Kevin Bogusch | Oracle Senior Competitive Intelligence Analyst | December 20, 2023
For all the benefits of moving computing infrastructure to the cloud, it can be difficult to make informed decisions about how to stay within budget. Cloud costs vary depending on the provider, the amount of storage being used, computing demand, and the application running on each cloud instance, among other variables.
Tracking and managing cloud costs has become a significant challenge. In a recent IDC poll, 64% of responding CIOs said they are outspending their budgets on the cloud. And their C-suite colleagues are noticing: More than half the executives polled in a 2022 IDC worldwide CEO survey said they worry about cloud spending.
An effective cloud cost management strategy requires detailed knowledge of all cloud costs and service requirements. The million-dollar question: Is the money being spent on cloud infrastructure appropriate given the company’s needs?
Cloud cost management is the process organizations use to keep cloud costs under control. An effort to increase convenience and save money by replacing on-premises infrastructure can quickly become a shadow IT nightmare as the cloud becomes less mysterious and easier to provision for nontechnical, line-of-business users. Not only may they spin up redundant services, but they also often don’t realize that the company is attempting to focus cloud spending on a single vendor. Using multiple cloud service providers, especially when it isn’t explicitly authorized, not only greatly increases the difficulty of managing expenditures, but it can also cost you in terms of lost volume discounts.
Cloud service providers use several common cost models, each with advantages and disadvantages. Typically, choices include a pay-as-you-go model billed by usage, a fixed-price subscription model, payment for long-term, steady-state use, discounts for volume commitments, and discounts for use during times of slack demand. Effective cloud cost management can rein in unauthorized spending and help harness available discounts while ensuring that IT departments are budgeting efficiently. You’ll minimize waste and administrative effort, save time—and avoid unpleasant surprises when bills arrive.
As companies’ reliance on cloud computing increases, so does the complexity of their IT infrastructures. The ease of setup and deployment, accurately attributed as a strength of cloud operations, often leads to sprawl. A multiplicity of vendors and pricing options, particularly in multicloud environments, can make it difficult to keep track of what a company is paying for, and why.
Here’s where cloud cost management comes in. Cloud cost management tools help companies control their spending by monitoring cloud use and demand. These tools can alert IT managers about cloud resources that are underutilized or that have become unexpectedly expensive. Most cloud service providers offer basic cost management tools, but specialized third-party systems give companies full visibility and governance across multiple providers.
Simply put, cloud cost management is important because no business can afford to waste money. In a decentralized IT environment, it’s so easy for teams to spin up new cloud instances that cost is often a secondary consideration—or not thought through at all. Frequently, cloud services are bought for specific purposes and then abandoned while the meter continues to run.
As important as cost management is for the budget, it’s just as vital for accountability. When cloud instances are casually set up and forgotten, it’s easy to lose track of them. That may lead to data duplication, corruption, or security issues. Cloud cost management helps companies understand what cloud instances have been created, by whom, and at what expense so costs can be allocated and problems traced back to the source.
It comes down to a mix of complex pricing and ease of provisioning. Cloud providers often have detailed and dynamic pricing models, with factors including the number of users, storage, data egress, and add-on services affecting what your cloud infrastructure costs on any given day. Understanding and managing fluctuations is difficult.
In addition, cloud services are all too easy for line-of-business employees to buy and install. Teams or departments may be using many different services or instances, scaling them up more often than scaling them back down and leaving IT to worry about the costs.
Cloud costs can be difficult to wrangle simply because there are so many factors that go into pricing, not all of them immediately obvious. Here are some factors that may contribute to excess spending.
There are many advantages to managing cloud costs, some of them obvious, others less so. They fall roughly into the categories of money, governance, and budgetary process control.
Once a company decides to manage its cloud costs, several strategies can help optimize spending.
Cloud infrastructure can sprawl across multiple vendors and offerings, driving costs out of control and making governance all but impossible. Cloud cost management tools, often offered in a software-as-a-service (SaaS) model, monitor your infrastructure and help eliminate waste by tracking and reporting on cloud use. Managers can analyze reports to identify and eliminate underused or redundant resources.
Each cloud vendor has its own native cost management tools, but a third-party solution is best when a company needs to manage its cloud infrastructure across multiple vendors. A third-party tool can provide important insights into the comparative costs of various cloud providers and even specific service offerings.
And, in many cases, a third-party tool has features, such as customization, visualizations, and granular visibility into usage, that a vendor’s native tools can’t match.
There are likely hundreds of cloud cost management tools, each with strengths and weaknesses. Here’s a sampling of popular tools worth investigating.
The “best” cloud cost management tool depends on the size, scale, and composition of your cloud infrastructure, as well as your IT maturity and management culture. In the smallest and most centralized companies, those that use few cloud services, and those in which only one person or a small team handles purchasing and management, a spreadsheet, combined with the manual tagging of each instance to help with tracking, may work just fine. But if a company has several teams working on multiple groups of cloud instances—and if corporate governance can’t quite manage or enforce the manual tagging of cloud resources to allow for accurate tracking—it should probably consider a dedicated cloud management tool.
When determining which tool to use, answer the following questions:
Oracle Cloud Infrastructure (OCI) delivers complete cloud services around the world, across clouds, or in a company’s data center. It offers innovative features, such as flexible compute, lower pricing, autotuning storage, up to 10-times lower data egress fees, and free tools and reports to help eliminate needless overpayment and billing surprises.
OCI’s cost management and governance services include cloud cost management tools that monitor spending, increase accountability, and optimize efficiency. Financial leaders can use the tools to set up guardrails that help ensure cost control and governance without getting in the way of growth. Services include organization management, cost analysis and reporting, governance and control, budgeting and forecasting, and optimization.
Even companies with the simplest cloud infrastructure can benefit from attention to cost controls, but the need becomes more acute the more a business relies on the cloud. To make informed decisions about cloud expenses, leaders require data about how much they’re spending, on what, and why.
Cloud cost management can help. It tracks cloud instances and how they’re being used so companies can control their budgets, improve governance over their IT infrastructures, and gain more and deeper insights.
What are the three different cloud costing model strategies?
Cloud costs generally are based on one of three models: time-based, cost-based, or auction-based. The first is built around how long the resource is used. Cost-based models are driven by how expensive the service is to provide. Auction-based systems are based on competing levels of demand by multiple clients on finite computing resources.
Who is responsible for cloud cost management?
Ultimately, top company management is responsible for cloud cost management. Depending on how a company is structured, costs may be the responsibility of an IT department, functional lines of business, or each individual project. Allocating cost responsibility is one reason why cloud cost management is so important.
What are the cloud cost models?
Cloud services use several common cost models, each with advantages in particular applications.