Whose role is cloud cost management?
Achieving mastery of your cloud costs if they’re running, or even just skipping, out of control is a challenge for the whole business, not just the IT department, or your CIO, CTO, or CFO. If you regard the responsibility for reducing cloud costs, optimising IT spend, and managing IT costs exclusively as an IT department challenge there’s likely to be a disconnect. It’s as if you’re passing responsibility for charting the course of the business entirely over to IT specialists, rather than business strategists, or the C-suite as a team.
The same applies if it’s treated purely as the finance department’s role. The distance between the tech resources your company needs, and the resources it actually has in place, expands. Costs, which you may not be as aware of as you’d like to be, start creeping in. Cost visibility evaporates. It is, or should be, a shared responsibility, best expressed in the mantra “We’re all in it together”. Or, to put it another way, “We’re all in IT together.”
How to tame your cloud costs
The global, industry-wide move to cloud computing, from on-premise self-serving, started picking up about ten years ago. As it did, there was a degree of nervousness about the concept. The idea of not having your servers and your core hardware on your own premises was difficult to accept. It required a degree of trust that some felt had not yet been earned by cloud services providers, or sufficiently validated by independent third parties. Companies felt they might lose control of their data, become over-reliant on vendors, or that it might be better to wait and see how the technology would evolve. Well, it did.
Today, businesses trust the cloud. It’s the backbone of how many businesses, if not most, operate. It enables the ways of working that are so essential to business success in a digital world. Cloud services support hybrid workforces, help accelerate innovation, and improve time-to-market.
But there is now something you can’t trust entirely, and that’s the costs of your cloud services. It has nothing to do with the pricing of the services, and everything to do with how a business consumes them. Costs can scale just as fast as the infrastructure if you don’t keep them in check. They require close and ongoing governance, visibility, and control. Cost control isn’t just about spending less, it’s about spending smarter.
Create an effective cloud cost strategy
Consider three simple, but powerful questions. How you answer them gives you a cost control compass. If you find yourself unable to answer each question definitively you can assume that’s a flag for further investigation:
- What do you have?
In the cloud environment resources spin up and down constantly. Only through proper tagging, grouping, and inventory tracking, can you get a clear picture. Do you know which services you’re running, where, and under which accounts or projects? - How is it invoiced?
When you look deeply into how you’re being invoiced, you might discover you’re paying premium rates for workloads that could have been discounted. When costs are scattered across different billing entities, optimisation is essential. Are you on pay-as-you-go? Reserved instances? Are you making use of savings plans or committed use discounts? - Why do you have it?
This is where governance meets accountability. When teams are empowered to launch services but not held accountable for their spend, waste happens.Every resource in the cloud should have a business justification. Is every server still needed? Was a certain database meant for a test that is now over?
The 3 key elements of cloud costs
Effective cloud cost optimisation strategies start with understanding what you’re actually being charged for. After that, you can assess how the cloud resources you use relate directly to the needs of your business. You can plan for resource elasticity to make sure nothing is wasted, while making sure no business need is under-served. You can control costs rather than wait for them to jump out at you.
Cloud pricing models vary, but most of the spend comes in three key areas: licenses, transactions, and consumption (the using of cloud resources). Once you have a firm grasp of these aspects, your ability to control them will come from predicting them, and adjusting your expectations accordingly. You’ll be working within defined parameters.
- Licenses
Licenses apply to operating systems, databases and data management, and applications. Many cloud services come with built-in licenses. Many also charge additional licenses or service tiers for AI and automation capabilities – even within existing cloud-based systems. Others involve bring-your-own-license (BYOL) models or add-on licensing, and that’s where companies often lose visibility. Then they lose control. They keep licenses running for lapsed or departed users, they have too many licenses or incorrectly used licenses.
Taking a close look at this area is not just about vendor compliance – some vendors issue hefty fines for non-compliance even if it’s inadvertent – it’s one of the prime cost optimisation opportunities companies tend to overlook. It all ticks over in the background until a major review takes place and that’s when overspends become apparent; after they’ve happened.
