The cloud as money pit? Solutions for efficient cloud cost management

Keeping cloud costs under control: Methods for efficient cloud cost management to create transparency and avoid "cloud waste".

Has cloud computing become a high cost factor? We’re hearing a lot about “cloud waste” – cloud resources that go unused or are used secondarily – in the media these days. A number of studies confirm that many companies don’t use cloud resources optimally. For example, a Statista survey showed that more than 30 percent of a company’s cloud spend is wasted, and 93 percent of companies pay their public cloud provider more than originally expected. How did we get here?

Cloud applications bring significant additional costs

At companies with high levels of cloud maturity, more and more units are acting on their own in harnessing innovative solutions based on cloud technologies. That’s a desirable situation in itself, allowing for rapid adaptation of innovations on the market, but the flip side is that higher cloud consumption brings significant added costs – as we see over and over in our day-to-day consulting practice. What's the problem?

At most companies, cloud spending is lumped in with IT costs, so it is not directly associated with the business itself. And that reduces the necessary cost sensitivity regarding cloud services on the business side. At the same time, system requirements for applications are described quite generously, especially where existing workloads are being migrated (“lift & shift”). This means the IT organization faces rising costs, often without any direct influence on those costs. The result is cost increases that the IT organization cannot influence directly.

One possible solution is to have business units and application owners bear their own costs associated with cloud applications to create more transparency and cost sensitivity. But even at companies where the costs are paid by the business units that incur them, there is often no capacity for optimization, especially since the business cases for cloud projects that have been calculated at some point, are still positive even so. Aside from that, it is difficult to identify potential for cost optimization without the IT team’s in-depth technical know-how. In its advisory role, the IT organization should bear full responsibility for illuminating cloud costs across the entire company and identifying areas where there is potential to save on costs. To do this, companies need to build automated, tool-based savings identification into the IT organization's processes. Business units also need to be more cost-aware.

How do you make the step from service IT to business capability IT? Find out more in our whitepaper: IT cost pressure!

Set budgets and continuous monitoring

When it comes to effective management of cloud costs, it is crucial to set budgets and plan for the costs of cloud usage and monitor these items on an ongoing basis. It is important not only to monitor whether the budget is being met, but also to continually look for ways to optimize - even if the planned costs are within the budget. Companies that do this can not only keep their costs under control, but also identify and leverage long-term savings potential. A real-world example from one of our customer projects makes clear just how necessary effective cloud cost management is. In this project, we discovered that even though the units themselves were responsible for their cloud resources, there was a wealth of potential for optimization. Over the years, this situation led to a sharp increase in costs, underscoring the fact that putting responsibility in the hands of the business units themselves does not automatically lead to cost-optimized use of the cloud.

Concretely, we identified and implemented the following optimization potential in the customer project:

  • Rightsizing of cloud resources that are not fully utilized: We automatically identify various resources that are not being fully utilized and craft a suitable recommendation based on actual capacity utilization over the past few months. This allowed us to achieve monthly savings of more than USD 50,000 without affecting the performance of live systems
  • Systematic identification of unused resources: cloud resources can be created quickly, including for test purposes. Our experience has shown that systems that are no longer used can pile up over the years. In our case, these systems were generating over USD 10,000 in monthly costs*
  • Optimization of storage: Selecting storage SKUs sufficient for the workloads unlocks significant savings


Leverage for cost savings and governance models

Identifying the areas of greatest leverage for cost savings requires a thorough analysis of cloud use and implementation of governance structures. The IT department needs to play a central role in this and must not be reduced to a merely advisory capacity. It is necessary to ask whether it has or can get direct access to all resources in order to enable central rightsizing. Alternatively, a process that points out required actions to the business units must be created – and accompanied by the appropriate level of management attention to follow up on the potential for cost savings that needs to be addressed. Failure to take these actions then becomes something the unit has to justify to their own management, not just the IT team (which serves in an advisory role).

Organizations definitely need to be able to allocate and assign costs clearly, which is made possible by methods such as tagging and resource ownership. Beyond that, creation of awareness of resource-optimized cloud computing is essential. Establishment of FinOps governance with IT and the units is a key component of ongoing cost optimization. Finally, the chosen governance model – whether managed centrally by the IT organization or through reporting to the resource owners – must be clearly defined and supported by organizational and technical processes.

A comprehensive tool: the CS Cost Optimization Framework

But how do companies get there? It’s a time-consuming and multilayered process – and it’s also difficult to carry out due to lack of internal resources and siloed structures. Companies also often have a hard time figuring out where to start with this complex topic. When this happens, it is helpful to bring in an external partner with experience in this area. Campana & Schott offers a structured approach to ensure that your company leverages the full potential of cloud solutions without generating unnecessary costs. As part of our one-day workshop, we identify concrete savings potential for your cloud costs based on proven best practices and develop suitable solutions. Our partnership-based process includes the following:

Step 1: Assessment and analysis

Comprehensive, detailed assessment of your current cloud costs and operating models. We use proven methods to get a clear big-picture view of your existing expenses. We also take into account your business needs and goals.

Step 2: Identification of savings potential

After a thorough analysis, we identify concrete areas of potential for savings. Best practices help to identify areas where you can lower your cloud costs. This might include optimizing SKUs, shifting resources to lower-cost areas, or adjusting VM parameters.

Step 3: Development of practicable solutions

The goal is to introduce a practicable solution in your company that takes your cloud maturity level into account and quickly realizes concrete savings. In the process, we consider both the possibility of centralized management by your IT department and enabling your business units to identify and harness potential for savings on their own – all in line with the overall conditions that apply within your organization.

Targeted cloud cost management

The CS Cost Optimization Framework is a comprehensive tool that helps your company to establish targeted and feasible cloud cost management practices. The components of this framework are:

  • Building a FinOps governance structure
  • Defining guidelines
  • Setting up dashboards for ongoing stakeholder reporting
  • Automating reports for business units
  • Ensuring long-term financial stability and transparency

This means the CS Cost Optimization Framework offers a holistic solution that helps you design your cloud cost management effectively and achieve your financial objectives in the long term.

Want to learn more about the CS Cost Optimization Framework?

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Timo Gouthier

Senior Consultant

David Malovecky

Senior Manager | Head of Cloud Platforms

* Mandatory fields

*Azure Cloud alone (not the main cloud provider for the company under review, so the figure for multiple cloud providers would be much higher); the guideline for all savings calculated was that there must be no impact on the systems running on these services. The units did not implement all of the recommended potential for optimization.