Proactive cloud cost management

By: Ranjit Nayak

One of the most common problems we encounter within organizations is runaway cloud costs. They can come in the form of rude shocks with the monthly cloud bill.  The CFO’s office typically desires predictability and to see spending based on budgets that are agreed upon in advance, usually by quarter or month.

Working within budgets is essential for enterprises. This calls for proactive cloud cost management. One way to stay within budget is to check on available funds anytime a purchase is made. This means that the availability of funds must be checked every time an order is placed. Since cloud service providers have no idea of the buyer’s budget, they can only help with an estimate of costs for the future. They do not know what an enterprise has already committed to buying and using.  A truly proactive model would be one which not only monitors bills monthly but also on daily or weekly basis and alerts the users whenever a budget threshold has been reached.  Ideally an alert on reaching 60 or 70% of the budget would call for actions to limit new purchases for the remainder of the period or even shut down certain assets. Additionally, a proactive monitoring could warn the financial analysts during the ordering process if a budget threshold is crossed based on current estimates of cloud subscriptions. A sophisticated budgeting and alerting mechanism is absolutely essential for any digital enterprise intent on using cloud resources.

In many cases the finance department finds out after the act that budgets have been exceeded because there is no control on the procurement process.  Finance may approve a purchase, but it is usage which determines the actual bill.  Since there is a wide variety of services, the type of service procured may have been more expensive than the one approved.  An even bigger problem is shadow IT purchasing services which were not approved in the first place.  One way to remedy these problems is for the enterprise IT organization to work closely with the finance department and channel all cloud purchases through a procurement portal.  This would enforce the purchase only of authorized products. This is not a new approach. Most large organizations have a procurement application for placement of orders for phones, phone services and even laptops and stationery.  With this approach they can standardize purchases and even negotiate better prices from the provider.

An even more innovative approach proactive cost management is use of data science and machine learning to detect anomalies and prevent cost overruns with cloud purchases.  Enterprises can use data science to analyze bills and cloud asset usage to  develop with actionable insights on grooming, optimizing and transforming cloud use.  Grooming here refers to shutting down underutilized assets. Optimization would be to reduce costs by buying in bulk or in advance. Transforming cloud use could be dependent on migrating workloads from one Cloud provider to another.

It is clear that there are many actions an enterprise can do to proactively manage cloud costs. With cloud consumption on the rise enterprise must adopt all these strategies.

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About The Author

Ranjit Nayak

Principal Product Manager, IBM Cloud Brokerage, Cost & Asset Management

Ranjit is an accomplished Tech industry professional with experience in large corporations as well as startups.