More on this at ‘New licensing rules in Dynamics 365: Everything you need to know’.
- Transactions
Transactions are small costs which have a habit of accumulating simply because they take place all day long. They’re often the least visible, but surprisingly costly over time. Using an API is a transaction. So is reading or writing-to a storage account. In high-traffic apps or data-heavy scenarios, these costs add up fast, especially if your system architecture isn’t optimised. The only way to generate savings in this area is through constant monitoring of your transaction volumes.
- Consumption
Consumption drives most of any company’s cloud costs. It’s all about compute hours, and data growth; the amount of storage, bandwidth, and memory your business uses just to get things done. Because it’s the biggest cost area, driven by ‘always-on’ services, it offers the most significant opportunities for cost control.
Understand your user behaviours and roles
User roles: Costs in the foregoing areas are all impacted by how users interact with your cloud solution; their security roles. These are the definitions of what a user is allowed to do, and this determines the kind of licence they need. This needs close control. A user with access to advanced modules, admin functionality, or certain integrations may be bumped into a higher-priced license tier, even if they rarely use those features. It’s known as licence creep. In some real cases, simply redesigning role access has led to 20–40% savings in user licensing costs, without reducing business functionality.
Reserved instances: Reserved Instances allow you to pre-commit to cloud capacity (typically for 1 or 3 years) in exchange for significant discounts, often up to 60–70% compared to pay-as-you-go pricing. They don’t lock you to a specific software package, but to a type, region, and operating system. It’s like buying in bulk. If you know you’re going to need the resource, why pay retail prices?
The cost challenge of AI and business automation
No discussion of anything to do with computing, technology, and business – no matter what the topic – is complete without assessing where AI comes into the picture. AI and automation are revolutionising how companies interact with cloud-based solutions. They also introduce a new wave of transaction-based costs. Every AI insight and automated decision is another touch-point with the system. And potentially another cost.
AI is increasingly embedded into cloud-based systems in areas such as forecasting, anomaly detection, predictive maintenance, or chat-based interfaces (such as Copilot in Dynamics 365). Business automation and robotic process automation (RPA) include tools that reduce manual processes by triggering tasks based on the system’s data or user behaviour.
AI is everywhere. Its costs are too. They increase the volume of transactions, computing activities, and integration calls. We have worked with customers where an automation bot, checking inventory ten times a minute for every SKU, generates tens of thousands of transactions. It’s a transformative capability, but it’s also tens of thousands of tiny increments to the cost. It demonstrates the vital importance of visibility.
Don’t let your cloud costs constrain your business success
If you’re losing money on your cloud resources, it’s probably not because the technology is expensive. Investigate if decisions driving the bill are being made in silos. Are people sharing the challenge, or assuming the responsibility falls to someone else?
The root causes of cost creep might look like IT problems, but their impact is in the form of business consequences. Cloud cost efficiency isn't a technical discipline or a finance task. It's a shared challenge. When IT and business stakeholders start making resource decisions together, the overspending will drop, and then it will stop.
See our webinar on ‘Cost efficiency in the cloud’ which might help you when it comes to creating effective strategies for financial optimisation.
How Columbus can help you to solve the cloud cost optimisation conundrum
Columbus offer services focused on reducing costs, in security and access management (controlling user roles) and in apps and infrastructure cost control.
For security and access management, we design user roles that affect licences in business applications and help optimise your setup. We’ll help you make sure that users have just-in-time and just enough access, keeping you within your licensing agreements and putting you in control of the costs involved. We also help design the role-based access required to meet your business needs, and improve the value of your investment. In application operation and infrastructure services, we help pinpoint high-cost alerts, track down inefficiencies and reveal the sources of poor performance.
Cloud cost control is no easy challenge; multiple strands to consider, with potentially vast areas of hidden costs. It’s also a responsibility the whole business needs to share in. The more you explore, the more you will find needs to be explored. The best thing of all is that each new discovery will be a new opportunity to get those sneaky costs tamed and back where they should be – in your line of sight, and on your agenda.
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