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Uncertain times are here – how do businesses scale down without causing more harm than good?

Uncertain times are here - how do businesses scale down without causing more harm than good? 3

Uncertain times are here - how do businesses scale down without causing more harm than good? 4By Mallory Beaudreau, Customer Portfolio Director, Apptio

With rising fears of a recession, businesses are looking for ways to manage budgets. Cloud computing bills often run into the millions for large organisations, so perhaps it is unsurprising to see them under the microscope.

Increased scrutiny in the face of economic uncertainty makes sense: with leaders’ priorities shifting from growth into a more conservative savings attitude, organisations need to know that every dollar they spend is providing business value. Now more than ever, companies need to understand how their cloud is being used and how it ties back to business objectives. New analysis on the top public cloud providers shows that spend has fallen YOY, but businesses can’t simply turn off business-critical applications running in the cloud. Achieving a decline in public cloud spending without compromising on business performance may seem like asking for a miracle. But it is achievable with a focus on cloud efficiency; getting the same results for less.

During the pandemic, the benefits of the flexibility of cloud services have been championed by many IT leaders. For example, Gartner estimates 51% of IT spending across application software, infrastructure software, business process services and system infrastructure markets will have shifted from traditional solutions to the public cloud by 2025. But a full understanding of the associated costs has not naturally followed from this mass adoption. 80% of IT decision-makers agree that moving a workload to a new cloud environment is costly and time-consuming. For example, using multiple cloud service providers (CSPs) can complicate costs as they’re profiled differently in the billing files, while it is challenging for IT teams to keep up with monitoring usage levels for newly-adopted SaaS products. This flexibility hinders leaders’ ability to establish a holistic view of the investments made, as they struggle to understand whether they’re getting value for money and how to optimise costs to suit the requirements of the business.

How to reduce public cloud costs

In contrast with the fixed costs of a traditional data centre, public cloud is billed based on variable usage. In theory, this is beneficial as it allows costs to be reduced when cloud instances aren’t in use, but in practice, many enterprises struggle to get engineers to take action on unused resources or waste. As a result, money gets spent on cloud services which aren’t actually in use or are under-utilised. All of this leaves IT leaders with complex cost reports, that traditional finance tools aren’t suitable for. It takes a huge amount of manpower to collate, analyse and distil actionable insights in order to gain any cost-benefit from the flexibility of cloud. These are the challenges which businesses are wrestling with right now.

The rise in popularity of industry frameworks like FinOps is no surprise. FinOps is a cultural and financial practice that encourages teams from across the business to collaborate in managing the cloud through a common framework. Two core principles of FinOps are to focus on the business value of cloud and to take advantage of cloud’s variable cost model, allowing you to maximise speed and quality at the best price.

Companies need to focus on unit economics in tight economic conditions such as these. Consumer demand remains high in many sectors, so companies can’t simply turn off applications that are run in the cloud. However, business leaders need to understand the cloud cost associated with each app/service/customer to understand the true value of their investment and focus on a balance between cost and quality. This approach has been extremely impactful for Apptio customers. We have seen users of FinOps-focussed tools from Apptio reduce cloud costs by 25% within days, reduce vendor and SaaS spend by 10%, and alter overall consumption by between 3 and 5%. They can also analyse trade-offs to different planning scenarios up to 75% faster, enabling rapid responses to changing market conditions. Crucially, these savings can be done while maintaining quality, maximising the value of every dollar spent in the cloud. 

Conclusion

Given that multi-cloud approaches are the way forward, leaders must understand the importance of technology cost transparency more than ever. With IT investments not only stretching across huge numbers of services but also multiple departments, it is now essential for businesses to evolve the way they are managing costs.

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