Cloud Cost Optimization - A Top Priority for SMBs, Midmarket Firms and Channel Partners

According to a series of surveys by Techaisle, cloud cost optimization (CCO) has recently become the top priority for SMBs and midmarket organizations. In 2023-24, cloud cost optimization has moved from being the 2nd priority in 2021-2022 to the 1st. Techaisle survey found that 59% of SMBs and 55% of upper midmarket firms are now focusing on optimizing their cloud costs, making it the top consulting services priority for 100% of firms surveyed. As the adoption of cloud services continues to grow, so do the accompanying costs, which can quickly spiral out of control if left unmanaged. This challenges organizations of all sizes to optimize their cloud costs. Cloud economics and cost optimization consulting are not only challenging for SMB and midmarket firms but also for channel partners. According to a parallel survey by Techaisle, 49% of channel partners have seen an increase in demand for cloud cost optimization consulting. As a result, 72% of partners are planning to offer these services to their customers.

Cloud cost optimization has become crucial for SMBs and midmarket firms to effectively manage their expenses, improve resource utilization, and keep costs within budget. By implementing strategic approaches to cost optimization, businesses are challenged to balance the value of their cloud investments with the need to control expenditure.

KEY CONSIDERATIONS FOR CCO

In 2014, 80% of these firms viewed the cloud as a solution for increasing revenue, while only 20% used it to reduce costs. In 2023, the data flipped. The appeal of the cloud lies in its flexibility, adaptability, and ability to provide resources on demand. However, SMBs and Midmarket firms often end up paying for more resources than they use, leading to unexpectedly high cloud bills impacting their financial stability and hindering growth and investment.

One effective approach is rightsizing resources, which involves aligning the size of cloud resources with the actual workload requirements to meet business objectives. By carefully assessing resources and matching them to workload demands, organizations can improve resource utilization and minimize waste, ensuring they only pay for what they truly need.
However, there is a common oversight – a failure to decommission or terminate unused resources, which results in substantially high bills despite negligible resource utilization. Keeping track of consumed resources in a predominantly cloud-based environment with rapid resource provisioning becomes challenging. It is essential to identify and remove unused instances to reduce cloud waste. Prioritizing, identifying, and eliminating dormant resources allows businesses to significantly reduce costs and free up capacity to scale resources as per changing business needs. Leveraging software tools and capabilities that continuously optimize cloud resources and costs enables them to allocate the resources needed for their applications while keeping expenses in check.

Another beneficial strategy is the use of reserved instances. Reserved instances offer a pricing model that allows organizations to reserve cloud resources for a specified period at a discounted rate. These resources are most suitable for anticipated and fixed workloads requiring advanced scheduling. By reserving capacity for specific periods, companies can accurately predict their cloud computing costs and achieve long-term savings.

Moreover, implementing a smart cloud optimization strategy will help businesses assess their strengths and identify areas for improvement, ensuring that they can maximize the benefits of cloud migration while optimizing their IT spending. CCO also goes beyond cost reduction and focuses on balancing cost and value, enabling organizations to effectively leverage the power of the cloud while maintaining financial efficiency.

IDENTIFICATION OF COST OPTIMIZATION CHALLENGES

While cloud computing offers scalability, flexibility, and cost savings, small and medium-sized businesses (SMBs) and midmarket firms often need help optimizing their cloud expenses. One common issue is paying for resources that are provisioned but have yet to be used. SMBs and midmarket firms are finding that limited visibility into cloud spending, and uncontrolled consumption, both by IT and business units, or cloud sprawl, is managing costs difficult. Without a clear view of expenses, businesses may have trouble identifying areas for cost savings and making informed decisions about their cloud spending.

While transitioning from on-premises solutions to the cloud provides freedom from upfront payments and quick resource provisioning, the pay-as-you-go model needs to be more transparent and predictable than the on-premises one. Different teams and products within organizations are utilizing different billing models based on their unique cloud service needs. Compared with fixed operating costs, adopting variable consumption models complicates the prediction of expenses. The nature of pay-as-you-go models makes it possible to lose track of resource usage, potentially leading to unexpected costs if adjustments are not made after the peak periods.

Cloud governance is also a major challenge for most SMBs and midmarket firms. To effectively manage cloud costs, it is important to have clear visibility into the cloud environment and strong governance over it. However, the decentralized and complex nature of cloud services, compared to traditional IT infrastructure, can make this difficult. With multiple providers, accounts, regions, services, and resources to manage and monitor, it’s easy to lose track of cloud spending, usage, performance, and security without proper oversight. In addition, managing expenses across multiple cloud service providers is proving to be a challenge for SMBs and midmarket firms. Each provider has its own pricing models and usage metrics, making it hard to compare costs and usage directly and manage hybrid and multiple cloud workloads.

EXPLORING FINOPS FOR CCO

FinOps is one way to optimize costs effectively in cloud environments. It involves a set of best practices and processes for managing and reducing cloud expenses. By bringing together the financial and operational sides of cloud usage, SMBs can fully realize the benefits of their cloud investments while keeping their spending in check.

A FinOps strategy revolves around three key areas: cost optimization, cost visibility, and cost governance. It also extends its core focus to monitoring tools tailored for public cloud environments. These tools aid enterprises in reducing cloud spending and eliminating wasteful expenses linked to cloud operations.

By adopting FinOps as a framework, organizations can significantly enhance their cloud cost management practices, ultimately reducing expenses, increasing transparency, and making informed business decisions. While still in its early stages, FinOps has gained significant traction and recognition for its ability to help businesses effectively manage their cloud costs and maximize their return on investment. FinOps also helps align IT and business goals by providing a framework for managing cloud costs and optimizing cloud usage to support technical and business objectives. Implementing it enables SMBs to gain better control over their cloud spending, maximize the value of their cloud investments, and allocate resources more effectively.

Various FinOps tools are available in the market, including IBM Turbonomic, AWS Cost Explorer, Azure Cost Management, Google Cloud Cost Management, Cloudability, Apptio (now IBM), and CloudZero. Since each tool offers distinct features and functionalities, it is important for organizations to select the one that best suits their specific requirements carefully.

FINAL TECHAISLE TAKE

Cloud adoption and migration can help small and medium-sized businesses (SMBs) stay competitive, but costs can escalate without active management and optimization of cloud spending. Implementing an effective Cloud Cost Optimization (CCO) strategy is crucial for enhancing cloud performance. Adopting FinOps practices can improve visibility into cloud costs, align IT and business goals, and help SMBs gain control over their cloud spending. CCO is about ensuring that cloud spending supports business goals, and by using FinOps practices, SMBs can optimize their cloud costs, make better use of their resources, and save money. Regular evaluation and adjustment of cloud infrastructure and strategies are important for maintaining financial efficiency and maximizing the value of cloud investments.

Cloud Cost Optimization (CCO) is more than just reducing expenses. It’s about making sure that cloud spending aligns with business goals. This has become crucial for SMBs and midmarket firms looking to get the most value and cost-effectiveness from their cloud infrastructure. SMBs and midmarket firms can maintain efficient and financially sound cloud operations by adopting a cost-aware mindset and regularly reviewing optimization strategies.