Why a cloud expense management programme is essential

One of the greatest benefits of cloud computing is cost efficiency but there is a flip side, costs can get out control if services are not provisioned effectively or properly managed. Cloud service providers must be carefully selected based on the needs of the business and the prices and services they provide, writes Amanda Vernazza, a product marketing manager at Tangoe.

Most organisations have not yet fully migrated all their applications to the cloud. Because of this hybrid cloud structure, public cloud services become an added cost to their overall budget, making understanding, planning and managing these services extremely important.

The following are some suggested best practices in managing cloud services and costs:

Cloud pricing
The complexity of cloud pricing is something most organisations struggle to understand. Unfortunately, there are few professionals who have the expertise or knowledge required when it comes to provisioning public cloud services. Evaluating pricing models of each vendor can be confusing, as each vendor has different definitions of the same services they provide. There is no standard pricing amongst them, making comparisons nearly impossible when it comes to cost vs. service.

Each cloud vendor does have flexibility when it comes to costs when the user provides some sort of a commitment. Think of it like a mobile phone bill:  when you sign a two-year agreement, the carrier gives you a lower cost versus paying as you go. It is similar with public clouds. AWS or Azure have what is called reserved instances and by purchasing these instances, you will receive a discount for your commitment.

While the savings are a key benefit, when purchasing reserved instances – or in Google’s case, committed use – it is very important to ensure these hours do not go to waste. According to the RightScale State of the Cloud report, “Cloud users underestimate the amount of wasted cloud spend at 30%, where the RightScale has measured actual waste at 35%.”

Before committing, you should ask yourself what percentage of these instances are planned to be used in the future and will your business needs change in regard to region or the instance type.

On-demand services are useful for when you have unplanned periods of time where your workload increases, and you need extra storage. While on-demand services are more convenient, they can generate unplanned charges, creating uncertainly when it comes to budgeting and forecasting. Without regular monitoring, your cloud costs can skyrocket. The big mistake would be to purchase more of these services than you need, versus purchasing lower-cost options.

Understand your business needs
While cloud vendors are competitive with each other’s pricing, customers should understand their needs to fully take advantage of cost-saving opportunities. There are other factors to consider beyond pricing, such as network usage, availability to other service and security.

Overprovisioning is easy to do when you are not greatly familiar with company needs, what past usage trends have displayed and what projects are planned. It is also difficult when you’re not able to fully evaluate pricing models for each cloud option.

Companies that do not have a proper monitoring process or system in place could end up overspending or wasting their public cloud services. Knowing what is happening in your organization can help you to reduce costs. For example: turn off virtual machines while not in use, or redistribute instances can help to reduce costs.

Use technology expense management (TEM) tools
Even with thorough planning, assessment and estimations of vendor’s costs and services, cloud cost management is still a challenge as IT environments are constantly changing and/or growing. The best way to keep track of your usage expenses and continuously monitor them is through a technology expense management tool.

Cloud expense tools can consolidate your usage and cost data across multiple cloud vendors. The data it provides will help identify underutilised resources ultimately reducing waste. It also provides the visibility needed to identify cost-saving opportunities. You will benefit from importing your invoice data and tagging it, turning those complicated and confusing bills into meaningful information.

With the understanding of cloud costs and your organisation’s usage, it is much easier to forecast costs or plan your public cloud usage needs. To do this effectively, take the time to understand the vendor payment models and utilise an expense management system, to minimise your costs and optimise your cloud services.