Delving into the criticality of the past few years, organizations are understandably eager to offset financial strains with improved flexibility, scalability and business agility – three tenets that cloud adoption promises to facilitate. For many organizations the migration to public cloud was not only driven by the promise of greater scalability, but expected cost savings, with IT departments expecting to pay for what they needed when they needed it. The problem is that a lot of IT departments over-provisioned capacity and/or have not been consuming cloud in the right way since.
Cloud costs have skyrocketed - far exceeding IT departments’ expected budgets and resulting in businesses experiencing what VMWare call ‘Cloud Bill Shock’. Against the backdrop of rising inflation and economic uncertainty, it’s natural that businesses are re-examining their cloud investments and, in many cases, taking the decision to reverse their cloud migrations.
So, is the age of the cloud first strategy over? While this may be a little extreme, businesses today are certainly beginning to question whether they need to move everything to the public cloud. Many organizations that initially rushed to migrate to the cloud are now back-pedaling, or at the very least exploring a hybrid model of public cloud, private cloud and on-premises. And while some analysts predicted that rising interest rates would result in a slowdown in cloud spending, could it be that the current economic climate is now the catalyst for a much-needed rethink and possible overhaul?
There’s no question that cloud has radically transformed IT and businesses over the last decade. The agility of public cloud has always been its greatest value proposition – something we witnessed during the COVID-19 pandemic. However, businesses must recognize there are far better ways to manage cloud costs.
The truth is that businesses have been overspending on cloud largely due to inefficiencies in usage, rather than because they are overusing resources. With various sources suggesting that around a third of cloud spend is wasted, it’s fair to say that utilization has been mismanaged. This is costing businesses millions of pounds each year, resulting in them losing much of the value that cloud solutions promised in the first place. With Gartner predicting that more than half of IT spending will be in the cloud by 2025, there’s an even greater need for cost transparency and optimization today.
Cutting back on cloud spending does not necessarily mean cutting back on cloud usage – it’s all about fostering good cloud health practices within the business to help manage cloud provisioning, not just within the IT department but across the various teams and departments within the organization that procure and consume cloud services. The mechanisms, processes, and policies of FinOps - the financial operating model for public cloud consumption – can help solve cloud cost utilization issues, putting the responsibility in the hands of the practitioners and helping create responsible cloud users.
To truly enable CIOs and CFOs to account for, analyze, control and optimize IT costs, as well as communicate their value internally they need a ‘single (data) source of truth’. Often described interchangeably, IT Financial Management (ITFM) and Technology Business Management (TBM) are complementary disciplines to FinOps that help improve an organization’s outcomes, particularly where IT spend is large and complex, by mapping technology assets and resources to business impact. The C-suite not only needs a top-down overview of compute, infrastructure and storage costs, regardless of whether it’s hosted in the public cloud, private cloud or on-premises, but other business-critical IT expenditure, such as labor costs, hardware, and facilities and power, to deliver the right transparency and charge back to the business.
This is where the ITFM/TBM team can assign public cloud spend data from FinOps with key business objectives to deliver a comprehensive, accurate chargeback. Conversely, FinOps can pull data from ITFM/TBM to deliver a fully burdened economic cost. Integrating these processes enables business leaders to compare like for like, i.e. the total cost of ownership in public cloud can be reflected in the same way as on-premises services to help business leaders make a truly informed decision about whether to cloud or not to cloud.
Most importantly, armed with more accurate data and comparable insights from suitable and business-specific use cases, the benefits of a cloud strategy can be laid out in clear projections and ROI – stripping away the hidden costs to reveal the true value.
Find out how IT controllers can get a grip on cloud costs and optimize cloud provisions as part of the entire IT value chain.