Achieving cost savings is one of the main drivers for cloud adoption, along with agility and innovation. Cloud users have the agility to spin up infrastructure whenever needed, in the scale and location that fits their workloads. Many also have a mandate to use innovative services offered by the public cloud such as Lambda (serverless), Lex and more, for their application’s needs. Despite the benefits of agility and innovation, organizations are often faced with the challenge of cost control and optimization.
Gartner’s report, Three Moves for CIOs to Lower Business Costs With Cloud, states that organizations are overspending by 70% and sometimes pay two to three times of what was budgeted.1 Cloud cost efficiency is a cross organizational effort, impacted mainly by your infrastructure and architecture decisions, but also by your application and business decisions. Compute vs Serverless, storage options, infrastructure distribution, commitment level (On Demand vs Reserved Instances vs Spot Instances) all have an impact on your cloud costs and efficiency.
While there are various ways for applying cost saving actions, measuring the impact of those is not a straightforward task. This is because your overall cloud spend can keep growing even when you implement cost saving improvements. As a result, the key questions to consider are “How do I measure my cloud efficiency? How can I show the value of my cost optimization efforts, while my overall cloud spend is growing?”
Introducing cloud cost per unit KPIs
In Gartner’s ‘Three Moves for CIOs to Lower Business Costs With Cloud’ it is recommended to measure IT cost efficiency via your ‘cost per unit’ overtime. The ‘cost per unit’ KPI is not limited to ‘cost per IT unit’ such as ‘cost per compute’, ‘cost per GB storage unit’ etc., but also measures your ‘costs per business unit’. For example, if you are in the advertising market you should measure your ‘cost per ad request’. If you are in the E-Com market you should measure your ‘cost per mobile purchase transaction’. Lastly, if you are a broadcaster you should measure your ‘cost per view’, etc.
Cloud KPIs in real life: CloudZone efficiency metrics
"How does this become a reality? Do cloud users actually measure their efficiency?"
The answer is YES. At CloudHealth Technologies, I am working closely with some of the leading Cloud Managed Service Providers (MSPs) and biggest cloud spenders in region. Some of them are starting to measure their cloud cost efficiency for the sake of their business and/or customers.
CloudZone is an MSP who has been measuring cloud cost efficiency KPIs for over a year, as a proof point for their advanced cost optimization services that they offer to their customers. CloudZone, utilizes the CloudHealth platform as an added value service for their customers, they know exactly how to leverage the platform to help their customers gain visibility into their cloud spend, optimize their spend, set governance policies and more.
CloudZone financial operations service:
Source: “CloudZone, Certified Cloud Excellence.” CloudZone |, cloudzone.io/solutions/.
Measuring cloud efficiency KPIs has become a key element for CloudZone in showcasing their expertise. CloudZone has formed a team of business analysts focused on implementing cost saving best practices. These best practices include: advanced reporting, rightsizing, Reserved Instances purchases, storage optimization and more. The results are impressive and CloudZone is able to demonstrate constant growth in cloud usage, while also reducing the overall average costs per resource.
Examples of CloudZone cloud efficiency KPIs:
The graph above shows the measurement of the total hours of EC2 usage compared to the overall costs of those resources. We can see clearly that while the overall EC2 usage is growing (Blue line), CloudZone advanced cost optimization best practices keep the overall costs steady (Orange line). This is a great example of how CloudZone maximizes the value of each EC2 instance used by their customers and reduces the average cost of each instance. Additionally, the graph below shows the reduction of their average EC2 costs per hour over time.
Measuring cloud cost efficiency KPIs should be a required ongoing effort for any organization running workloads on a public cloud infrastructure. While the ‘IT per Unit’ measurements may be similar across organizations (average cost per EC2, average cost per S3, etc.) the ‘Business per Unit Costs’ measurement will differ per your business and will require tight collaboration between IT Ops, application and the business teams. Your organization will need to identify what type of measurements will have a business meaning. Once those are identified, it will be a cross organizational effort to ensure cost reduction per unit over time. This will require smart decision making regarding your infrastructure choices, application changes and business investments (RI purchases, etc.).
Tracking cloud cost KPIs can be helped with a Cloud Financial Management practice. Cloud Financial Management (CFM), also known as FinOps or Cloud Cost Management, is a function that helps align and develop financial goals, drive a cost-conscious culture, establish guardrails to meet financial targets, and gain greater business efficiencies. Learn more about establishing a Cloud Financial Management practice here.
1Gartner Three Moves for CIOs to Lower Business Costs With Cloud, Ron Blair, 24 March 2017.
CloudZone is one of the leading cloud partners in Israel & EMEA and is an Amazon Web Services Premier Consulting Partner, a Microsoft Azure Gold Cloud Platform Partner, and a Google Cloud Authorized Service Partner. With over 8 years of experience in the cloud, they provide their customers with a complete service package that includes professional services, managed services and consulting. CloudZone’s wide range of services and solutions include: Multi-cloud, DevOps, SysOps, architecture design, cost optimization, data solutions, cloud migration and more.