By 2025, 51% of IT budgets will go to cloud-based systems and operations. But, as cloud adoption increases, so does the cost of doing business. As more cloud services are introduced, along with serverless and microservice-based architectures, measuring cloud costs is both complex and unpredictable. That’s where cloud cost optimization comes into play.
In our recent report, Cloud Cost Optimization 2.0, we break down traditional methods for managing cloud costs, CCO 1.0, and examine a new approach that uses AI and automation. CCO 2.0 methods enable organizations to derive the maximum value from cloud computing while spending less time managing and optimizing cloud costs. Let’s start by framing how cloud cost optimization tools and techniques typically work, and how a new approach can impact your bottom line.
FinOps Basics: What is Cloud Cost Optimization?
Provisioning a server in an on-premises world was a straightforward process. A CIO or IT leader made the purchase on behalf of the engineering team, and the expense was clear. Today, engineers are far more in control of their own destiny, and they often have their own budget for cloud computing expenses. However, the same elastic, dynamic characteristics that make the cloud appealing for rapid innovation also makes it unpredictable from a cost perspective.
Many of us have been here: Finance panics about the cloud bill and puts pressure on engineering to investigate. This stalls innovation, as key engineers are taken away from building to drill into the drivers of excess cloud costs. What’s worse, many current methods of reporting and analyzing cloud costs are retroactive. That means a change made months ago could reflect poorly on the cloud bill today. In other words, it’s tough to pin down the root cause of unexpected cloud costs.
To address these challenges, many organizations have assembled FinOps teams that bring finance, IT, product and business leaders together to make data-driven spending decisions. Lately, especially in the face of economic headwinds, the practice of cloud cost optimization has become more mainstream. Now more than ever, teams are proactively working together to keep cloud costs in check. Even so, “Cloud Cost Optimization 1.0” needs to evolve to meet the needs of modern FinOps and DevOps teams.
Cloud Cost Optimization 1.0 vs. 2.0
It’s quite possible that your engineering team is still stuck using dated Cloud Cost Optimization 1.0 tools and methods. You may be leveraging basic tools to “forecast” cloud usage, estimate savings potential and identify and recommend optimization opportunities to reduce cloud waste. In reality, these cost optimization tools provide inaccurate forecasting, an endless stream of optimization tasks, and may cause teams to overestimate their own savings performance.
A common pain point we hear is that engineering teams, instead of building new products and features, spend too much time manually addressing the recommendations generated by their cloud optimization tools. Fortunately, there’s a better way. Cloud Cost Optimization 2.0 is an automated, intelligent and continuous approach that leverages AI to eliminate process bottlenecks and streamline previously manual cost optimization activities.
Rather than relying on backward-looking, static reports and top-line data (total costs and estimated total savings) this discipline can help your team stay ahead of cloud spend while also automating resource-intensive processes, such as managing discount instruments available from your public cloud provider.
CCO 2.0 methods and tools can even help your team understand cloud costs with more granularity, exposing important metrics like the cost of goods sold, and unit costs like cost per feature and cost per user. These insights make it much simpler to price and package products or renegotiate inefficient customer contracts, not to mention improve your bottom line.
Transition to Cloud Cost Optimization 2.0
In the face of uncertain economic conditions, it has never been more important to understand and control cloud costs. Additionally, CCO 2.0 delivers intelligence and insights around cloud spending to create more transparency between engineering, product, IT and other business leaders—your FinOps stakeholders. With CCO 2.0, teams understand how cloud spending is aligned with growth and innovation, and they can prioritize cloud cost optimizations that prevent bill panic.
Download our Cloud Cost Optimization 2.0 eBook to learn how FinOps teams can embrace a new approach to CCO. One that combines AI, automation, and greater intelligence around cloud costs to advance your organization’s FinOps culture and help you achieve optimal savings outcomes.
Download the eBook: Cloud Cost Optimization 2.0
Embracing AI, automation and granular business insights to get more value from cloud computing