In my last blog post, I covered the basics of cloud cost optimization using the Six Pillars model, and focused on the ‘hows’ of optimization and the ‘whys’ of its importance. In this blog, I’d like to talk about what comes next: preparing your organization for your optimization project. The main reason most clients delay and/or avoid confronting issues regarding cloud optimization is because it’s incredibly complex. Challenges from cloud sprawl to misaligned corporate priorities can cause a project to come to a screeching halt. Understanding the challenges before you begin is essential to getting off on the right foot.
5 Main Cloud Cost Optimization Challenges
Here are the 5 main challenges we’ve seen when implementing a cloud cost optimization project:
- Cloud sprawl refers to the unrestricted, unregulated creation and use of cloud resources; cloud cost sprawl, therefore, refers to the costs incurred related to the use of each and every cloud resource (i.e., storage, instances, data transfer, etc.). This typically presents as decentralized account or subscription management.
- Billing complexity, in this case, specifically refers to the ever-changing and variable billing practices of cloud providers and the invoices they provide you. Considering all possible variable configurations when creating many solutions across an organization, Amazon Web Services (AWS) alone has 500,000 plus SKUs you could see on any single invoice. If you cannot make sense of your bill up front, your cost optimization efforts will languish.
- Lack of Access to Data and Application Metrics is one of the biggest barriers to entry. Cost optimization is a data driven exercise. Without billing data and application metrics over time, many incorrect assumptions end up being made resulting in higher cost.
- Misaligned policies and methods can be the obstacle that will make or break your optimization project. When every team, organization or department has their own method for managing cloud resources and spend, the solution becomes more organizational change and less technology implementation. This can be difficult to get a handle on, especially if the teams aren’t on the same page with needing to optimize.
- A lack of incentives may seem surprising to many, after all who doesn’t want to save money, however it is the number one blocker in large enterprises that we have experienced toward achieving optimization end goals. Central IT is laser focused on cost management and application/business units are focused more on speed and innovation. Both goals are important, but without the right incentives, process, and communication this fails every time. Building executive support to directly reapply realized optimization savings back to the business units to increase their application and innovation budgets is the only way to bridge misaligned priorities and build the foundation for lasting optimization motivation.
According to many cloud software vendors, waste accounts for 30% to 40% of all cloud usage. In the RightScale State of the Cloud Report 2019, a survey revealed that 35% of cloud spend is wasted. 2nd Watch has found that within large enterprise companies, there can be up to 70% savings through a combination of software and services. It often starts by just implementing a solid cost optimization methodology.
When working on a project for cloud cost optimization, it’s essential to first get the key stakeholders of an organization to agree to the benefits of optimizing your cloud spend. Once the executive team is onboard and an owner is assigned, the path to optimization is clear covering each of the 6 Pillars of Optimization.
Path to Cloud Optimization
Step One: Scope and Objectives
As with any project, you first want to identify the goals and scope and then uncover the current state environment. Here are a few questions to ask to scope out your work:
- Overall Project Goal – Are you focused on cost savings, workload optimization, uptime, performance or a combination of these factors?
- Budget – Do you want to sync to a fiscal budget? What is the cycle? What budget do you have for upfront payments? Do you budget at an account level or organization level?
- Current State – What number of instances and accounts do you have? What types of agreements do you have with your cloud provider(s)?
- Growth – Do you grow seasonally, or do you have planned growth based on projects? Do you anticipate existing workloads to grow or shrink overtime?
- Measurement – How do you currently view your cloud bill? Do you have detailed billing enabled? Do you have performance metrics over time for your applications?
- Support – Do you have owners for each application? Are people available to assess each app? Are you able to shutdown apps during off hours? Do you have resources to modernize applications?
Step Two: Data Access
One of the big barriers to a true optimization is gaining access to data. In order to gather the data (step 3) you first need to get the team onboard to grant you or the optimization project team access to the information.
During this step, get your cross-functional team excited about the project, share the goals and current state info you gathered in the previous step and present your strategy to all your stakeholders.
Stakeholders may include application owners, cloud account owners, IT Ops, IT security and/or developers who will have to make changes to applications.
Remember, data is key here, so find the people who own the data. Those who are monitoring applications or own the accounts are the typical stakeholders to involve. Then share with them the goals and bring them along this journey.
Step Three: Data Management
Data is grouped into a few buckets:
- Billing Data – Get a clear view of your cloud bill over time.
- Metrics Data – CPU, I/O, Bandwidth and Memory for each application over time is essential.
- Application Data – Conduct interviews of application owners to understand the nuances. Graph out risk tolerance, growth potential, budget constraints and identify the current tagging strategy.
A month’s worth of data is good, though three months of data is much better to understand the capacity variances for applications and how to project into the future.
Step Four: – Visualize and Assess Data Usage
This step takes a bit of skill. There are tools like CloudHealth that can help you understand your cost and usage in cloud. Then there are other tools that can help you understand your application performance over time. Using the data from each of these sources and collaborating them across the pillars of optimization is essential to understanding where you can find the optimal cost savings.
I often recommend bringing in an optimization expert for this step. Someone with a data science, cloud and accounting background can help you visualize data and find the best options for optimization.
Step Five: Remediation Plan
Now that you know where you can save, take that information and build out a remediation plan. This should include addressing workloads in one or more of the pillars.
For example, you may shut down resources at night for an application and move it to another family of instances/VMs based on current pricing.
Your remediation should include changes by application as well as:
- RI Purchase Strategy across the business on a 1 or 3-year plan.
- Auto-Parking Implementation to part your resources when they’re not in use.
- Right-Sizing based on CPU, memory, I/O.
- Family Refresh or movement to the newer, more cost-effective instance families or VM-series.
- Elimination of Waste like unutilized instances, unattached volumes, idle load balancers, etc.
- Storage reassessment based on size, data transfer, retrieval time and number of retrieval requests.
- Tagging Strategy to track each instance/VM and track it back to the right resources.
- IT Chargeback process and systems to manage the process.
Remediation can take anywhere from one month to a year’s time based on organization size and the support of application teams to make necessary changes.
Download our ‘5 Steps to Cloud Cost Optimization’ infographic for a summary of this process.
With as much as 70% savings possible after implementing one of these projects, you can see the compelling reason to start. A big part of the benefits is organizational and long lasting including:
- Visibility to make the right cloud spending decisions
- Break-down of your cloud costs by business area for chargeback or showback
- Control of cloud costs while maintaining or increasing application performance
- Improved organizational standards to keep optimizing costs over time
- Identification of short and long-term cost savings across the various optimization pillars:
Many companies reallocate the savings to innovative projects to help their company grow. The outcome of a well-managed cloud cost optimization project can propel your organization into a focus on cloud-native architecture and application refactoring.
Though complex, cloud cost optimization is an achievable goal. By cross-referencing the 6 pillars of optimization with your organizations policies, applications and teams, you can quickly find savings from 30 – 40% and grow from there.
By addressing project risks like lack of awareness, decentralized account management, lack of access to data and metrics, and lack of clear goals, your team can quickly achieve savings.
Ready to get started with your cloud cost optimization? Schedule a Cloud Cost Optimization Discovery Session for a free 2-hour session with our team of experts.
-Stefana Muller, Sr Product Manager