How to Manage company cloud storage costs

The Hidden Challenge of Cloud Costs: How to Tame the Spending Beast

From Google workspace to site hosting and beyond, we all post and store data and emails online. and whilst Cloud costs might not always be on your mind, but they can quickly become a significant drain on your resources if left unchecked. Cloud services have become a necessity for businesses to stay competitive in today’s landscape, but their expenses can spiral out of control without proper management.

Understanding the Volatility of Cloud Costs

Cloud expenses can be unexpectedly volatile. A survey involving 750 U.S. businesses across various sectors revealed that over a third experienced budget overruns related to cloud services, with some facing increases of up to 40%. Shockingly, one in twelve companies experienced even higher budget overruns. The issue isn’t confined to the U.S.; globally, businesses are projected to invest nearly $600 billion in cloud services this year. Surprisingly, an estimated $180 billion of this amount could be wasted due to inefficiencies.

The Opaque Cloud Cost Conundrum

Curiously, many businesses tolerate this wastage when they wouldn’t accept such inefficiencies in other areas of their operations. This acceptance is partly due to the complex and often confusing billing practices of cloud service providers. A common scenario involves a company noticing a substantial increase in its bill from a major cloud provider in just one month. Deciphering this sudden increase is a challenge due to invoices filled with numerous jargon-filled services used by the company’s software engineers.

The Accumulation of Uncontrolled Cloud Costs

Cloud costs can quickly accumulate, resembling a spending spree with little accountability. This situation is often described as the “Wild West” of spending, characterized by unpredictable and massive costs. To address this issue, having a well-defined strategy for managing cloud expenses is crucial. By doing so, entrepreneurs and their companies can redirect these funds to more strategic investments.

Why Cloud Costs Escalate and Management Tips

The ease of procuring cloud services contrasts sharply with the challenges of controlling their costs. Here are five actionable tips for reigning in your cloud spending:

1. Spreading Awareness for Collective Benefit

Educating your employees about the magnitude of cloud-related wastage is the first step. Cloud overspending isn’t a trivial matter; it can account for one of the most significant budget items in many companies. Instead of imposing strict control, emphasize the benefits of reducing costs. When a business effectively manages its cloud expenses, it opens up opportunities for allocating resources to critical areas such as product development and expansion.

2. Harnessing FinOps for Effective Cost Management

FinOps, short for financial operations, is the term for the team responsible for developing processes and frameworks to handle cloud costs. Just as various departments have their dedicated operational teams, cloud expenses demand the same level of attention. The FinOps team can consist of a few key individuals, such as a senior finance executive and the CIO/CTO. They can design a framework that encourages accountability by assigning ownership of cloud expenses to different business units. This approach fosters a clearer understanding of costs and promotes efficiency.

3. Automating Cloud Cost Controls

Manual review of monthly cloud bills is outdated and often leads to inefficiencies. Embrace the growing selection of tools designed to provide real-time visibility into cloud expenditure. These tools can automatically highlight overruns, optimize resource allocation, and suggest cost-saving measures. Alerts for detecting unusual spending patterns are particularly essential, as they not only catch excessive purchases but also potential security breaches.

4. Integrating Cloud into Procurement Processes

Automation should extend to governance and approvals. Companies wouldn’t make substantial equipment purchases without scrutiny, and the same principle should apply to cloud expenses, especially when they run into millions of dollars annually. Implementing procurement controls, perhaps through a cloud asset policy tool, can ensure that spending is justified and aligns with business objectives.

5. Consistent Cost Management: Tending the Cloud Garden

Cloud expenses require ongoing attention, akin to tending a garden. After addressing major cost inefficiencies, it’s crucial to consistently monitor and manage smaller expenses. Neglecting these smaller costs could lead to them spiraling out of control. Implementing cloud cost forecasting can also help reduce uncertainty regarding future usage, aiding in effective budget planning.

Realizing the Potential Savings

The effort invested in managing cloud costs is well worth it, considering the potential savings of 30% to 50% for many businesses. These savings can then be allocated to more critical areas such as product development, customer acquisition, and innovation-driven teams. By approaching cloud cost management strategically, companies can navigate the complexity of cloud services while ensuring that their financial resources are optimally utilized.