How well is your organization managing finances in the cloud? That might be a tough question to answer for some people—although you may have spending data at your fingertips that can tell you the development team is within its monthly budget or that your monthly recurring revenue is on an upward curve, this information doesn’t necessarily mean you are managing finances in the cloud as well as you could be.
While many organizations may claim to be managing cloud finances well, the evidence tells a different story. Between 2016 and 2020, the IaaS market grew from $22.1 billion to $49.1 billion—an increase of 122%. During the same period, industry experts calculate cloud waste increased by 214% from $5.6 billion to $17.6 billion due to poor cloud financial management. So it would appear, regardless of how many metrics organizations collect, the ones that matter in terms of cloud financial management are often being overlooked.
We’ve compiled a list of five metrics organizations should collect today in order to assess their cloud financial management performance, which can then be used as benchmarks to determine future performance.
Provisioned capacity vs utilization
One of the biggest causes of cloud waste is over-provisioning—deploying resources with more capacity than required. While many people attribute over-provisioning to a hangover from the days of on-premises computing when size didn’t matter, it’s also the case that cloud computing has been sold on the tag line “you only pay for what you use” when, in fact, what you pay for is what you provision.
A report in 2017 claimed that 40% of instances and Virtual Machines deployed in the cloud are at least one size bigger than necessary for their workloads, so the first metric organizations should collect to measure resource efficiency is provisioned capacity vs utilization. If your provisioned capacity is considerably higher than utilization, it’s a sign your environment is inefficient and that you can take remediative steps to rightsize and reduce your cloud spend.
Spend on unused resources
The second metric to collect and use to assess whether you need to improve your cloud financial management is how much money is spent on unused resources. Every organization has unused resources they’re paying for—for example recovery snapshots—but how much is being spent on them is a good indicator of how well the organization is managing finances in the cloud.
There are likely hundreds, if not thousands, of other unused resources in most organizations’ cloud environments, ranging from idle load balances to unattached block storage volumes, but in many cases these are not easy to identify (poor visibility into your cloud resources is typically the culprit). Therefore, it’s a worthwhile investment to implement a cloud management platform that can bring granular visibility into your entire cloud ecosystem and can actively monitor and identify unused resources that can be terminated.
Underutilization of discount programs
Making use of committed use discount programs such as AWS Savings Plans and Reserved Instances can be a great way to save money on cloud computing—provided the programs are fully used.
Previously it was understandable if discount programs were a little underutilized because the discount for the commitment justified the overspend. However, since the introduction of AWS Savings Plans, there is no excuse for not fully utilizing discount programs. Furthermore, as your organization’s use of AWS Savings Plans increases, the % underutilization of discount programs should decrease to zero.
Storage spend vs data retrieval costs
Most organizations are aware that they can save a considerable amount of money by storing infrequently-accessed data in cold storage tiers. However, because of data retrieval charges, if infrequently-accessed data is accessed often enough, the data retrieval charges could exceed how much is saved by placing data in a cold storage tier.
Recently AWS introduced an ”intelligent tiering” class for S3 object storage which goes some of the way to resolving this potential issue, but the service doesn’t work with one zone storage (which may be necessary for compliance purposes) or archived storage.
Other clouds are yet to introduce a similar service; and, even if you can take partial advantage of intelligent tiring, it’s still a good idea to look at how much of your object storage costs is accountable to data retrieval.
Automated notifications for financial policy violations
All leading Cloud Service Providers have a feature within their billing dashboards through which organizations can set up granular budget alerts. Consequently, the number of automated notifications for financial policy violations received each month can be influenced just as much by the number of budget alerts set up as the number of times departments, projects, or teams overshoot their budgets.
However, if a cost spike occurs which doesn’t push a team over budget (or over projected budget), you won’t find out about it until a budget alert is received when there are sufficient cost spikes to push the team over budget. Unexpected cost spikes can be an indication of a misconfigured resource or a network infiltration, so you need to know about them as soon as possible.
Look for cloud management platforms that both provide flexibility when creating governance policies as well as automatically alerts stakeholders when policies are violated.
Obtaining metrics to measure cloud financial management performance
It was mentioned previously that obtaining some metrics to measure cloud financial management performance can be difficult due to a lack of visibility and potentially worthwhile to invest in an agent-based cloud management platform. Agent-based cloud management platforms such as CloudHealth not only shine a light on what goes on below the level of abstraction, but can also be configured to:
- Produce reports relating to provisioned capacity vs utilization
- Automatically terminate unused resources after a user-defined period has elapsed
- Alert you to the underutilization of discount programs and opportunities to increase your commitment or convert/modify your existing commitment
- Alert when daily infrequent access storage costs are greater or less than a predefined amount
- Alert you to violations of any financial policy you wish to create and enforce