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Cloud costs are out of control

Repatriation isn’t necessarily the answer, but now is the time for companies to start evaluating where their cloud spending is going and how it can be optimised.
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Judging from the headlines, everyone in the IT industry is talking about the high and unexpected costs of the public cloud.

With South African organisations accelerating their migration to the cloud during the pandemic, we can expect to hear a lot more discussion about why the public cloud is expensive in the months ahead. We may even hear some CIOs whisper the words, ‘repatriation from the cloud’.

The challenges that South African CIOs are facing are universal, with organisations around the world wrestling with the same issue.

According to one global survey, enterprises estimate they waste 30% of cloud spend, while 61% plan to optimise existing use of cloud (cost savings) this year, making it the top initiative for the fifth year in a row.

This has even led some organisations to ask if they could save money by reversing the move to the public cloud, with Dropbox as the poster child for cloud repatriation. The company achieved $75 million in cumulative savings over two years through infrastructure optimisation, primarily repatriating workloads from public cloud.

Yet given that Dropbox is primarily an as-a-service company itself, its experience might not be relevant to companies that aren’t in the tech services business.

There is another cloud repatriation story that isn’t told as often as the Dropbox case study. Zynga, the maker of Words with Friends and Farmville, moved off Amazon Web Services (AWS) to its own infrastructure in 2011 with great fanfare. By 2015, the mobile games company returned to AWS because it realised it couldn’t innovate as fast as Amazon, or achieve the same economies of scale.

Developers and other techies that are given free rein with public cloud resources are like kids in a sweetshop.

This shows the fault often lies not with the public cloud, but with the way organisations have approached it. By failing to make it a strategic discussion that involves finance, HR, legal, the CEO and other business stakeholders from the start, many companies set themselves up for unbudgeted expenses and disappointing ROI.

Here are three major reasons that South African companies are struggling with the costs of the public cloud:

Looking at cloud as a technology rather than a business model

Many organisations underestimate how much moving to the public cloud will change their business model in the shift from capital expenditure to on-demand, consumption-based procurement.

When they fail to adjust IT operations and processes to this new business model, inefficiencies can start to creep in. One element that deserves scrutiny is the culture of the IT department.

Developers and other techies that are given free rein with public cloud resources are like kids in a sweetshop. They have all this power, all this compute and storage, all these services on demand. It’s all too easy for them to write a few scripts and spin up new instances in a few minutes, especially with the pressure to deliver new features and releases in two-week sprints.

Simply making them aware of the costs − backed with appropriate incentives and KPIs − can help to curb spending.

Retrospective optimisation

IT environments in large businesses are complex and sprawling, and it can be difficult to keep tabs on spending. When organisations start to introduce the public cloud into the mix, complexity starts to spiral and costs begin to rise. Unfortunately, many enterprises only start to optimise when they see costs are out of control, and then stop optimising when they have achieved some cost-savings.

I advocate an approach of continuous optimisation. Building a FinOps (financial operations) team to analyse costs is just the start. There are many aspects to cloud cost optimisation, from optimising application performance and refactoring applications to be cloud-native to ensuring instances and services are promptly shut down when they’re not needed.

Applying good practices can help organisations save 30% to 40% on public cloud costs. It’s key to keep optimising public cloud spending since the environment and the applications it runs are continuously changing.

For companies that don’t have in-house skills, a service provider with cloud integration expertise can help. Look for a partner willing to take a risk/reward approach to saving costs.

Matching public cloud to workloads where it isn’t fit for purpose

All too often companies match the wrong computing model or the wrong public cloud provider to the wrong workload − which is as inefficient as using a bicycle when you need a cargo truck.

Companies that run legacy applications that are not optimised for a multi-tenancy, shared model will soon run into cost versus performance issues, for instance.

Hyperscale cloud providers like Google, Amazon and Microsoft are not the right fit for every app or business. In reality, most large organisations will achieve the best results from hybrid cloud approaches, where they use a mix of private, managed private and public cloud services to address the requirements of different applications and workloads.

Public cloud: Here to stay

The public cloud isn’t going anywhere; in fact, momentum is growing, and the repatriation trend may be overhyped.

Gartner forecasts that global cloud revenue will climb from $408 billion in 2021 to $474 billion in 2022.

By some estimates, cloud repatriation and replacement rates among the top three providers (AWS, Azure and Google) are only 1%, 2% and 3% respectively.

Given that most organisations that have already gone the public cloud route will find it difficult to find their way back to on-premises models, now is the time for them to start evaluating where their spending is going and how it can be optimised.

Those just embarking on the journey should begin with an optimisation mindset and the readiness to embrace the right culture to get the best from the cloud. 

Karind Ori

Cloud and digital executive, +OneX.
Karind Ori is cloud and digital executive at +OneX. He was part of the core team that conceptualised +OneX. Before joining +OneX, Ori was a senior executive at EOH. He led the Microsoft Licensing and Platform business at EOH and later headed the Hyperscale Advisory business at EOH’s iOCO group. He also worked at Deloitte in its Financial Services Division for six years and co-founded AssurAir, which later transformed into cARscan, a global AI start-up.

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