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Cloud Economics: A Perspective on Implementing the Right Consumption Model for your Organization’s Evolving Needs
Thought Leadership

Cloud Economics: A Perspective on Implementing the Right Consumption Model for your Organization’s Evolving Needs

By Mark Jamensky | May 07, 2020

The ability to quickly adapt and scale has been fundamental to the cloud’s meteoric rise, and those characteristics are being pushed to the limit in today’s environment. The rush to work from home created a significant spike in the use of cloud applications. Specifically, video conferencing and collaboration apps including Zoom, Microsoft Teams, Google Hangouts, Slack and others have experienced unprecedented growth. The seismic shift to the cloud hasn’t all been about work, however. Entertainment platforms like Netflix, Hulu and video game platforms are experiencing a boom too. For most, the cloud infrastructure that supports these services has been critical to keeping life moving.

However, there is also great economic uncertainty brewing, and many organizations now face serious economic headwinds. Based on our conversations with customers as well as analysts, we’ve seen two primary responses when it comes to cloud: Some are accelerating their move to public cloud and ramping up their consumption as the way to get work done and mitigate risk. Others are decreasing their public cloud consumption to cut costs and save money, particularly if a multi-year cloud migration initiative was still in planning or early implementation stages.

We have gathered some tips and tricks to help make whatever approach you decide to move forward with easier, more strategic and less costly. And it all starts with improving your visibility.

For Organizations Accelerating Cloud Consumption

In the current climate, ESG senior analyst Mark Bowker says the businesses that are already using cloud are likely to have a growing appreciation for their investment and will accelerate their adoption where possible.

If you’re increasing your cloud consumption, increased usage will inevitably lead to increased costs. In order to manage demand while not breaking the bank, consider techniques such as:

  1. Continuously rightsize and downsize. A key factor in keeping cloud expenses in line is ensuring all virtual machines (VMs) are allocated with the proper resources for workloads. Over-provisioning means higher costs. Rightsizing infrastructure reports analyze performance monitoring data for individual VMs and then recommend changes to resource allocation.
  2. Configure power scheduling. Running VMs affect usage data, so power them down when developers aren’t using them. Our research shows that for non-production workloads like development and test environments, the most effective immediate step is to leverage power schedules, which can yield up to 10-15% savings.  
  3. Purchase reserved instances strategically. We recommend analyzing usage patterns at the end of each month. Based on this analysis, and after plenty of discussion with owners of the target instances, consider whether it makes sense to purchase reserved instances.
  4. Automate and orchestrate. Institute governed consumption including role-based API/UI access and create guardrails to keep cloud instances within budget. It’s also important to put automation in place where it makes sense to reduce manual tasks required to both actively manage cloud usage and provide easy guidance for new cloud usage. 

 

For Organizations Decreasing or Delaying Cloud Consumption

For organizations that are still in the planning stages of a cloud migration, as well as those who are in the early stages of working with a consulting firm to roll out, it may actually be more beneficial to cut cloud investment during this period of uncertainty. While a move to the cloud may still be advantageous in the long run, migrations require significant process changes, some of which may be too disruptive over the next couple of months. If this is where you find yourself, consider the following steps to make your current efforts more effective and efficient.

  1. Gain visibility into your new status quo. Changing workforce requirements means you likely have new cloud instances that have been spun up by employees needing to complete critical projects, not to mention the addition of new hardware and software applications to your tech stack. Identify all of these new assets and bring them under management. For additional tips on how to gain visibility into your cloud applications, be sure to read our recent blog The SaaS Surge: A Perspective on Managing Cloud Applications as Remote Work Accelerates.
  2. Communicate with business units. Collaborating with your business units on what they are trying to accomplish in today’s new environment will help you determine what can (or cannot) be done in the cloud. This insight will also serve as the foundation for where efficiencies may be uncovered in the future.
  3. Reclaim on-premises resources. If you’re also using an on-premises environment in conjunction with cloud instances, consider running an audit to see if the resources are still being used as originally intended. You can potentially expect to free up roughly 10% of your resources this way, which can help defer hardware purchases months or even quarters. 

 

In some cases, we’ve also heard reports of companies that are considering moving from the cloud back to on-premises, what some in the industry have called cloud repatriation. According to research from IDC in 2019, some 85% of IT leaders were considering moving workloads out of the public cloud. However, while most cloud providers make it easy to start using their services, it can be difficult to migrate out. It is essential that organizations evaluate both usage data and the potential costs of making such a move before deciding how to proceed.

Another point that is critically important whether you’re accelerating or decreasing your public cloud spend is the notion of cost visibility. Providing business units a view of their project’s private and public cloud spend will make everyone more accountable during these uncertain times.

At the end of the day, the more information that you can gather on the current status of your cloud footprint and usage, the better positioned you’ll be to make an informed decision about how to manage your cloud costs. For more advice on how to manage and optimize cloud costs, be sure to check out our Essential Resources Center and our guide A Perspective On Rightsizing Your Hybrid Cloud Costs: The Shortcut To Cloud Cost Savings.