A Practical Guide to Optimizing the Value of Cloud | Deloitte US has been saved
This post is the first in a series of three posts that highlight how businesses can get started with optimizing their cloud costs. While in the first post we look at why cloud cost optimization is a vital business need, and describe a practical framework that businesses can adopt, the subsequent posts will dive deeper into each lever of the framework and describe how businesses can derive value from them.
Growing need of cloud cost optimization
The increasing adoption of cloud computing has helped transform and streamline the way businesses operate, but enterprises find themselves facing a new challenge that has a direct impact on their bottom line—inefficient cloud spend. With Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), businesses incur operating expenses (OpEx) as they are billed based on ongoing consumption, instead of capital expenses (CapEx) associated with capacity in a data center. Consequently, businesses often find themselves trying to create complex cost estimates of their consumption on cloud, which affects their financial management—ultimately having an impact on businesses’ bottom line.
There are six key factors that drive complexity of cloud cost optimization:
Preparing for cloud cost optimization
Given the complexities involved with optimizing cloud costs, businesses should begin with examining their current spend and existing practices across the FinOps capabilities. This can help identify existing gaps, thereby helping define a strategy and road map for optimization execution.
Our experience has shown that the following five steps can help businesses get started with reviewing their existing processes and strategy:
A framework for optimizing cloud costs
A thorough assessment of an enterprise’s current-state capabilities and governance models will help organizations identify cloud costs optimization opportunities. These opportunities can be systematically evaluated leveraging a framework that is built upon four crucial levers: waste management, consumption management, purchasing best practices, and cost-aware architecture. Each of these levers is supported by two enablers: alerting and monitoring, and automated tagging.
While all cost optimization levers work in tandem with each other, there are clear benefits that can be achieved with each of these levers. The levers, mapped to their benefits, are:
Wrapping it up
Optimizing cloud costs is important for every business. In today’s hypercompetitive environment, it is very easy to lose track of cloud services and resources being used, as businesses scale and develop new products to meet market needs and maintain a competitive edge. This tends to have a direct impact on an enterprise’s bottom line. Without a well-thought-out strategy to optimize cloud costs, the cloud becomes yet another cost center like traditional IT.
Cloud cost optimization involves a combination of improving visibility and accountability of cloud spend; continuous efforts to reduce known and unattributed costs; and enhancing planning and forecasting. For effective cloud cost optimization, businesses should start with assessing their current-state maturity levels, cloud costs, governance mechanisms, FinOps capabilities, and operating models. Depending on their maturity levels, businesses should identify gaps compared to the target state they want to achieve.
To learn more:
Read the second blog in this series, Optimizing the value of cloud: Four crucial levers to optimize cloud costs.
Read the third blog in this series, Optimizing the value of cloud: The impact of optimization.
Nikhil is a principal with Deloitte Consulting’s Financial Services practice. With more than 20 years of experience as a trusted technology advisor to large global banks and insurance providers, Nikhil has designed and executed multiple large-scale, global transformation programs to enable new business capabilities and drive innovation. Nikhil specializes in Cloud Strategy, guiding his clients through all phases of their technology modernization journeys, from defining an overall vision and strategy to designing and implementing new operating models aligned to modern technology delivery practices. An engineer at heart, Nikhil leads platform and application teams to deliver scalable cloud platforms and enable new use cases made possible by Cloud. Nikhil leads Deloitte’s Cloud Financial Management/FinOps offering for the US market, driving go-to-market strategy, establishing partnerships with leading ecosystem partners, and delivering engagements to help his clients measure the value from their cloud investments.