5 signs your cloud costs are out of control

Roughly one-third of cloud spending is wasted – learn how to spot warning signs and eliminate unnecessary spending

The cloud has become a pillar of the IT industry, making effective cost management an imperative, not a choice. As businesses heavily depend on these cloud services, unchecked spending can lead to serious financial repercussions. Recognising the warning signs is crucial to prevent wasted budget.

In this guide, Cloud & DevOps specialists will explore five key indicators that your cloud costs might be spiralling out of control, and provide insights on how to regain control of your cloud finances.

Sign 1: You routinely encounter unexpected costs

These are expenses that were not initially factored into your budget, leading to overspending whether that be caused by new projects, changes in business strategy, or unforeseen technological requirements. The key is to have a robust system in place that can quickly identify these unplanned costs before they escalate.

Spotting unexpected cost overruns involves vigilant monitoring of your cloud expenses. Be alert to significant variances, which could indicate unplanned expenses, and look out for spikes in usage or services not previously factored into your budget.

Once spotted, it’s crucial to understand the impact of these cost overruns on your overall budget and resources. They can significantly affect your financial projections, lead to resource strain, and potentially disrupt other projects or initiatives due to resource reallocation. By analysing these impacts, you can develop a more strategic approach to managing your cloud costs, ensuring that unexpected expenses don’t derail your IT operations or your company’s financial health.

Sign 2: Cost overruns aren’t immediately visible

If you have to go looking for your cost overruns, this is evidence of a further problem: a lack of cost visibility. Without a clear view of where and how your cloud budget is being spent, you may find yourself spending more time identifying a problem than dealing with it. Financial transparency in cloud operations is essential, not only for tracking expenses but also for making informed decisions about resource allocation and usage.

Insufficient cost monitoring can lead to various challenges, including difficulty in identifying wasteful spending, problems in allocating resources effectively, and obstacles in predicting future costs. By enhancing your cost visibility, you can address these issues head-on, paving the way for more efficient and cost-effective cloud management.

Improving visibility starts with implementing a robust cloud cost management strategy. Use tools that provide real-time reporting of your cloud spending, breaking down costs by different parameters like services, departments, or projects. Regularly review these reports to identify trends or anomalies and consider using tagging to categorise resources and gain more granular insight into your spending.

Sign 3: Your data transfer expenses are above expectations

Data transfer expenses can form a significant portion of your cloud bill. These costs accrue when data moves between different regions or zones within the same cloud provider, or when data leaves the cloud provider altogether (egress). Without careful management and oversight, these costs can quickly escalate and contribute to a spiralling cloud budget.

To identify unmanaged data transfer costs, it’s crucial to have a detailed understanding of your cloud provider’s pricing model. Some providers charge based on the volume of data transferred, while others may also factor in the distance it travels. Understanding these nuances can help you predict and manage these expenses more effectively.

Strategies to control data transfer costs include optimising your architecture to minimise data movement, compressing data before transfer to reduce volume, and caching frequently accessed data closer to the user to limit repeated data transfers.

Sign 4: You have underutilised resources

Are you making the most of your cloud resources? Or are there dormant assets silently draining your budget?

Underutilised resources can take many forms, including idle compute instances, provisioned but unused storage, and over-utilised network bandwidth. When combined with other resources unexpectedly overrunning, your cloud spending can go into free fall, making it difficult to understand which budgets you can cut and which resources you simply need to use more effectively.

Identifying these idle or misallocated assets involves a comprehensive audit of your cloud infrastructure. This process includes examining your instances for low utilisation patterns, reviewing your storage usage to identify volumes that are over-provisioned or rarely accessed, and analysing your network traffic to pinpoint any excessive use of bandwidth.

Implementing automated scaling policies can also be a game-changer. By scaling your resources up or down based on demand, you not only ensure optimal utilisation but also prevent unnecessary spending.

Sign 5: You lack clear cloud implementation guidelines

Inefficient cloud governance is a significant challenge for many organisations. It can lead to poor integration of cloud systems, misalignment with business goals, and new security issues. Regulators are increasingly concerned about the solvency of companies that underwrite cloud services, further complicating matters.

Cloud governance refers to defining, implementing, and monitoring a framework of policies that guide an organisation’s cloud operations. Without effective governance, businesses risk losing control of their cloud computing environments. This loss of governance can occur when workloads are migrated from exclusively on-premises IT infrastructure to the cloud.

One of the biggest challenges in cloud governance is cost management. Anodot reported that almost half of businesses (49%) struggle to get their cloud costs under control. Inefficient governance can also lead to security weaknesses due to reduced visibility from using different services.

However, when leveraged effectively, good cloud governance can be a game-changer (especially for small businesses), helping to ensure users operate efficiently in the cloud. A robust governance framework can address inefficiencies and higher cloud costs, helping organisations establish a set of rules for administering the use of assets across the organisation.

Solution: Taking control of your cloud costs

FinOps, short for Financial Operations, is an operational model that helps organisations understand cloud costs and make informed decisions about resource allocation. It brings together IT, finance, and business teams to ensure that every penny spent in the cloud brings value to the organisation. Here’s how FinOps can help you take control of your cloud costs:

• Visibility and understanding: FinOps promotes transparency by providing visibility into cloud spending. It helps decision-makers understand exactly where and why money is being spent, which is the first step toward cost optimisation.
• Cost allocation: With FinOps, you can attribute cloud costs to specific teams, projects, or departments. This fosters accountability and encourages responsible usage of cloud resources.
• Forecasting and budgeting: FinOps tools can provide insights into trends and patterns, helping businesses to predict future cloud costs accurately. This aids in budget planning and avoids unexpected expenses.
• Optimisation and efficiency: FinOps focuses on getting the most out of cloud investments. It includes practices like rightsizing instances, identifying idle resources, and leveraging discounts offered by cloud providers, all of which can lead to significant savings.
• Governance and control: With FinOps, policies are set to regulate the provisioning and de-provisioning of cloud resources, ensuring that they align with the organisation’s financial goals.
• Cultural change: FinOps instils a culture of cost awareness and efficiency. It encourages all stakeholders to think about the financial impact of their decisions, leading to more cost-effective use of the cloud.

By implementing FinOps, your organisation can ensure its cloud strategy is not just technically sound but also financially smart.