The opinions expressed by Entrepreneur members are their own.
Many people’s experience with cloud spending is limited to the $10 or so monthly bill they get from Apple or Google. But for tech companies that have to manage and process huge amounts of user data, it can be second largest expense after payroll. Indeed, when Snap went public in 2017, disclosed documents the company had over $3 billion in cloud service contracts with Amazon Web Services and Google.
And if you thought your mobile phone bill was hard to understand, try to understand cloud payments. Companies like AWS, Azure, and Google offer thousands of options with variations that can lead to mind-blowing cost overruns, whether you’re a startup. accidentally messed up a $72,000 bill for a few hours of testing or Pinterest, spend an additional $20 million to accommodate the surge in user demand.
In fact, it is estimated that at least 30%—or $180 billion— almost 600 billion dollars for cloud spending around the world – absolutely not necessary. The culprits can be as mundane as having multiple copies of identical files or failing to clean up obsolete or unused assets. Often, cloud computing costs are a black box. In our 2020 Saas Cloud Spending Surveyabout one third of the decision makers who responded didn’t even know their company’s cloud spending as a percentage of annual recurring revenue.
Thinking about moving the use of the cloud across teams and contracts can seem like a game of kill the mole. But by focusing on the three principles of transparency, accountability, and automation, companies are finding ways to fight cloud spending, often saving millions and avoiding layoffs.
Related: With rising costs and vendor lock-in, is there an exodus out of the cloud?
Visibility: You can’t fix what you can’t see
The first step is to understand where cloud spending occurs. It’s not as easy as it might seem. The very characteristics that make the cloud so convenient also make it difficult to track and control how much teams and individuals are spending on cloud resources. Even costs can be variable depending on the type of service used, the resources consumed, and the time of day or week.
According to FinOps Funda group dedicated to promoting best practices in cloud finance management, most companies are still struggling to coordinate budgets. The good news is that a new generation of specialized tools can provide transparency. Resource labeling can automatically track which teams are using cloud resources, allowing you to accurately measure costs and identify excess capacity. Meanwhile, with cloud cost anomaly detection, users can be alerted when the counter starts ticking wildly. But visibility is only the first step to controlling costs.
Responsibility: put someone at the helm
Companies wouldn’t dare roll out a payroll budget without an administrator — or an entire HR department — to carefully optimize costs. However, when it comes to spending on cloud services, often no one is in the driver’s seat.
That’s why the second step is to establish accountability and accountability for cloud costs. Enter the new disciplines of FinOps or cloud operations. More often, organizations stand up these dedicated teams, whose competencies can span everything from defining cloud budgets and securing lucrative contracts to providing engineering discipline to control costs. It is important to note that this is not an annual event, but an ongoing commitment.
To work, these teams must be given permission to create barriers that apply across the company. One of the reasons cloud spending spirals out of control so quickly is because teams have been insulated from the financial implications of using the cloud.
Let’s say a developer is testing a new program or feature and has built a machine in the cloud for that purpose. It may seem easier to just keep the machine running than shutting it down and restarting it. But the budget suffers when developers use that bandwidth during latency periods. Multiplied by hundreds or thousands of users in a company, wasteful spending adds up quickly.
On the subject: Cloud data storage is changing the rules of the game for modern business. Here’s how to use them to grow and expand.
Automation: The Missing Ingredient – AI
But even with a dedicated team tracking cloud usage and demand, automation is the only way to handle complex and fast-paced scenarios.
The sad truth is that much of today’s cloud computing cost management remains individual and manual even at some of the most advanced technology companies. In many cases, the monthly cloud waste report or summary is the only maintenance, and highly paid engineers are expected to manually remove abandoned projects and initiatives to make room. It’s like asking someone to delete extra photos from their iPhone every month to free up extra storage.
This is why artificial intelligence and automation are critical to identify cloud waste and eliminate it.
Surprisingly, the most recent FinOps Foundation survey shows that less than 40% of organizations automated cloud usage or anomaly reports, cost overrun notifications, container resizing, or other statistics. But this is only the first step of automation. The next step is intelligent and automatic waste disposal. I’ve seen Fortune 1000 companies cut cloud spending by 40-50% by automating best practices.
For example, tools like “intelligent auto-stop” allow users to stop their cloud instances when not in use, in the same way that motion sensors can turn off a light switch at the end of a work day.
Companies that rely on “spot instances” to access excess capacity can use automation to help them get the best rate, similar to how Expedia allows travelers to get better deals on hotels and car rentals.
In the meantime, more tools are being developed to help companies model the most cost-effective service contracts or sell excess capacity on the secondary market.
As cloud management advances, companies are finding ways to save millions, if not hundreds of millions of dollars. Now, as next-level artificial intelligence does the hard work of identifying and eliminating cloud waste, the very foundation of the technology economy — data storage and processing — is undergoing a much-needed overhaul.
Related: The Challenges of Optimizing Your Cloud Spending in 2022