Cloud technology has changed the way companies operate by offering a myriad of advantages, including enhanced flexibility, scalability, agility and cost efficiency. Businesses leverage cloud services to optimize their operations, reduce capital expenditures, and respond rapidly to market demands. Many can agree on that, right?
With that said, it is imperative for organizations to recognize that the cloud (while offering many benefits) is not without its share of unforeseen costs. These hidden financial implications often stem from various sources, such as data transfer fees, unexpected spikes in usage, compliance requirements and the need for specialized expertise in managing cloud resources.
And here’s the kicker
More than half of IT professionals admit their organizations waste significant IT spend due to inefficiencies with cloud platforms and services, according to a recent Aptum study. Adding to that discovery, 73% of IT respondents report that their cloud investment resulted in higher-than-expected IT costs within the last 12 months, marking a 28% increase compared to 2021 figures, and 71% of IT professionals state that cloud-related costs make up around a third of their total IT spend. That is a big chunk of that IT budget pie.
This raises a big question. How are these costs being overlooked? I guess we can throw in a “why?” as well.
One issue is poor planning, where organizations may hastily migrate to the cloud without conducting a thorough assessment of their existing infrastructure and future needs. This lack of strategic foresight often leads to inefficient resource allocation, overprovisioning or underutilization of cloud services, all of which result in increased operational expenses.
A shortage of internal expertise exacerbates these problems, as organizations struggle to effectively manage and optimize their cloud environments. Insufficient knowledge about cloud service offerings and best practices leads to suboptimal configurations and operational inefficiencies that drive up costs.
Another issue highlighted in the survey is the accelerated pace of cloud adoption. Many organizations race to embrace cloud technologies to stay competitive and agile in the digital age. However, this rapid migration can inadvertently lead to cost escalation as organizations may prioritize speed over cost optimization.
"Many organizations believe they are excelling in the cloud, but in reality, like flying in a cloud, they have to rely on instrumentation," said Ian Rae, CEO and president at Aptum. "It isn't the cloud that is costly but the lack of observability and governance. This shortfall hampers the ability to unlock the cloud's potential for enhancing operational efficiency while controlling costs."
Continued cost savings rely on a clear cloud investment strategy that focuses on visibility and control of costs – especially for those accelerating cloud investment and moving into more complex, multi- and hybrid cloud environments. Therefore, it is recommended for organizations to look at FinOps principles.
FinOps principles ensure that organizations operate efficiently within the cloud environment. They emphasize the importance of cost visibility and accountability, enabling teams to have a better understanding of their cloud expenditures and promoting more conscientious spending habits. FinOps practices also facilitate the identification of underutilized or unnecessary cloud resources, allowing for their termination or downsizing, which lead to significant cost savings.
FinOps contributes to enhanced decision-making and forecasting by providing clear insights through usage analysis. This lets organizations make informed decisions that reduce the likelihood of unexpected budget overruns.
Additionally, FinOps fosters a cultural change within organizations, making cost-consciousness a fundamental aspect of their mindset and a standard topic in operational discussions.
Organizations must strike a balance between reaping the benefits of cloud technology and proactively managing the potential financial risks associated with it. Staying vigilant about the total cost of ownership in the cloud leads to long-term financial sustainability and success.
Edited by Alex Passett