Cloud services were originally billed as a more cost-effective way to manage information technology (IT). As a rising number of companies flock to them it’s becoming clearer that, left unchecked, cloud costs can accumulate quickly.
According to research conducted by Gartner, worldwide end-user spending on public cloud services increased nearly 19 per cent in 2022, and it is projected to grow an additional 20.7 per cent in the year ahead. In another recent study from Toronto-based cloud-managed services provider Aptum, 73 per cent of IT decision makers said cloud computing has resulted in higher-than-expected costs, up from 57 per cent last year. Sixty-five per cent admit to having wasted money on cloud-related inefficiencies.
“We are beginning to see the kickback, where customers are starting to say ‘wait, this isn’t working the way I thought it would,’” says Marvin Sharp, vice-president of product and strategy for Aptum.
Mr. Sharp explains that while public cloud services are not exactly new, they have only recently achieved mass-market appeal, thanks to more robust infrastructure and the success of enterprise adopters. Small and medium-sized businesses were widely attracted to public cloud operators – including Amazon Web Services (AWS), Google Cloud, Oracle Cloud Infrastructure (OCI) and Microsoft’s Azure Cloud Services – which deliver precise amounts of computing power for any given moment, offering the opportunity to easily scale their services while only paying for the resources they use.
“A few years ago, it was all about cost savings – this idea that you only pay for what you use – that is disappearing quite quickly,” he says. “The way the economics and how it works and feasibility is not what it seems, it can be very expensive, and the narrative is changing.”
Public cloud services are still considered cost efficient overall, but results can vary. According to the Aptum study, 63 per cent of users believe they positively impact IT spending, and 86 per cent say they are essential to their company’s financial security. At the same time, companies lacking holistic strategy often bear unnecessary costs, with 80 per cent of respondents admitting they did not have one in place prior to pursuing cloud adoption. Mr. Sharp says he believes it’s important to work with a managed services provider who can help put a strategy in place.
“We all have great technical skillsets, we all have certifications on how to use Azure and AWS and so on, but to me a big differentiator is in the advisory stage,” he points out. “Those consulting services at the beginning – that’s what’s really critical.”
Mr. Sharp adds that small and medium-sized businesses can optimize their cloud budgets by working with a third-party provider who understands how to get the most out of the platform. He also recommends an iterative approach to development, with reviews and testing after each phase.
“That way, if things don’t work out the way you thought they would you can shift, you can change, you can adapt, or you can even stop before you’ve spent a massive amount of money moving everything over, only to then discover it doesn’t work.”
Once up and running, costs can add up quickly if you’re not tracking the resources you’re using, according to Nelson Ford, CEO and principal solutions architect of Ottawa-based AWS consulting partner Pilotcore Systems.
“You just have to pay close attention to what your actual usage is,” he says. “I would start by monitoring costs, using metrics that are provided the platform to increase awareness of cloud usage, review workloads regularly, and adjust to minimize spend.”
Mr. Ford adds that service providers offer a range of automated tools that make it easier to keep cloud costs under control, but it’s up to individual users to put them to use.
For example, he says, most platforms allow users to set automatic notifications tied to hourly costs, permission requests and run time. Other tools allow organizations to create account structures that limit who can use cloud resources, and to keep individuals accountable for shutting down services that are no longer active.
Tools such as Load Balancers can redistribute application traffic to multiple server types – including spot instances, which have a cheaper billing model than default on-demand instances.
“If you use [storage] lifecycle policies you can set rules that say ‘if my document isn’t accessed for 30 days, move it into this cheaper [storage class] automatically, and if it still hasn’t been accessed for another 60 days, move it to an even cheaper one,’” Mr. Ford says. “That way you don’t need to have people manually doing this for thousands and thousands of documents.”
There are similar tools and strategies that can help reduce cloud spend by following a similar playbook: increasing visibility, automating service management, and identifying lower-cost options for lower-priority functions.
“Get the data and go through a regular cycle of evaluation and adjustment,” Mr. Ford advises. “You don’t want to have any more than you need, but you also want to have enough to always meet your end users’ needs.”