Managing cloud costs is easy, right? Actually, what many organisations find is that getting a handle on cloud expenditure is a lot harder than they anticipated. But they know how important it is to rein in those costs to make sure they are getting the best return on their investment. Now, more than ever, cost efficiency could be the difference between growth or stagnation – or worse. Add to that the rising cost of cloud and many businesses find themselves looking to cloud cost optimisation as the answer.
As a business that focuses on helping other businesses get the most out of their cloud deployments and costs, we understand how difficult it can be and what challenges lie ahead. So, we’ve done a bit of myth busting to help organisations who are looking to optimise costs to save money and boost performance.
Myth #1: It’s all about the discounts
When looking at reducing cloud costs one of the first things many organisations do is ask their cloud service providers for help in the form of discounts. And why wouldn’t they? Discounts = savings. But taking that discount is a mistake – especially if it means they have had to make a forward commitment on future spend to get it. Again, discount = saving. But not if the discount is based on the flawed assumption that their current level of spend is accurate. When it comes to cloud expenditure there is a lot more to consider than just what they’re spending. They have to understand why they’re spending it; that is, they need to look at both the supply side and the demand side of the equation.
So, what should organisations do? Firstly, we recommend they get visibility of their cloud spend; not just what is being spent but where it is being spent in terms of compute, storage and network, as well as across production and non-production services. Secondly, they need to understand how that spend changes according to the underlying business demand. For example, for e-commerce businesses, this will be a number of transactions on the website, or for a SaaS enterprise, the number of subscribers.
The key here is understanding the relationship between demand and expenditure and how it changes. It’s about knowing what future spend looks like based on that relationship and not based on what they’re spending at a single point in time.
Myth #2: A cloud optimisation tool will solve all your problems
There are some great cost optimisation tools on the market at the moment, including AWS Cost Explorer, Azure Cost Management and Cloudability, that provide useful data. The challenge is what do companies do with that data – because there is no context or meaningful insight accompanying it. Or justification to make the necessary optimisations. Again, it is about looking at the different data sets together – demand, capacity utilisation, application performance, and cost – to build out the bigger optimisation picture.
To put this into perspective, in a recent engagement with a client, the Capacitas team identified 33 areas for cost optimisation. The client had also used a tool, which only identified three areas. Our approach is to look at that bigger picture, examine the complex relationships between the four data sets, look at a wider time period and not just a snapshot and provide recommendations for ongoing cost savings.
This leads to the next myth that deals with one regularly overlooked element of cost optimisation…people.
Myth #3: It’s a technology-only approach
Cloud cost optimisation isn’t a one-off activity or a tick-box exercise. Nor is it a programme that looks just at technology. It is also about people, about company culture, and changing processes and practices. In essence, there is a large component of change management involved, again, not something that can be done using a tool. Finding the optimisations is one thing; it’s another to manage stakeholders and a programme to deliver them.
When it comes to making those optimisation opportunities a reality for the longer term, it means getting people to do things differently, adopt new processes and working practices, and follow new methodologies. As a result, getting buy-in from stakeholders is vital, as is ensuring their ongoing engagement.
We incorporate this in all our cloud cost optimisation projects, including work we’ve done for Jaggaer and Cegid – starting with regular, transparent communication with all involved, and delivering our analysis and step-by-step plans, and being available to offer advice and guidance as the project progresses.
Myth #4: You can do cloud optimisation in-house
Every business is on a cost-cutting drive at the moment – and we understand that spending money on cloud cost optimisation might seem a little counterintuitive. Isn’t it more effective to get staff who are using the cloud to look for optimisations themselves? Yes and no. Yes, because there is a certain amount of housekeeping needed to make sure cloud cost optimisation yields longer-term gains. No, because the process of optimisation needs to be looked at in context – that is looking at those four data sets (demand, capacity utilisation, application performance and cost) mentioned earlier, understanding the complex relationships between them, and using analysis, predictive forecasting and modelling across them. Typically, these skills aren’t found within traditional developer or FinOps teams.
So, to perform this deep dive, staff need to not only take on more responsibilities, but learn new areas of expertise too – all in addition to their day jobs. There has to be a balance between the skills and duties expected, and those tasks that can be realistically delivered. When it comes to optimisation, it can’t be just another task added to a never-ending list when product delivery will always be the priority.
At Capacitas, we help organisations develop a step-by-step plan to implement optimisations—not just for immediate benefit but also for the longer term and to ensure ongoing savings, effectively embedding new processes that become standard behaviours over time.
Myth #5: You need to spend more to get better performance
Cloud cost optimisation isn’t just about cutting costs. It’s about improving performance. And spending more on cloud doesn’t guarantee better performance. Rather, it’s about efficiency, getting cloud to work better, be faster, and more scalable. How? Cost and performance are closely intertwined, so if an organisation makes an application and its cloud architecture more cost-efficient, they also improve its performance.
Again, we recommend that organisations look at cost, demand, capacity usage and application performance data over a longer period so that they can accurately identify the cost-efficiency opportunities that will improve performance. Importantly, the money that is saved can be re-invested into the business, be that for more staff, for example hiring more developers to deliver more business change and value to the organisation, or to capitalise on emerging technologies, such as generative AI, that cloud facilitates.
Conclusion
While managing cloud costs isn’t easy, implementing a cloud cost optimisation strategy isn’t an insurmountable task. Where to start? We recommend looking at more than just cost data – alone, it’s one-dimensional and doesn’t yield any true insight. Also look at demand, capacity utilisation and application performance data and the relationship between them – over a longer period of time. From there, use this analysis to predict future costs, understand what is being spent and why, and identify areas for improvement and optimisation. Importantly, organisations should recognise that cost optimisation is about sustainable gains and not only immediate savings. Ultimately, it’s about having the right cloud resource where it’s needed, when it’s needed – at the right price and delivering the best value to the business.
What next?
If you’d like a deeper dive into cloud cost optimisation and the benefits it can bring, take a look at our recent whitepaper. Or, if you’d like to chat through some of these myths or other questions you may have, get in touch with us today.
