The abrupt need to transition to remote work last year caused many companies to migrate to the cloud or accelerate an in-process migration. Cloud has become an essential part of company operations and budgets. Last year, worldwide end user spending on public cloud services was $257.5 billion, making up 9.1% of total global enterprise IT spending, and it’s forecasted to increase to 14.2% by 2024, according to Gartner.
Upfront Cloud Costs
The allure of cloud for organizations is its potential to save money, increase agility and offer easier scalability. However, these promises don’t materialize without proper management. Organizations will likely see an initial rise in costs with cloud adoption. Organizations spend, on average, 12% more running a workload in IaaS (infrastructure-as-a-service) compared to when it happens in their own data center. These cost increases occur when work is lifted and shifted without modification.
Like any change, there will be upfront costs involved with the process of migrating to the cloud that need to be considered. With careful planning, organizations can avoid surprises. Items that need to be factored in when budgeting include the cost of cloud infrastructure, labor costs associated with migrating applications to the cloud, and the monthly bill from cloud providers. Many cloud providers provide cost calculators to help organizations determine what to expect when migrating to the cloud.
A factor that is key to managing cloud costs is planning for the monthly cloud bill. Without proper monitoring, this is where overspend can occur—57% of IT leaders have exceeded their cloud budgets at some point, according to a 2018 Softchoice survey. One of the issues is the lack of visibility that leaders have into their cloud costs. A lag in your cloud billing data makes it difficult to make accurate decisions, which can be the case with spend reports from cloud providers that are 12 to 24 hours old.
A lack of timely visibility into current costs and the inability to forecast future costs leads to cost overruns and blown budgets, which is why having a product that provides the most up-to-date information and monitors your budget is important. There is no use in budgeting if it’s not being monitored. Let me repeat: an unmonitored budget is useless.
Timely visibility and monitoring your budget fall under financial control of your cloud—one of the three pillars of cloud governance. Cloud governance includes the development and implementation of budget controls, as well as controls to manage access and ensure ongoing compliance.. A cloud management product can help with this by not only keeping your budget under control and alerting you before you go over that budget, but also by finding saving opportunities through ongoing optimization.
Using these tools means you can automatically find out about ways to save your organization money.
The other two pillars of cloud governance, managing access and ensuring compliance, also impact your overall cost in the cloud. A robust governance and management solution establishes proactive protocols that can automate tasks such as account setup and ensuring compliance with your security standards. Automating controls will save your organization time and money. Monitoring and ensuring that your cloud is secure will help you avoid costly security breaches. When adopting the cloud, a plan for implementing cloud governance should be at the forefront to help you realize the cost savings of cloud.
Despite the initial costs of scaling to the cloud, in the long term, cloud adoption does result in cost savings. Once organizations move away from managing on-premises data centers and implement cloud governance in their cloud environment, that’s when opportunities for innovation can happen due to time and money being saved. For example, when Riso, a printer and digital copier manufacturer, migrated to AWS, the company cut its total IT operational costs by 55%. Avery Dennison, a manufacturing company that specializes in labeling, saw an annual run rate savings of $5 million due to investing in cloud-first initiatives. These are just some examples of how the cloud has helped companies optimize their costs. It can be possible for your organization to reap similar benefits with proper planning and the implementation of cloud governance.