Cloud Cost Blowouts – The new paradigm to manage for IT costs
It only seemed like yesterday that all we heard about was how imperative it was that we move everything to the cloud. It would be better, more secure, more scalable and more agile. Platforms and apps proliferated like never before and for even the simplest programs there is so much choice it has become painful to make a decision. Of course, most of the Software-as-a-Service platforms were just so cheap that we couldn’t help but try out 1 or 2 or 10. These platforms enabled our teams to collaborate in a way that we never have before. They were much more fun to use than some sketchy spreadsheet that we cobbled together in the past and of course they were accessible on our phone so we could use them everywhere.
Throw in enterprise level server deployments to the cloud as well as enterprise tools and we were all in. After all, the costs made sense, the tools would empower a new level of working and we avoided a whole lot of capital cost to replace aging infrastructure.
At least those were managed centrally by the IT department who of course would manage the costs in line with budgets. I’m sure it has come as no surprise to many finance and buying teams that cloud cost control have become an issue for many businesses. There have been a number of recent articles but here is one of our recent favourites.
While much of the burden of the article referenced needs to be handled by IT – there is much that other areas of the business can do to alleviate some of the costs. After all, they have a degree of responsibility for the so-called sprawl of shadow IT. Before we get into the ways to manage the sprawl – let’s look at why it has increased for most organisations and some of the challenges of managing cloud sprawl for your business.
Why do cloud costs keep rising?
There is any number of reasons why cloud costs have risen and risen and risen.
1. It’s easy to sign up.
Whether we are buying for business (or personal) software has never been easier to buy. Find what you want, click a few buttons (enter a credit card for a trial – we are just trying it) and voila – off we go. There are no purchase orders, approvals other than your immediate manager if you do that or invoices to take care of. The ease of use of new web apps or software is too easy and can be done via any browser.
In fact, it is so easy to sign up that forgetting you signed up for something and never really using it is even easier. This is further exacerbated by the ability for any department to sign up to anything.
2. Most of the tools seem very inexpensive
Most new platforms or services start out as start-ups. Startups who are all about gaining subscribers rather than profitability. This often means that when we sign up to something new, it is cheap – usually under $10 per user. It is hard to even buy a sandwich for $10 so it seems like so little. The barrier to signing up is small that it often fails to register in the part of the brain that says 0 should we be buying this or considering other alternatives.
Of course, once you are in, either the number of subscribers, the price per month or both can scale up very quickly.
3. A new shiny platform comes along and we discard the old ones without ending a subscription.
Peoples love affair with online platforms is short, much shorter than it was for software that sat facing us on our devices (and for those of us old enough – filled up our CD tower). The new and exciting product quickly has a weak spot – wouldn’t it be good if it did ‘x’? Then, of course, another platform comes along with an even better feature and we now cannot live without it.
So we sign up to a new platform – and forget about the old one as we will get to back up our data one day. When you are busy being busy – one day can be a long time in the future. And, it is only a few dollars a month anyway isn’t it?
When you do this for multiple types of platforms – all the small amounts add up to a large amount.
4. It costs more for more data, usage or add on features
Pricing models for cloud subscriptions are pernicious in their very nature. No one should have been fooled when the as a service came along and seemed cheaper. No large global corporation is going to give away revenue or profit. Smart business people we are, we knew the sting in the tail was coming.
New features get added but they required an extra fee (which of course was again very small but is per user or pro rata and adds up quickly). Even worse are the models where you get charged for the amount of data you have stored. Jeff Bezos did not get to be the richest man in the world by being stupid. Amazon already knew that people would not be deleting data or cleaning it up any time soon. Keep an eye on the added costs as usage balloons.
So why are cloud costs difficult to manage?
Visibility of payments
For many platforms, visibility of the payments (and costs) can be hidden on company credit cards. This we know is a minefield for compliance and management of the costs. The situation becomes even worse if the person who signed up is no longer working for a company.
We all know that one of the challenges of managing P Card payments is the due diligence that goes into signing them off. With a lack of due diligence, a lot of cloud costs can be hidden and passed through without thinking.
Much of the time subscriptions are not even going to be visible in a p2P system.
Lack of centralised management
One of the biggest causes of this shadow IT problem has been the ease of anyone signing up for this or that subscription. A lack of compliance or centralised management is one of the simplest things to implement. A lack of centralised management can also open the door to cybersecurity or privacy risks as without centralised management, the same level of security may not be enforced.
All the fee models differ.
Keeping track of the different types of fee or pricing models for all the different subscriptions is of paramount importance to keeping costs down. This is another area where centralised management or a designated owner can keep track of everything.
So what are the simple ways to manage cloud costs?
1/ Centralise ownership
Platforms and software need a centralised owner. Any organisation with strong governance and leadership should be able to enforce this simply. Having this function supported by a finance person
2/ Establish clear policies
Off the back of centralised ownership, establish clear policies for each department to follow.
3/ Regular auditing
Over and above all of it, keep on top of all the costs through regular auditing and understanding your options. Many organisations also fail to take advantage of discounts on offer through even the likes of Microsoft, Google and AWS.
A regular steering committee comprised of various departments can help you keep ahead of the needs of various departments as well as future needs.
At the end of the day, seeking outside advice through a reputable service provider or IT partner can make a huge difference. There is also a range of tools available that say they will help you keep on top of all the platforms and tools that your organisations may be using.