Strategies to navigate the pitfalls of cloud costs

In my line of work, I often hear CIOs and CFOs say, “Cloud providers are bleeding us dry.” As ever-increasing cloud bills roll in, they’re demanding answers about what they’re paying for and why they’re paying so much.

Public cloud providers are eager to oppose this line of questioning. They point to the shared responsibility model. If cloud customers spend too much money, it’s usually because they created cost-ineffective deployments. It’s common knowledge that many enterprises “lifted and shifted” their way to the clouds with little thought about how inefficient those systems would be in the new infrastructure.

Think of it this way: If a customer puts rubber tires on a horse-and-buggy delivery cart so it can be operated on a modern highway, isn’t the cart owner responsible for its lack of speed and increased operating expenses, and not the highway department? Yes, but the situation is not completely one-sided, and the cloud providers are not blameless. Let’s look at what they are doing wrong.

Complex pricing models

Purposely or not, public cloud providers created intricate pricing structures that are nearly incomprehensible to anyone who does not spend each day creating cloud pricing structures to cover every possible use. As a result, enterprises often face unexpected expenses. Many of my clients frequently complain that they have no idea how to manage their cloud bills because they don’t know what they’re paying for.

The solution to this problem is straightforward. Until providers simplify their pricing models, enterprises should assign a specific employee to be the pricing structure expert. That person can engage with cloud advisors and use cost calculators and other tools to help illuminate the intricacies of pricing models. Another option is consulting services that specialize in cloud economics.

However, many enterprises are pushing back on the notion that they need to spend even more money to figure out how they spent too much in the first place. Cloud providers need to do a much better job of making their pricing easier to understand. If you provide pertinent facts and information to your clients, you empower them to make changes that will benefit everyone. For example, let’s say the highway department knows that a motorized delivery van is 8.5 times more efficient than a horse-drawn delivery cart. The horse’s owner now has solid facts; replacement will result in a fully realized ROI in 1.25 years. Getting the horse and buggy off the roads will also make road management and maintenance tasks easier for the highway department. Everyone wins.

Overprovisioning and underutilization

Cloud providers often encourage enterprises to overprovision resources “just in case.” Enterprises still pay for that unused capacity, so the misalignment dramatically elevates costs without adding business value. When I ask my clients why they provision so much more storage or computing resources beyond what their workload requires, the most common answer is, “My cloud provider told me to.” Again, there’s an easy answer. Enterprises should adopt regular monitoring strategies to align resource allocation with usage demands.

Better cost management tools

Many providers offer cost management tools, but they are too complex or insufficient for effective tracking. Some enterprises may try other third-party tools to manage costs, but most enterprises just keep paying whatever providers ask.

The answer for this one is not so easy. Enterprises need to adopt regular monitoring strategies to align resource allocation with usage demands. They can also mitigate unnecessary spending by implementing rightsizing tactics and deploying tools to track and optimize cloud use. Sadly the state of the tools and the knowledge to construct monitoring strategies is pretty lacking right now.

For enterprises, these tools are essential. Companies should fully utilize the available features in cost management dashboards to gain insight into their spending. Establishing spending alerts and conducting periodic reviews of cost reports can improve financial oversight and compliance with budgetary constraints.

Cloud providers also need to do better. Instead of pushing back on enterprises that are having issues, help them. Now there’s a new concept that could help both sides.

Automatic scaling without proper governance

One of the best features of public cloud computing is autoscaling so you’ll never run out of resources or suffer from bad performance due to insufficient resource provisioning. However, autoscaling often leads to colossal cloud bills because it often is triggered without good governance or purpose.

Here’s a simple solution, although most enterprises don’t understand it: Set clear guidelines and thresholds for scaling operations. This avoids the financial impact of unchecked scaling by continuously reviewing and adjusting policies to align with evolving business needs and budget capabilities. The parameters need to be paired with sound cost governance systems. However, the cloud providers’ systems are often insufficient, and other paths should be found.

Lack of transparency in service offerings

Unclear service offerings and related charges can lead to unpleasant billing surprises. Having a thorough understanding of the utilized services is essential. Organizations should prioritize regular training for IT teams to ensure they comprehensively understand the cost implications of various cloud services. Developing a full grasp of the service terms and conditions will further inform decisions. This is another area where, once again, the cloud providers need to improve transparency.

Addressing these cost pitfalls requires a strategic approach to cloud management, which many enterprises avoid, and most cloud providers do not promote. By implementing informed and proactive strategies to tackle complex pricing, optimize resource usage, improve cost management, control scaling, and improve service transparency, enterprises can significantly reduce wasteful spending and maximize the value of their public cloud investments.

A day of reckoning is on the horizon. Currently, most enterprises blindly pay these inflated bills, albeit with many complaints. Enterprises, you need to fix the problems you are responsible for fixing. Cloud providers, you need to become a true partner. Help your customers use your resources in the most business-efficient ways possible. In the long run, helping them will help you.