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Controlling costs in the public cloud

It’s easy to get lost in the innovative options available in the cloud, but tracking costs is vital.
Read time 10min 00sec
Pradeep Roy, Accenture.
Pradeep Roy, Accenture.

The pressure for businesses to accelerate their move to cloud is growing. While South African businesses have started this journey, not all are seeing the returns they had hoped for.

So says Pradeep Roy, cloud advisory lead for Accenture in Africa, who adds that a post-Covid world will look quite different. High demand for remote work, e-commerce and virtual learning, as well as fundamental shifts in consumer demands, will make it critical for companies to adopt cloud technologies. However, cloud migration is a complex, time-consuming, resource-intensive exercise that might be easy to understand, but hard to master, so treating it as just another IT project means missing the point. It’s imperative that companies spend adequate time crafting a cloud migration strategy that helps reduce the gap between benefits expectation and realisation.

Steen Dalgas, senior cloud economist at Nutanix, says the impact of high bills associated with poorly managed cloud resources can be devastating. “Cloud economist Corey Quinn said on Twitter that public cloud pricing worked similarly to medical billing in the US – you don’t know the cost until the end when you get your bill. Cloud costs are variable by design. This means there’s a huge risk of cost overrun. In mature markets such as the US, a brand-new job role, FinOps, has been created within many global companies to own the management of this risk. The primary function of the FinOps person is to perform financial management for an organisation's cloud investments. Cost overruns can use up whole budgets, leaving nothing for innovation and meaning that other workloads cannot be moved from the datacentre. If customers don’t address this risk, it can open them up to financial disaster or financial governance issues, or both. Security compliance and data locality are equally important headaches that need management.

As cloud infrastructure becomes more complex, costs become opaque and difficult to track, adds Jean-Pierre Pienaar, cloud optimisation practice lead at Synthesis. Cloud offers users access to per-usage models of infrastructure, which, as great as this sounds, can be a double-edged sword. If costs are not monitored and managed properly, moving to the cloud can be much more expensive than traditional on-premises solutions. Managing costs effectively in the cloud needs buy-in and collaboration between all business units in an organisation. These include finance, governance, risk, application teams and suchlike. If cost management and optimisation is not a core consideration in the way you manage your business, effective cost management cannot be achieved. For example, the finance team needs to be aware of all spend to be able to forward on costs to the teams responsible for them. The governance team needs to consider and control what users are allowed to use as well as how they can use it, for example limiting usage to less expensive regions or enforcing which configurations of, for instance, virtual machines can be used to not incur unnecessary costs. Risk teams could play a core function to way up risk versus cost. Sometimes a much cheaper solution can incur some risk and it is up to this team to decide if the benefit is worthwhile.

Deeper insights

Roy adds that there are also various cloud-native and third-party tools on the market to help with cloud cost management. Each hyperscaler provides a set of native services, dashboards and other out-of-the-box metrics and ‘cost advisors’ that provide some level of insight and views into operational spend in cloud. “Typically, for enterprise-grade cloud cost management where customers have more than one cloud provider, we recommend to our customers to augment these services with third-party tools and professional services that enhance these services with better levels of granularity of costs, increased means to ‘slice and dice’ cost allocations;, automated aggregation of costs across multiple cloud service providers, advanced analytics and cost optimisation opportunities. It must be said that although tools play a large role in automating, industrialising and providing deeper insights into managing costs, it still requires experienced human insight and process excellence to ensure that it’s an operational discipline that’s embedded in the organisation to continuously maintain and optimise the estate working with the various stakeholders in the business.” 

The reality is that cloud costs are not about cloud at all, it’s about understanding your business needs and the technology that enables you to stay competitive.

Avsharn Bachoo, Comair

Avsharn Bachoo, CIO at Comair, cautions: “Before jumping into a tool, a process framework with metrics should be defined. A tool can then be selected to support the process framework, because without a process, a tool is just a tool. I use a balanced scorecard process to assess cloud costs as it considers financial, customer, business and learning and growth processes. As a CIO, you are empowered to innovate and move quickly, and that means spinning up cloud resources dynamically, so you’re almost certain to be spending money on resources that you’re not using at some point in time. I’ve found that the biggest contributors to my cloud costs are unused or over-provisioned resources. Due to a plethora of reasons, some resources that are spun up can end up idly sitting by waiting to be more fully utilised. Whether I’m trying to get control of cloud spending, purchase reserved capacity to optimise my spend based on historical usage data, or drive cultural change across my organisation with regards to cloud cost management across my cloud services, there are tools out there that can make life easier. I utilise a tool called ‘Park my cloud’, which supports my balanced scorecard by automatically managing, governing and optimising my cloud spend. It further helps identify the expensive systems and usage outliers responsible for escalating cloud costs.”

