Balancing costs and business value in the cloud

Greg Schroder, Manager of Solution Architecture, Entelect.

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Comparing on-premises computing costs with cloud costs can be a challenge, with many organisations finding that migrating to the cloud costs more than expected. To optimise costs and still get the benefits of the cloud requires careful balancing of budget and business value, says Greg Schroder, manager of Solution Architecture at Entelect.

Schroder says a common challenge for businesses moving to the cloud is that cloud costs can escalate over time. “Once they have moved some or all of their workloads, the costs are often more than they initially envisaged,” he says.

“These unexpected costs may be due to over-provisioning, incorrectly sizing resources, going with defaults or due to egress costs of outward-bound data, especially when moving high volumes of data for analytics. Understanding these data transfer costs can be complicated, which poses a barrier. In addition, there are costs organisations may not have considered, such as supporting services – security, networking, monitoring, instrumentation, backups, redundancy, recovery, scalability, elasticity, the cost of cloud engineering skills and upskilling staff.”

Schroder says organisations need adequate load forecasting to understand cloud usage and growth now and in the future. “It might be cost-effective now, but in the case of rapid scaling, costs could get out of hand. Organisations also need to understand factors like how the developers need to use the cloud – does each one need their own instances or are there suitable emulators locally?” he says.

Schroder notes that moving to the cloud is not necessarily a cost saver. “If the organisation’s primary driver is cost cutting, they need that as their vision from the outset and have it communicated throughout,” he says.

“The value of cloud includes options, elasticity and scalability, and the ability to pay for only what you use. Unlike on-premises environments, in which you often need to over-provision, in the cloud you can start small and expand.”

Schroder and his team at Entelect have assisted a number of large enterprise organisations migrate to the cloud. In almost all instances, they found that to balance the value and cost of the cloud, careful planning is needed before migration.

Schroder says: “It is important to have clearly defined goals around why the organisation is moving to cloud, and experienced people assisting with this planning. Cloud platforms do offer pricing calculators, but there are so many ways to utilise cloud, so many varieties of workloads and the intricacies of the architecture to consider. It can be hard to compare apples with apples when looking at on-premises versus cloud, because the opex and capex are very different.”

Entelect has seen first-hand the benefit of creating a realistic and cost-effective plan, having enabled large blue-chip organisations navigate these complexities. “We’ve worked with organisations and have seen the impact of determining drivers, approach and strategy, which has helped them save from 10% to 30% in cloud expenditure. Key factors that have been considered include medium- and long-term goals, and balancing scale and spend. It is also important to have access to the right skills and knowledge transfer. For organisations already in the cloud, they can get assistance in assessing, monitoring and optimising their utilisation and costs,” he says.

To control spiralling cloud costs, Schroder recommends a cultural shift in the SDLC that takes consumption into account, while carrying out an optimisation exercise at least once per quarter. “Organisations must have eyes on the costs, and put measures in place to prevent over-provisioning. We see a lot of organisations putting governance in place, but not necessarily the controls,” he says.

One problem is that it is not always clearly defined whose role it should be to achieve this balance, he says. “It’s often rolled up to the executives, and at the end of the day they will likely look only at costs. Finance may not have context around the numbers, and not have a clear understanding of the value the organisation gains from the cloud, such as better turnaround times, redundancy or user experience.”

Schroder says simply slashing cloud spend without considering how the organisation benefits from the cloud could be a mistake. “You may find the organisation dictates a 30% cost cut, and that can be achieved. However, there is a risk of focusing on only the cost, but not the value you may lose. So, while you cut costs, you also need to understand what you are losing as a result,” he says.

He believes the responsibility of balancing cloud cost and value should be a culture across the organisation. “Top management may just see the savings, while developers might want the Rolls Royce and not want to make compromises. Ideally, there should be transparency around the costs and benefits, and everyone in the organisation should view cloud expenditure as if it was their own pennies they were spending,” he says.