According to Gartner, most executive leaders find that cloud services (IaaS/PaaS/SaaS) have been adopted in a decentralized way in their organization. This may lead to a lack of cloud cost governance or even an emphasis on maximizing the business enablement benefits of cloud computing, without regard to the costs. Cloud cost management is part of the broader cloud economics discipline. Cloud economics also includes aspects of the total cost of ownership (TCO) and ROI calculation as organizations evaluate the adoption of cloud services. These aspects are out of the scope of this Quarterly Outlook.
What is the answer to a systematic cost management approach? Some vendors promote their tooling for monitoring, other vendors promote the idea of a dedicated FinOps team. The expected result of this Quarterly Outlook is to give you deeper insight into ways to control your cloud IT costs.
Using the cloud can help reduce costs. In fact, 25% of all organizations that adopted cloud report a decrease of cost. That in itself can be a good reason to adopt the cloud, but this is not achieved automatically and that is also the reality that we see in cloud adoption. Cloud also introduces complexity. Having a hybrid IT model alone is already difficult to maintain; maintaining costs within this hybrid IT model can be difficult.
When using the public cloud, organizations are billed continuously as consumption occurs. With cloud computing, organizations are confronted with the difficulty of creating accurate cost estimates. They are often hit by bills that they apparently can’t explain and struggle to identify items that are responsible for spending. As a result, financial management is often overlooked until spending is out of control.
So how to achieve cost savings? To get a grip, and ultimately control the cloud costs, organizations need to prevent overspending and drive a more efficient way of consumption. For this to be realized a financial management process needs to be developed. These processes affect multiple levels of the organization.