Editor in Chief B2B COMPUTERWOCHE, CIO, CSO in Germany
Analysis
Jul 11, 20245 mins
BudgetingCIOCloud Architecture
Many companies find it difficult to manage their cloud spend in the interest of maintaining optimization. The result: a quarter of cloud budgets are wasted money, according to findings from Forrester.
The complexity within IT infrastructures is increasing, as is the pressure on IT budgets to use available funds as smartly and efficiently as possible. Effective cost management in the cloud is, therefore, becoming increasingly important. Yet many companies still find it difficult to keep an eye on the costs of their cloud deployment and to continuously optimize them.
This is a key finding of a survey commissioned by Boomi from Forrester Research. At the end of 2023, analysts surveyed 420 IT decision-makers worldwide about their cloud usage, a quarter of whom were primarily from Germany, France, and the UK. It emerged that there are major gaps in cloud cost management and optimization (CCMO) strategies, resulting in exceeded budgets and an overall loss cloud spend control.
More workloads move to the cloud
User companies can’t afford cloud cost uncertainty in view of an increasingly difficult economic environment resulting in growing pressure on IT budgets. Forrester analysts expect cloud migration to accelerate significantly with findings showing 37% of respondents expecting the number of workloads moving to the cloud to increase by at least a fifth in the next two years. In this context, more than a quarter expect cloud costs to rise by 20% or more.
Yet most companies are far from being able to keep these increasing cloud expenses under control, or calculate them precisely, with nearly three quarters of the IT decision-makers surveyed admitting to having exceeded their cloud budget in the most recent fiscal year due to excessive resource consumption — in terms of storage or network bandwidth — errors in integration strategy, and inefficient cloud architecture.
So for many companies, it’ll be a matter of increased vigilance to not let costs get out of hand as cloud usage increases. But only 6% of those surveyed described their strategy for handling cloud costs as proactive, and at least 42% stated that cost considerations were already included in developing solution architecture. However, the majority of IT managers admitted they can only handle cloud costs reactively, meaning only when services are rolled out or after they’ve been put into operation.
There’s a lot of room for improvement in cloud cost management. Just one in 10 respondents said they were able to get the maximum cost savings from their cloud budget with the help of their CCMO tools. On average, IT decision-makers assume they can only correctly record 40% of their total cloud expenditure, despite using the appropriate CCMO tools.
According to the survey, almost seven out of 10 IT leaders are experiencing difficulties creating transparency about their cloud costs with main problem areas being data management and fees for data imports and exports. The effort required to develop and operate integration scenarios is also difficult to calculate and track.
Overspend in cloud deployment
Money wasted on an untargeted cloud strategy has serious consequences to the enterprise. The survey results further reveal around a quarter of cloud spend is entirely wasted, and the tools currently used for CCMO are unable to change this. According to IT managers, there are deficits in how these tools are handled, and as a result, complaints increase that the tools can’t sufficiently illuminate cause-and-effect mechanisms regarding cloud spend. So more than a third of respondents, 35%, complain that recommendations for cost adjustments come too late in the cloud development process.
However, the problems aren’t only due to the tools themselves. More than half of respondents admitted difficulties in first feeding the CCMO tools with the appropriate data, and 44% said that integration was a problem and third-party tools didn’t match their reporting requirements. Plus, about 40% of respondents complained they weren’t able to establish effective cost governance within their cloud architectures, so they were essentially unable to get to grips with the causes of money being wasted in the cloud.
The complexities of FinOps
FinOps apparently can’t provide a solution either. According to cloud practitioners, the framework, which consists of tools, processes, and cultural aspects, is too complex and difficult to anchor in organizations, and almost half of the IT decision-makers surveyed said there were too many different roles in the FinOps concept, creating obstacles for transparency in cloud costs. In addition, processes for cost monitoring often don’t fit with cloud architectures, and the lack of a central data platform is also causing problems, say three out of 10 IT decision-makers.
So what’s the solution? According to many IT managers, the key to more efficient cost management appears to be better integration within cloud architectures. Almost three-quarters of respondents in the study expressed the hope that more efficient integration of various cloud resources could lead to a reduction in cloud spend.
More customer-centric cloud providers
It may not be in the interest of cloud providers, but even they are calling for better cost management. During his keynote speech at the AWS re:Invent 2023 conference in November, AWS CTO Werner Vogels argued that the cost aspect must be taken more into account in the cloud development process. IT decision-makers must be able to continuously monitor their cloud architectures and adapt them to optimize costs, he said.
AWS, Google, Microsoft and others must ensure their cloud customers aren’t alienated by excessive costs, but criticism is growing. The increasing complexity of heterogeneous IT landscapes and resulting higher costs are causing problems for many organizations. As a result, some companies are even considering reversing course, and bringing workloads from the cloud back to their own on-premises data centers.
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