3 reasons cloud computing doesn’t save money

I found this article interesting, especially the statement, “Over the past decade, cloud adoption has become the rule, not the exception. And yet, many companies that have embraced the cloud are feeling the acute burden of a spike in spending. In other words, cloud usage costs may be costing many businesses more than they are actually saving.”

Other recent articles and studies say the same thing. The initial perception that cloud computing would lead to operational cost savings did not pan out for many Global 2000 companies. 

This is not due to the cloud provider or the cloud itself. Enterprises make mistakes that end up tossing away any business value they should get from cloud computing. Let’s look at the three reasons I come across most often and how you can avoid them.

First, there is little or no monitoring. A common problem is enterprises have ineffective or no cloud cost management operations, also known as cloud finops (financial operations). Finops should include cloud cost observability systems that report what’s spent where, by whom, and for what purpose, as well as the root cause of the spending. 

For example, perhaps provisioning cloud storage services are launched but never shut down. Cloud users hog services for no good reason. Developers overuse or overspend their cloud budget because they know no one is really watching. Sound like your own company’s cloud computing operations?  

Without cloud spending visibility and insights, you’re basically driving a car without a dashboard. You don’t how fast you’re going or when you’re about to run out of gas. A guessing game turns into a big surprise when cloud spending is way above what everyone initially thought. That sucking sound you hear is the value that you thought cloud computing would bring now leaving the business. 

Second, there is no discipline or accountability. A lack of cloud cost monitoring means we can’t see what we’re spending. The other side of this coin is a lack of accountability. Even when a business monitors cloud spending, that data is useless if everyone knows there are no penalties. Why should people change their behavior? They need known incentives to conserve cloud computing resources as well as known consequences. 

Accountability problems can usually be corrected by leadership making some unpopular decisions. Trust me, you’ll either deal with accountability now or wait until later when it becomes much harder to fix. 

Third, the business can’t or won’t optimize cloud resources. One of the core goals of a sound finops program is to optimize cloud spending. Finops will report the measured value of all money spent on cloud-based resources that’s returned to the business. The overall objective is to have more business value from fewer cloud computing dollars. 

Why is fixing this problem important? Ongoing cloud cost optimization is hard. You must understand what’s being spent and for what purpose. Then the most difficult part: You’ll need to figure out ways to spend less and still maintain or increase the business value.

Optimization differs from enterprise to enterprise, but most rely on cloud cost observability systems to find and resolve the root causes of unneeded spending. An observability system can also help find creative ways to spend less for the same resources, such as cloud shopping for better pricing and terms or prepurchasing cloud services at a discount through programs such as reserved instances. There are literally a thousand approaches to cloud cost optimization; this is the focus of most enterprise finops programs.

These are the three most common reasons that businesses save less money than promised and spend more than budgeted on cloud computing. A solid finops strategy and implementation solves all three.