Why Your Cloud Bill Is So High - Part 2

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 The Mounting Cloud Cost Crisis

Somewhere, right now, a CFO is looking at Q4’s balance sheet and scratching her head. Another one is on Zoom off-camera, Googling what on earth “hypervisor-level lift-and-shift” means. One more has marched (for the first and last time) straight to the IT back-office. 

“If this cloud migration was supposed to save us money, why is our bill up 20%?”
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Cloud computing offers on-demand computing resources where you pay only for what you use. And yet, the majority of cloud-based companies are overspending on cloud.  Over half of organizations spend 20% more than forecasted, and cloud spend is growing an average of 35% YoY.

What are the main causes?‍

1. It’s too difficult to accurately forecast usage when purchasing upfront capacity. Most companies end up over-provisioning, and wasting as much as a third of their cloud budget on unused compute. 

2. Cloud resources require more robust budgeting. On-demand computing can be a double-edged sword: it’s fast and flexible, but when each team is in charge of its own spend it’s easy for a 10% increase here and a 20% increase there to add up. Non-cloud resources have budgeting built-in as part of the overhead of acquiring physical servers, whereas cloud-based organizations need to intentionally make this a part of their process. Missing this step is a common pitfall for first-time cloud companies.

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One framework for achieving ongoing cloud cost optimization is to split it into three phases. The first phase, inform, focuses on allocating and reporting cloud spending. The second phase, optimize, uses those insights to maximize business value at the lowest cost. The final phase, operate, involves building a culture and processes that prioritize cost-conscious decision-making.