Four Key Optimization Levers for Cloud | Deloitte US has been saved
In the previous post in this three-part series, we discussed how businesses can optimize cloud costs using four crucial levers: waste management, consumption management, purchasing leading practices, and cost aware architecture. Further, each of these levers is supported by two enablers: alerting and monitoring, and automated tagging. In this post, we explore each of these levers in-depth.
While all the cost optimization levers work in tandem with each other, there are clear benefits that can be achieved with each of these levers, as shown in figure 1.
Let’s dive deeper into each of these levers and enablers to explore how they can help businesses optimize their cloud spend.
Waste management is a critical FinOps lever that helps minimize wasteful expenses and refers to the management of resources that generate waste in terms of usage and cost. For example, an instance and its underlying storage no longer in use are potential waste, leading to avoidable expenses. Waste management helps to navigate the challenges posed by cloud environments where resources are being continually provisioned, scaled, and de-provisioned. Significant cloud spend is also wasted via instances that are over-provisioned and due to lack of optimized networks across the three major public cloud providers every year.
Common ways to reduce cloud waste are included in figure 2.
Consumption management refers to the management of resources that are currently in use but are over-provisioned. For example, an instance in use with low usage metrics might be an over-provisioned resource. With the ease that cloud resources can be provisioned spur of the moment, it becomes imperative to manage consumption patterns to avoid excess costs. Some common consumption management practices are:
Purchasing leading practices
Purchasing leading practices refer to tactics to utilize all available procurement levers to manage the complexities of cloud provider pricing models, optimize rates, and drive unit cost efficiency. Over long periods, businesses can significantly reduce their cloud spend by leveraging purchasing leading practices while provisioning cloud resources. Following these leading practices can result in the following benefits:
Implementing cloud purchasing leading practices is not a one-time activity, but a gradual process that evolves with time. Businesses can take three key steps to help ensure that they can purchase cloud resources on favorable terms
1. Data gathering and filtering
2. Data aggregation
3. Scenario identification
Traditional cost optimization efforts focus on optimizing applications already running on public cloud infrastructure through the IaaS-focused levers—consumption management, waste management, and purchasing tactics. However, very few organizations have evaluated the potential of addressing the application architecture and revisiting architectural decisions to drive even higher levels of optimization.
A cost-aware architecture can help optimize costs by ensuring applications are built around appropriate services, resources, and configurations for each workload. Application design patterns are adopted by business units to standardize deployment and manage workloads. Additionally, these patterns can help set preventive and detective controls (or guardrails) to enable future cost tracking.
Cost-aware architectures focus on three main goals:
Key measures in achieving cost-aware architecture are listed below:
While each of the above levers is crucial to optimize cloud costs, they are collectively driven by two enablers: auto-tagging, and alerting and monitoring.
Auto-tagging refers to mapping cloud resources and services to organizational and operational metadata by leveraging scripts and automations. This can help eliminate the need to manually tag resources, enabling more efficient control of cloud resources. Effective auto-tagging can help enterprises enhance their operational efficiency, improve governance, and add conditional tags based on business context.
Alerting and monitoring:
Alerting and monitoring is using alerts driven by capacity, utilization, or budget thresholds for effective control of cloud resources and services. This enables holistic and sustainable cloud financial management. Alerting and monitoring helps to optimize current cloud costs and sets guardrails for future deployments and cost tracking.
Alerting and monitoring help businesses by enabling real-time usage and cost monitoring, improving real-time data analysis, reducing incident response time, driving operational effectiveness, enhancing spend visibility, and helping right-size resources.
To recap, 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 against the target state they want to achieve. Next, enterprises should align their cloud cost optimization efforts across four key levers: waste management, consumption management, purchasing best practices, and cost-aware architecture.
Each of these levers, supported with enablers such as alerting and monitoring and auto-tagging, help drive operational and financial improvements, with direct impacts on the bottom line and productivity. These efforts should be aided with cost optimization tools provided by cloud service providers and third-party market leaders.
To learn more:
Read the first blog in this series, Optimizing the value of cloud: A practical guide to getting started.
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.