Cloud cost projection should be an ongoing process for your company. It involves estimating impacts of changes to your company’s cloud hosting solution in order to reduce recurring expenses.
According to Synergy Research Group, companies spent over $30 billion on cloud infrastructure services in the second quarter of 2020, 33% percent more than the same time last year. Company cloud costs have increased between 30-50% every year since 2016, and they have no signs of decreasing.
Cloud cost projection is a powerful method to optimize your company’s cloud deployment. Cost projection enables you to model future changes to your cloud deployments. This includes changes of cloud providers, regions and workloads.
This article goes over some suggestions on how you can add cost projections to your cloud financial management plans. First, use cloud cost projection to estimate the impact of changes to your company cloud costs. Then, model the impact of more granular changes. For example, migration to another cloud or region to reduce costs. Estimate how changes of your company’s cloud provider or the regions hosting your company’s cloud solutions can reduce your cloud spend.
Investigate your current cloud solution
The first step in cloud expense management is to get a good sense of how your company currently spends money on cloud infrastructure. By keeping track of past expenses, you can model future expenses. You can also use historical spending patterns to model the forthcoming spending.
Most software asset management solutions offer customizable dashboards where you can see current costs on one page in real time. You can use reports to analyze spending based on a timeframe (day, week, month, year).
Create a cloud spend budget
A big part of cloud cost governance and budgeting system is not only keeping track of cloud cost spending, but cloud cost savings as well. Just as a financial budget helps keep costs in line, a cloud cost budget sets guidelines for maximum cloud spend.
You can integrate a financial plan and policies for expectations around cloud usage. For example, do you need to maximize high availability or fault tolerance? If your systems can sustain some amount of annual downtime, perhaps you’d skew your solution to be more highly available, for example.
You also want to build in working capital for unforeseen expenses. For example, this year’s COVID-19 pandemic has shown the value of cloud services and demand on them as many people stay at home and use the Internet for work, shopping and entertainment.
Once you’ve developed a budget, you can see the impact of cutting cloud costs more granularly.
Migrate to another cloud or region to reduce costs
You can project your company’s cloud costs against other cloud platforms and regions to see how to reduce cloud costs.
Cloud storage pricing comparison
Using the cloud cost comparison, for example, you may decide to migrate some storage from an Amazon S3 Standard to a Microsoft Azure Block Blobs. The storage pricing not only differs among the various cloud providers, but also is contingent on many multi-factor parameters.
For example, every cloud has a number of price options depending on a storage tier, locality and warm/cool storage type, so the cost projection becomes a complicated process due to a necessity of taking different dimensions into consideration.
Smart cost projection and cloud pricing comparison either on other platforms or within one cloud enables you to find out how to optimize cloud infrastructure and reduce costs.
For example, if you currently host a SaaS workload in multiple regions, you can project the cloud cost savings of migrating it to another region, based on usage, and see the savings before making the switch. This way, just as in financial budgeting, you can model the most effective cloud computing cost savings.
If most of your cloud activity comes from a specific region, you can use cost projections to estimate the value of switching to hosting from another region, if you’re willing to sacrifice some availability for cost savings. For example, you could host Europe, the Middle East and Africa (EMEA) instances from Asia-Pacific (APAC) regions during off hours. That might be weekends, holidays and non-work hours for a business-facing app or during work hours for a leisure application.
You can also investigate the adoption of a multi-cloud model.
Evaluating a multi-cloud model
There are benefits and disadvantages of offering a multi-cloud system, where you use more than one cloud provider to host services at your company. The benefits include reduced costs from discounts and plans by different cloud providers. Companies can also use software and operating systems offered by the cloud provider to optimize spend. For example, using Microsoft software in an Azure cloud or native products in AWS.
The disadvantages are that each cloud provider can have complex license terms and requirements. It also takes time to learn the intricacies of each vendor, or for IT staff to obtain training to use the products. The cost savings of a multi-cloud must be weighed against these outside costs that impact deployment.
In summary
Reduce your company cloud costs with cost projections. Cost projections give you options so you can predict future savings. This process is a continuous cycle. Your company should regularly investigate, budget, deep dive into granular processes, and analyze the benefits of migrating to other cloud providers or regions.
Take advantage of cloud cost management to realize cost savings and forecast future expenses. Make cloud cost projection a part of your cloud expense management solution.
Nick Smirnov, Digital transformation & FinOps enthusiast and visionary, CEO at Hystax
