Due to their ever-expanding cloud portfolio, operations, and IT teams are beginning to investigate the value of cloud cost optimization (CCO). It helps businesses reduce cloud spend by gaining visibility over mismanaged resources, allowing them to correct or eliminate extraneous applications, licenses, or resources to maximize value and performance for the best price. This benefits the organization by reducing costs, saving time, and lowering business risk.
A significant part of CCO is using the best-supporting technology to optimize your technical deployment in a right-sizing process. Another component is ensuring you’re purchasing licenses and resources for the lowest possible cost through a practice called right-costing. Unfortunately, most organizations only excel in right-sizing or right-costing initiatives and struggle to employ both simultaneously, lessening the impact of their CCO strategy.
Since these customers are only seizing half – or less than half – of their CCO potential, they’re leaving money on the table. With research estimating that 35% of public cloud resources are wasted, this could come to hundreds of thousands of dollars in cloud spend for your organization.
To maximize your savings on cloud spend, optimizing your approach to right-sizing and right-costing is crucial. Let’s explore why both should be performed simultaneously to develop a mature CCO strategy.
Right-sizing is a crucial aspect of Cloud Cost Optimization. It is a very technical process that considers the precise specifications of each resource running in your IT environment and then seeks to attain the best possible deal on items that support the cloud.
A prime example of right-sizing is choosing the right data center and optimal configurations for your workloads. Data centers control the reliability, cost, and speed of cloud workloads and directly impact data privacy and other factors that directly impact a business’s good regulatory standing. Due to these interdependencies, IT teams would need to perform an in-depth analysis of their data and environment requirements before storing any data or signing any contracts. This analysis will help your team determine if the data center meets technical standards regarding latency and reliability and ensure regulatory compliance. Once you understand these intricacies, you can choose the most cost-effective data center.
Similarly, IT teams must consider the financial impact of supporting technologies like virtual machines (VMs). Many organizations with VMs run them on legacy versions that were available when their VM was initially created, paying what they believe is an acceptable price for the utility. However, organizations typically get better performance for less spending by upgrading their VMs – but knowing this would involve an in-depth cost-benefit analysis using their existing and planned environment. This is an easy task, but it’s rather time-consuming, and many IT teams don’t have the time or expertise required to perform an accurate analysis.
While these are two typical examples of right-sizing, this is not an exhaustive list.
Right-sizing can include any of the following activities:
Now let’s closely examine the concept of right-costing. Right-costing is an often-ignored facet of Cloud Cost Optimization, but neglecting to do it is a serious oversight. It’s essential to understand right-sizing and right-costing completely, as they should be considered with equal weight and performed simultaneously.
Right-costing is a process that leverages commercial resources to give you the best deal on software and cloud solutions. This often involves tactics to get specific licenses for free or at a reduced cost by transferring existing on-premise licenses to the cloud, removing excessive licenses or solutions, or simply taking advantage of different cloud usage rights provided by some software publishers and using them to your advantage.
Right-costing can also take the form of special discounts that must be negotiated with the cloud vendor. Vendors often offer volume-based discounts, reducing the license sticker price depending on how many your organization purchases. This is usually far cheaper than paying for the software components billed together with cloud computing resources.
Organizations should also take advantage of reserved instances, where vendors offer discounted pricing if you can predetermine how much computing capacity you will need in a set space of time. Some vendors may also provide unique savings plans, which will reduce your costs based on several factors.
While IT plays a significant role in orchestrating these initiatives, right-costing isn’t usually a technologically intensive activity. The most challenging part for the IT team is gaining visibility over the licenses you currently have versus how many you need – once that is determined, IT tends to take a supporting role.
That’s because right-costing is designed to lower expenses first and foremost, with little to no trickle-down effect that would improve efficiency and increase revenue. This is why right-costing absolutely must be performed in conjunction with right-sizing – both depend on each other to optimize cloud costs while enhancing efficiency.
Right-sizing and right-costing are interlinked processes. They should both be planned and executed in tandem, accounting for any and all interdependencies that may occur between the two. To refer back to the virtual machine example, analyzing right-costing and right-sizing at the same time may uncover that upgrading your VM will improve efficiency, allowing you to downsize your machine (right-sizing), then find extraneous licenses that can be removed to save money (right-costing). Alternatively, you may find it possible to downsize your VM and commit resources using a Reserved Instances model.
If you performed these activities in a non-logical order, your outcome would be quite different. A right-costing analysis might find that you need to buy a given number of licenses, then prompt you to buy Reserved Instances. A right-sizing analysis may discover that upgrading to the newest VM edition would boost productivity and allow you to downsize the machine. In this situation, your analysis would result in you overspending on unnecessary licenses and reservations – requiring you to perform your right-sizing and right-costing analysis all over again. When your analysis is complete, you realize you overspent on bigger Reserved Instances and more licenses than you needed.
Remember that a right-costing and right-sizing initiative isn’t as simple as snapping your fingers and saying it’s done. You must gain complete visibility into your cloud assets to find and seize the best opportunities for Cloud Cost Optimization. This could be a labor-intensive process, especially if you don’t have a FinOps-certified platform.
Cloud Cost Optimization is by no means a straightforward process – if you leave one stone unturned, you won’t truly optimize your cloud costs. This is especially true if you plan to use this CCO initiative as part of your larger FinOps strategy, as you may make mistakes again and again, resulting in perpetual overspending.
There are a lot of tools on the market that claim to assist with CCO – but they typically only focus on right-sizing. Among solutions that do include right-costing considerations alongside right-sizing, it’s incredibly rare for them to provide a full stack of all right-costing opportunities. Since these processes tend to depend on each other, you need a partner who is able to understand how both of these concepts tie together and use them in conjunction to get you the lowest cloud costs possible.
SoftwareOne is that partner. Not only are we able to tie these two practices together, but we also have the in-depth expertise and technological solutions necessary for effective Cloud Cost Optimization. To date, we’ve helped hundreds of organizations optimize their cloud environment, and saved them an average of 10 to 25 percent. We’ve even cut one organization’s cloud costs by 40 percent!
Part of this comes down to our cloud services and expertise, but a larger part of this is our helpful, FinOps-certified platform. When you partner with us, we’ll immediately add this solution to your IT team’s toolbox. With this, you’ll gain a whole new perception of your owned cloud assets, illuminating the path to CCO.
Without visibility, it’s difficult to right-size and right-cost. Get in touch with our CCO and FinOps experts to gain the visibility and expertise you need.
Without visibility, it’s difficult to right-size and right-cost. Get in touch with our CCO and FinOps experts to gain the visibility and expertise you need.
