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April 5, 2024

Solving the 5 main issues draining cloud budgets

With the vast majority of businesses acknowledging the difficulty of controlling cloud budgets, what are the secrets to unlocking the true potential of cloud investment?

By Sashank Purighalla

In recent years, cloud computing has become the cornerstone of modern business operations, offering unparalleled scalability, flexibility, and efficiency. However, as organisations increasingly rely on such services, they encounter many challenges that can strain their cloud budgets and hinder their success. 

Failure to control cloud costs can fundamentally undermine broader digital strategy. (Image created using Shutterstock)

The 2023 Flexera State of the Cloud report found that 82% of organisations surveyed said managing cloud spending was their top challenge. 

With hidden inefficiencies lurking beneath the surface, quietly siphoning away valuable resources, for today’s business leaders, understanding these crippling costs and implementing practical solutions is paramount. From vendor lock-in and human error to redundant data, many issues pose significant obstacles to maximising the value of cloud investments.

But what are the root causes of the main budget-draining challenges – and what actionable solutions can organisations adopt in order to maximise their return on investment? 

Issue 1: Redundant data overload

Nowadays, data reigns supreme; however, amidst the vast volumes of data generated lurks duplicated and redundant data. 

Accumulating duplicated migration and backup data is easier than people think, particularly when there is a lack of governance in place. This surplus data poses a significant threat to businesses’ cloud budgets as providers charge based on the amount of data stored.

In 2023, most companies spent between 26-50% of their cloud budget on cloud storage. However, by implementing robust storage optimisation techniques, businesses can reclaim valuable storage space, streamline cloud budgets, and enhance operational efficiency. 

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Companies can employ various strategies, such as data deduplication software, which eliminates identical copies of files across cloud storage, significantly reducing the space needed.

Another method is data archiving, where firms move infrequently accessed data to lower-cost storage tiers like cold storage, ensuring accessibility while minimising operational costs. Tools like Azure Blob storage or Amazon S3 Glacier are ideal for this type of work.

Issue 2: Overprovisioning resources

Overprovisioning refers to allocating more cloud resources—like central processing units and memory—than workloads require. It might seem like a safety net, but it’s a costly habit that sees cloud bills quickly mount. 

The issue is that businesses pay for every resource they provision, regardless of utilisation. Overprovisioned resources also make it challenging to scale accurately based on fluctuating demands, leading to wasted capacity or performance bottlenecks. A report from Cast AI found that, by solving issues regarding overprovisioning, organisations could reduce their monthly cloud spend by almost 50%. 

Businesses can solve overprovisioning with workload consolidation, combining multiple workloads or applications onto a single cloud infrastructure or platform. 

Consolidating workloads can be done in several ways, such as containerisation (see below) and virtualisation. The latter involves leveraging hypervisors that enable multiple virtual machines to run on a single physical server, lowering hardware and infrastructure costs. 

By consolidating, businesses can also enable right-sizing, which allows them to accurately assess resource needs and provision exactly what their workloads require, eliminating overspending. With optimised resources, companies can achieve higher utilisation rates, maximising their value from their cloud investment.

Issue 3: Strict vendor lock-in

Usually, loyalty is rewarded, but staying loyal to one cloud service provider can be harmful when it comes to cloud computing. 

This is because users are typically tied down to inflexible pricing models. Being locked into vendor-specific and proprietary features means users cannot leverage open-source or multi-cloud options that might be more cost-effective. 

Vendor lock-in is an issue not only for businesses but also for government agencies. IBM allegedly utilised a predatory audit to lock a US government agency into a 5-year, $265 million contract by inflating alleged noncompliance costs. 

This is where containerisation comes in. Imagine neatly packed and self-contained applications ready to run anywhere on any cloud platform. Containerisation helps users leverage open-source alternatives for container management and orchestration, like Kubernetes. This allows businesses to move them seamlessly between cloud providers or their on-premise infrastructure.

Issue 4: Complex cloud

While adopting multiple cloud services is a strategic budget move, they often contend with a myriad of cloud services and platforms. Therefore, they must be mindful of resource fragmentation—blind spots leading to suboptimal utilisation and increased costs.

In fact, a report from Anodot found that managing multi-cloud environments cost-effectively was a challenge for 49% of participants—underscoring the importance of developing robust optimisation strategies. 

Enter standardisation—the cornerstone of cloud cost optimisation and operational excellence. The practice refers to creating standard practices and protocols for cloud services, allowing businesses to simplify management, improve resource utilisation, and reduce costs.

Companies can implement standardisation in various ways, like using lead and lag measures to track resource usage and historical spending. They can also adhere to industry-standard security frameworks like ISO 27001 and NIST SP 800-53 to avoid fines. 

However, the simplest way to start standardising in cloud computing is by prioritising standardisation around a core set of essential services that directly contribute to business outcomes. A company’s CIO needs to outline the business’s strategic goals, compliance mandates, and financial limitations, thereby establishing the blueprint and criteria for the cloud infrastructure, aiding standardisation, and avoiding resource fragmentation.

Issue 5: Human error

Even the best tech teams make mistakes. But in the fast-paced world of cloud computing, minor human errors can significantly impact a business’s bottom line. 

For example, employees can accidentally misconfigure cloud resources and settings, allocating more computing power, storage, or other services than needed, leading to overspending on underutilised resources. A report from the Cloud Security Alliance found that over 50% of system failures are caused by human error and mismanagement.

But the solution is a simple one: Automation. and luckily, most cloud service providers offer an array of tools facilitating this solution. For example, AWS Lambda is a a serverless computing service that automatically provisions and scales resources based on demand, eliminating manual server management and reducing costs. Azure DevOps Services, meanwhile, offers a continuous integration and continuous delivery platform for automating software development and deployment, reducing manual errors, and increasing release velocity.

Automation not only eliminates human error but also frees up valuable IT staff to focus on strategic initiatives. 

By understanding the five key culprits for cloud budget overpend – redundant data overload, overprovisioning, vendor lock-in, cloud complexity, and human error – businesses can take control and reclaim their financial footing. With proactive monitoring, analysis, and implementation of these solutions, companies can turn the tide on draining cloud costs, unlock the true potential of their cloud investment, and achieve sustainable growth for their business.

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