Chargebacks

Speaking of whether cloud consumers can be made accountable for what they spend, Dalgas says accountability for actions is a core mantra of high performing organisations. “A chargeback is central to this accountability, but a cloud user must influence the cost to be accountable for it. This is much easier to achieve in the public cloud, where costs are visible and easy to chargeback, than in a private cloud. Chargebacks, where the cost hits the profit and loss of the cloud user and directly impacts their personal measurement, are likely to drive good behaviour in managing costs. If a cloud user can spin up public cloud resources without them having an impact – it will increase shadow IT and result in higher hidden costs. Chargebacks that bear no relation to the underlying costs and merely recharge fixed costs will not support or enforce positive behaviour. Suppose you enable cloud users to directly influence their cloud consumption and give them tools to manage their consumption while IT focuses on delivering the best unit cost. In that case, this can provide the most favourable business outcome.”

Cost overruns can use up whole budgets, leaving nothing for innovation and meaning that other workloads cannot be moved from the datacentre.

Steen Dalgas, Nutanix

By including cost allocation information to resource tags, you’re able to track usage and cost to specific consumers or departments, says Pienaar. Most cost management tools allow the partitioning of spend by resource tags, which grants the ability to tie consumers to spend and cost. Also, set budgets for teams, he advises, for example monthly budgets in the development environment, and have a review session at the end of the month to understand the data. “It’s fine for a team to exceed a budget, provided there is a valid reason, such as experimenting with new technologies; not turning off an idle resource isn’t a valid reason. Finally, train teams on cloud economics and once they’re familiar with how cloud is billed – stick to the allocated budgets as a KPI for the team.”

Cost comparisons

What’s the best way to go about building cost-tracking foundations? According to Dalgas, for new and existing workloads, a total cost of ownership-based model to compare running workloads between private and public cloud is essential. “It avoids unnecessary emotion and politics and ensures that business decisions are based on value and not opinion. You can use tags to define the resources that make up your workloads and use the tools. Identifying the total cost of workloads in the cloud, comparing the cost of similarly sized workloads in other clouds, and making recommendations on when it would result in cost savings to migrate from private cloud to public cloud is also important. These cost comparisons are dynamic and ensure that you can avoid costly ‘sticker shock’ due to migrating a workload that may not be as cost-effective to run in a particular cloud. For existing workloads, cost optimisation tools are essential to managing public cloud spend, given the dynamic nature of these costs. Dedicating specialist resources to manage these costs, such as FinOps, is also worth considering as long as they consider both private and public cloud environments.”

Optimal performance

Cost-optimisation across an organisation is built up by a combination of detailed monitoring and resource-based cost information, adds Pienaar. If the organisation has the ability to attribute cost to specific resources or a combination of resources that form a workload, they have the ability to optimise based on metrics collected from these. “One of the simplest ways to optimise cost is by implementing right-sizing of resources. This can be accomplished by collecting and validating resource utilisation metrics and selecting the resource type that would be able to offer optimal performance without waste.” 

One of the simplest ways to optimise cost is by implementing right-sizing of resources.

Jean-Pierre Pienaar, Synthesis

“I don’t believe that cost alone is a sufficient metric to evaluate cloud computing,” says Bachoo. “If you needed heart surgery, you wouldn't necessarily select the cheapest surgeon, or choose the cheapest builder if you wanted to renovate your house, so why would you decide on a cloud solution based on cost? Cost tracking almost always leads the argument for moving to cloud computing. We hear that cloud is cheaper, that it frees up IT resources, that it reduces capital expenditures and allows seamless scalability. The reality is that cloud costs are not about cloud at all, it’s about understanding your business needs and the technology that enables you to stay competitive. As a savvy CIO, you should take a holistic approach by building cost-tracking foundations with other intangibles such as capabilities, skills, talent and experience, not forgetting process and agility enhancements.” 

Driving cost optimisation requires a collaborative approach, with the various stakeholders concerned, says Roy. “This approach needs to be strictly governed, clear accountabilities defined and an operational process that is embedded into the organisation to ensure it is sustainably executed and not seen as a once off exercise, or one that is done annually. This is a continuous and frequent process that needs to adapt as a business’ services and cloud usage changes and as and when new services are released by cloud vendors. Innovation through utilising new services must always be on the cloud cost agenda to either use more cost -effective services, or make use of services that don’t require maintenance or support from the business.”

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