Aligning Cloud Spend Management With Cloud Transformation

The cloud transformation movement is well underway, with more than half of enterprise organizations moving to a cloud-native approach this year, according to Forrester Research. Spending on cloud infrastructure is rising accordingly – more than $21 billion in Q4 2021, up 13.5% from Q4 2020, according to IDC. The cloud offers economies of scale and connectivity that companies can leverage to optimize operations, make better use of their data and identify opportunities. However, if a company’s cloud infrastructure investment isn’t well planned, they can end up spending more than expected due to unplanned access costs, applications consuming more resources than expected and underperformance caused by inefficient architecture or lack of maintenance.

Spending governance–creating and managing a budget that supports the company’s cloud goals–also helps to maintain cloud security by ensuring that there are adequate solutions in place to prevent phishing, ransomware and other attacks that can disrupt or disable an organization’s cloud operations. Financial monitoring allows organizations to accurately evaluate the cost-efficiency of the apps in their cloud ecosystem. This can help control costs and avoid situations where different groups add their own apps without first leveraging what’s already available or correctly gauging associated cloud spend. Unchecked app proliferation in the cloud can create a cycle that includes overconsumption of resources and security issues. 

Cloud governance can address sustainability concerns, too, as executives increasingly focus on reducing their organizations’ carbon footprint. It’s important to benchmark the organization’s on-premises servers’ carbon impact, so you can quantify how moving workloads from on-premises to the cloud impacts sustainability progress. As with spending, cloud sustainability measurement requires adequate planning, execution, organization-wide visibility, effective monitoring, and efficient use of cloud resources. 

Planning for Effective Cloud Spend Governance

Spending management processes have always been crucial for business, but governance of cloud initiatives is playing catch-up to technology advances and an accelerated digital transformation. We see many organizations that are relying more heavily on cloud infrastructure because of the speed it offers to deliver new products and experiences through innovation. But without financial controls, there can be an element of inefficiency that affects cloud spending decisions—something that we’ve seen as an increasing issue for companies over the past decade. 

Whether an organization is preparing for the transition to the cloud or seeking to make existing cloud spending more visible and accountable, the financial governance aspect requires readiness. Assessing this readiness starts with cataloging the tools and expertise available in the organization to build a cloud budget, put monitoring tools in place, setting threshold levels that trigger notifications when spending exceeds certain levels and providing organizational controls to remedy any spending excesses. 

It’s also helpful to define the goals and potential benefits of implementing better spending controls. First, no one wants to deal with unplanned costs that create budgetary problems and have a negative impact on the business. Second, spending accountability allows you to identify the internal groups that are knowledgeable enough about both cloud operations and spending management to take ownership of their role in the move to the cloud. At the same time, you can also identify the groups that need more training, guidance, and resources to get the most value and beset employee experience from their cloud transformation. Third, proper cloud governance can help companies avoid scenarios where cloud-related issues such as security, budget or over-proliferation of apps in the cloud ecosystem lead to customer experience problems. 

All these planning requirements are more complex for organizations with an existing or planned multi-cloud environment. Because each cloud provider has its own processes and features, the organization will need to understand–and financially manage–a diverse set of tools and resources to analyze what happens across their cloud network. For example, it’s relatively simple to pull two similar reports from a single-cloud environment and synthesize them to create a summary report. When the reports are coming from two different cloud platforms, there can be format differences that make synthesis more challenging, time-consuming and costly to aggregate that data and present it in a dashboard for leaders. 

Platform differences also mean that simply comparing previous on-premises spending to proposed cloud spending may not be a good model for accurate cost planning for multi-cloud environments. For all of these reasons as well as technical ones, multi-cloud governance often requires creating a team or task force to collaborate and share knowledge for effective technology and budgetary decision-making. 

Cloud Spend Governance in Practice

Like cloud technology and applications, cloud spend governance is a continually evolving practice, not a one-and-done task. That’s because proper financial visibility and management require monitoring to identify any emerging issues in terms of capacity, cost and security. For example, a manufacturer might analyze their cloud usage data and find they’re underutilizing some resources, which enables them to turn those resources off to save costs. 

Financial governance also allows companies to find opportunities for optimization–something that can be as simple as identifying potential configuration changes that make cloud operations more efficient and secure. In the end, the promise and potential of the cloud for companies depend on smart, properly planned use of cloud resources and spending governance is a critical part of that smart planning.