Cloudmore Blog

Cloud Spend Creep: A Realistic Look At Cloud Cost

Cloud-Spend-Creep-A-Realistic-Look-At-Cloud-Cost

Spend creep.

Just the sound of that term seems like something you want to avoid, doesn’t it? Especially if you think about it happening in your company.

Unfortunately, cloud services and applications have made it extremely easy for unexpected costs to creep up on a business—without anyone even realizing it.

How does this happen? To understand, let’s look at how IT procurement has evolved over the years. Then I’ll discuss where spend creep comes from and how to manage your cloud costs.

In The Past

In the old days of IT, companies would buy almost everything for a service or solution upfront—software licenses, hardware, bandwidth, and more. They would make a guess about what they needed, and to prevent running out of resources down the line, they would overestimate. They would buy a bigger server than they really needed to ensure they wouldn’t run out of storage, and they would buy more user licenses than necessary in hopes of their company eventually expanding.

There was a budget allocated for each of these projects, and once that was spent, the project would be approved and put to the side. No one would ever look back two or three years later to find out whether that technology was actually being used—it was a good decision at the time, and that’s all that really mattered.  

In The Present

Today, the process of procurement is much more transparent—people can actually see the tools you’re using. Rather than making capital expense investments, we pay operational costs—so each month, your solution (which is based in the cloud) shows up as a line item in your expense report or purchase ledger under IT costs. This puts your purchase under regular scrutiny.

Budgeting for the cloud is also much more transparent. You’re able to put together the cost and benefit of a solution, as well as scale it up or down depending on your needs—something that wasn’t possible before. In an ideal setting, this allows you to better control your costs, and if managed correctly, allows you to get a better value for your money.

The challenge that arises with scaling a service up or down is that those changes have to be managed with good reports. You need to be able to see how many users are being deployed each month, how many resources you’re using on your server, and how the service is being utilized in order to know how to properly size the solution.

So, where is cloud spend creep coming from?

Ultimately, cloud spend creep comes from a lack of ongoing management. It may be that you have so many cloud solutions being used that it’s difficult to keep track of everything. Or it could be that you haven’t clearly designated who will be responsible for this reporting. Or it could be because no one is managing the employees that are moving, changing roles, leaving, or starting at your company.

Whatever it stems from, this lack of management prevents you from knowing which things would cause a rise or reduction in the amount of resources and users needed within a cloud service. And the bigger a company gets, the more of an issue this becomes.

The reality of this situation is that when you have a cloud service with resources that can be increased or decreased on a monthly basis based on your needs, people rarely choose to decrease—it’s human nature to always want more of something, not less. So instead of analyzing what you truly need, people tend to assume they need more users, storage, bandwidth, and other resources.

All of this leads to more cloud cost.

What can you do to manage cloud cost?

Managing cloud cost goes hand-in-hand with the issue of shadow IT. If you’ve already taken the first step to manage and control your shadow IT—which is to perform an audit—you’ve found out which cloud apps are being used in your company and what you’re paying for.

With that information, you can then implement processes and tools to monitor those apps. One such tool is a cloud aggregation platform, which helps you centralize your users, resources, and standards. Once you’re monitoring your cloud usage, you’ll begin to understand where you can cut costs, when you can spend more, and how to properly manage your cloud budget.

Download Guide: Shadow IT

Posted by Mark Adams on 13-Aug-2015 08:00:00


Mark is the CCO of Cloudmore, and has over 10 years experience in driving SaaS-based businesses.

Find Mark Adams on:

cloud

New Module

Add content here.