you will.”
Internal trust, external partnerships. Josh Wigmore, VPt of product at Vertice, said one of the reasons finance leaders lack visibility into how much engineering teams are spending on cloud platforms and why is because detailed information is often primarily accessible via admin consoles—which are designed with technical users in mind. The pay-as-you-go model of cloud services also triggers expenditures outside of the normal procurement process.
Trust is key to ensuring the two teams can work together effectively to reduce waste and build a cost-aware culture, Wigmore added.
“If you provide visibility for finance professionals to understand not the details of the cloud product, but to understand what that money each month is buying, and how that money translates back to ROI for the business, that generates trust between those two areas,” Wigmore said.
Zelinka’s biggest piece of advice is that organizations should find ways to treat cloud providers as strategic partners, which can move cloud negotiations away from deal desks to the C-suite level. For example, Jack Henry’s strong relationships with credit unions and banks gave the firm leverage to strike deals with Salesforce and Google Cloud.
Executive sponsorships at the C-suite are “where the best deals are occurring,” Zelinka says.
“Those are the people that understand the things that you’re doing in the marketplace, in the communities that you’re serving, and they have interest and more so they have products,” he added.