Cloud computing has significantly transformed how businesses manage their IT systems by providing scalability and flexibility, along with access to cutting-edge technology solutions. However, many companies are increasingly dissatisfied due to the rising costs of cloud services coupled with the increased use of cloud resources.
I’ve found that much of this can be attributed to unrealistic expectations or customers failing to implement the technology properly. Many enterprises lack the necessary resources or understanding of cloud resource optimization. Consequently, thousands of applications and data sets that migrated to the cloud now consume excessive resources and waste money.
How vendors price their services is another factor, but companies must also recognize their own poor management in the cloud sector. To thrive in today’s tech-savvy and AI-driven environment, they must take proactive action.
Factors driving up cloud expenses
The simplest reason for the rising expenses associated with cloud services is that major cloud service providers consistently increase their prices. Although competition among these providers helps keep prices stable to some extent, businesses now face inflation, the introduction of new premium services, and the complex nature of pricing models, which are often shrouded in mystery. All these factors complicate cost management.
Meanwhile, many businesses have inefficient usage patterns. The typical approach to adoption involves migrating existing systems to the cloud without modifying or improving their functions for cloud environments. This “lift and shift” shortcut often leads to inefficient resource allocation and unnecessary expenses. A recent analysis revealed that only 13% of CPUs and 20% of memory in Kubernetes deployments are utilized. Multicloud strategies can sometimes result in increased costs and management inefficiencies for businesses, despite their intended purpose of reducing reliance on vendors.
The cost savings and operational ease projected and promised to businesses often fail to materialize, resulting in disappointment and increased financial burdens for enterprises.
Businesses bear the responsibility
Blaming cloud providers for cost increases is a common practice. However, businesses have the ability to manage their cloud expenses more effectively. Unfortunately, many companies fail to implement cost-saving strategies and do not proactively monitor their resource usage. Why?
Most organizations today lack a practical approach to cloud management. They adopt cloud services without setting clear goals or considering how to maximize resource utilization effectively. Many organizations lack a strategy and overlook strategic initiatives such as optimizing workloads and enforcing governance, which are crucial for cost-effective cloud utilization.
Countless companies are currently considering AI and machine learning tasks. According to some projections, these tasks are expected to account for half of cloud computing resources by 2029. AI and machine learning require substantial resources, which can be more costly without carefully planned management and efficiency strategies. Delaying discussions about costs until these systems are operational will leave organizations vulnerable and without options for adjustments along the way.
Organizations need to proactively manage their cloud expenses by taking control by developing and implementing cloud strategies based on practical goals and forward-thinking planning. Here are the key steps.
First, before embracing cloud technology for its advantages, companies should develop a well-defined plan that outlines the rationale, objectives, and approach to using cloud services. Identify which tasks are suitable for cloud deployment and which are not, and assess whether a public, private, or hybrid cloud setup aligns with your business and budget objectives.
Second, before transferring data, ensure that you optimize your tasks to improve efficiency and performance. Please resist the urge to move existing systems to the cloud in their current state. Take a moment to assess workloads and make adjustments to enhance performance. This typically involves reassessing your application structure, optimizing resource usage, and eliminating any redundancy.
Third, effectively managing cloud expenses relies on implementing strong governance practices. Develop guidelines that outline the procedures and protocols for resource provisioning, monitoring, and decommissioning. Set up appropriate governance frameworks to support cost tracking and ensure that resource usage aligns with constraints.
Hone your expertise in cloud finops
Many companies lack the necessary skills to effectively assess and oversee their cloud workloads. By adopting finops—a financial management practice specifically designed for cloud environments—businesses can improve their cost monitoring, resource allocation, and overall value realization.
AI systems come with costs. Consider the needs of AI workloads from the beginning. The demand for AI and machine learning tasks is expected to increase in the future, so begin preparing now. Establishing regulations and governance tailored to AI tasks early on can help avoid exceeding budget limits. This includes outlining the computing resources needed and assessing whether the current infrastructure can efficiently meet these requirements without waste.
Be ready to continually improve. Cloud services are always evolving. It’s essential to monitor resource utilization and associated costs to ensure everything is effectively optimized over time. Utilize tools and services that provide up-to-date information to prevent situations where you‘re either overpaying for capacity or not fully utilizing the available resources.
Reclaim authority and responsibility in the realm of rising costs. Cloud service providers such as Amazon Web Services, Microsoft Azure, and Google Cloud share some of the responsibility. However, businesses should not depend solely on them to manage expenses. Instead, take charge of reducing unnecessary spending and preventing the disappointments that are common among cloud users.
Moving operations to the cloud is not merely a one-time event; it requires ongoing optimization and adjustments to keep pace with technological advancements, such as AI. Businesses that recognize this reality and respond appropriately will not only save money but also position themselves for success by adopting AI and other cutting-edge technologies that depend on cloud computing.