The increasing adoption of cloud computing has transformed the way businesses operate, providing unparalleled scalability, flexibility, and efficiency. However, enterprises now face a significant challenge that directly affects their bottom line: inefficient cloud spending. With Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), businesses incur operating expenses (OpEx) based on ongoing consumption rather capital expenses (CapEx) associated with capacity in a data center.

The Growing Challenge of Cloud Costs

The pay-as-you-go model of cloud computing, whileappealing, can lead to unexpected expenses if not managed carefully. Overprovisioning resources, inefficient usage, and a lack of visibility into cloud spending can result in significant cost overruns. Studies consistently show that a substantial portion of cloud spending is wasted due to these factors.  

Cloud cost wastage statistics

Cloud cost wastage occurs when companies pay more than money than necessary on services. Common contributors include overprovisioning and neglecting to replace old resources with new ones.
According to the International Data Corporation (IDC), worldwide spending on public cloud services is projected  to reach $805 billion in 2024 and double by 2028.Although annual spending growth is expected to slow slightly during this period, the market is forecast to achieve a five-year compound annual growth rate (CAGR) of 19.4%."Identifying the right cloud solution for your business needs helps you reduce your cost significantly.
Cloud cost optimisation is crucial for enterprises for several reasons:

1. Cost Control: Once Cloud resources are deployed, continuous governance over the costs of these services often lapses. By optimising costs, enterprises can avoid overspending and ensure they only pay for the resources they use. Below examples show how you can achieve cost control

• Expensive storage replacement: Assess storage requirements based on the type needed (SSD vs. HDD).
• Instance rightsizing: Adjust your virtual machine (VM) sizes to optimise cost and performance and reduce overprovisioning.
• Automating optimisation: Use auto-scaling systems to efficiently utilize resources, leading to ongoing optimisation.
• Tagging analysis: Enhance asset costing to better manage expenses and gain insights into costs.

2. Resource Efficiency: Optimisation helps identify and eliminate unused or underutilized resources, reducing costs and improving overall efficiency. Below are examples of unused resources usually seen in customer environments:

• Shutting down unused instances: Turn off unused instances to save costs, enabling features for different environments.
• Unattached disks cleanup:  Remove wasted resources to allow IT teams to focus on core capabilities, improving time to market.
• Snapshots cleanup: Identify and delete old or unused snapshots, determining retention needs.
• Account restructuring: Reduce costs by deleting unused accounts and related services
• Network IP cleanup: Remove unattached network IPs to decrease unnecessary resource expenditure.

3. Budgeting and Forecasting:   Enterprises can more accurately predict future costs and allocate resources effectively. Using cloud service provider (CSP) tools can help design a cost-aware architecture, such as:

• Azure Pricing Calculator: Calculate Azure Services Cost
• Azure Total Cost of Ownership Calculator: Evaluate Azure deployment Bills
• Azure Advisor: Optimize Azure efficiency through scaling down, etc.

4. Governance and Compliance: Proper cost management ensures that enterprises adhere to governance and compliance requirements. This is particularly important in regulated industries where financial oversight is critical. Effective cost management ensures that enterprises comply with governance and regulatory requirements, which is particularly important in regulated industries where financial oversight is critical

 

5. Scalability: As businesses grow, their cloud needs can change rapidly. Cost optimisation ensures that scaling up or down is done in the most cost-effective manner.

How can BDO help?

At BDO, our experienced professionals help  organisations streamline their cloud financial operations. We evaluate whether the right cloud solution justifies the desired business outcome, refine  cloud budgets with future investment cost in mind, and shape manage business decisions considering long-term impact of cloud solutions. We provide a  range of tools and services to support cloud cost optimisationincluding cost calculators, usage reports, optimization recommendations, and expert consulting services.

Our review process follows the below guidelines:

Review current Finops Strategy	Review & understand existing Finops processes and policies
	Identify stakeholders (such as finance, operations, engineering teams) for managing and tracking cloud spend
	List existing tools/accelerators for cloud spend monitoring
Evaluate current spend	Review cost usage reports and dashboards to derive baseline report of spend patterns
	Factor in cloud spend on newer cloud technologies and if its line with business outcomes.
Assess tagging mechanisms	Review existing tagging schema, compliance policies and governance
	Identify automation tools in place to track and tag resources
Evaluate Alerting mechanisms	Review existing monitoring capabilities and configured policies
	Review thresholds for various policies and alerts/notifications triggered
Define KPIs	Establish organization cost optimization goals
	Review existing metrics and reports for cloud spend
	Define relevant metrics and benchmarks to measure resource utilization and spend.

Reference = https://www.idc.com/getdoc.jsp?containerId=prUS52460024

Author: Dr. Madan Mohan
Director - Technology Advisory Services