In today’s landscape, SMEs across various industries grapple with the complex task of managing cloud costs. Most of these organizations find themselves in a predicament of overspending on underutilized resources. Furthermore, the economic challenges and escalating inflation rates have led to a significant surge in SMEs adopting cloud technology. This has intensified the need for businesses to exercise greater vigilance in managing their cloud expenditures.
Statistics reveal that three out of ten organizations comprehensively understand their cloud spending. Additionally, research data indicate that over 50% of SMEs’ technology budget in 2023 is designated for cloud expenditure. More than 54% of SMEs are projected to allocate $1.2 million on cloud-related expenses. Therefore, SMEs must optimize their cloud investments while navigating the complexities of cost management.
But, in the current scenario, managing cloud costs is challenging for SMEs across industries, with most organizations overspending on unutilized resources. Moreover, a significant increase in SMEs adopting cloud technology due to economic headwinds and increasing inflation is compelling businesses to be more conscious of their cloud expenditure. According to a report, only three out of ten organizations know about their cloud spend. Another research data shows that more than 50% of the technology budget for SMEs is diverted towards cloud spend in 2023, with more than 54% of SMEs spending $1.2 Million on the cloud.
Leveraging cloud resources supports SMEs with added flexibility and scalability provisions, but unchecked resources can lead to ballooned pricing. Therefore, managing cloud resources cautiously with complete transparency in spending is an uphill battle without using the right tools and strategies.
Proven Strategies for SMEs to Calculate Cloud Costs
Effective cloud resource management is critical for SMEs across industries. There are instances where idle resources add up to the costs and the traditional resources hampering productivity, forcing SMEs to have a precise cost analysis with a holistic understanding of applications, cost centers, and deployed resources and have the viewpoint of all concerned stakeholders.
So, let’s look at key strategies for calculating cloud costs incurred in the organization.
Have you Identified Every Cloud Cost?
It is crucial to comprehensively understand all the costs associated with cloud computing, storage, and networking requirements. Additionally, it should include the costs associated with managed cloud services. To obtain an accurate cost estimation, involving all relevant stakeholders, such as product owners, managers, DevOps teams, the Finance department, and teams responsible for cloud cost management is essential. This collaborative approach ensures everyone is on board and aligned with the estimation process.
What’s your Pricing Model?
Each cloud provider offers two pricing models; one is based on an allocation-based model where users must pay a fixed amount irrespective of the actual usage. And the other one is usage-based pricing, where users pay only for the services they have used. Most of the time, businesses should opt for the consumption-based model, but designing an architecture based on expected usage and factors like service availability, backup, multi or single-tenant environment, and performance target can help businesses to articulate their requirements precisely, paving the way for selection of best pricing model.
Have you considered Shared Resource Cost Allocation?
In an organization, different departments use cloud resources based on a consumption model, and the distribution of costs among all these departments is critical. There are two ways to approach this: first is tagging the nested virtual resources, indicating which particular department or project has utilized it, and this data can be used to create reports on detailed cloud spending of each department. The other way around is building multiple copies of a single platform, such as a database and web server, on smaller resource sets. After that, labeling them and distributing them among departments follow up. It helps in assigning each copy with a labeling that throws light on the department it is associated with and distributing it among different departments.
Choosing an Appropriate Governance Model
There are two governance strategies: in-the-way and out-the-side governance, and companies need to choose a strategy based on their requirement. The former brings a scenario where the centralized IT department handles all cloud requests and services without any scope for autonomy with a hidden cloud interface. The latter covers a scenario where specialists and departments control cloud resource allocation through the native cloud interface by taking care of governance policies. The on-the-way governance is a healthy option for businesses where teams can leverage cloud resources without waiting for centralized department’s approval, enhancing their productivity.
Dispose the Unused Resources
Unused resource disposal is critical for organizations planning to optimize their cloud cost spend. It is important to define how resources are termed as unused based on parameters such as RAM and CPU usage pattern, login session, and network bandwidth. Also, having the individual defined policies based on the above parameters for instances like computation, storage volumes, IP addresses, old snapshots, and PaaS resources helps unmask unused resources.
What’s your Rightsizing Strategy?
Rightsizing involves the administration of resources based on workload demand. The key here is to initiate with resources that are expensive and have minimal usage. Then, the focus should be on dividing instances into smaller resource sets and distributing the required workload among them. It’s essential to carefully consider the RAM, CPU, storage, and network bandwidth before resizing the instances. Continuous rightsizing is one of the key strategies recommended for downsizing and measuring performance in multiple steps. Therefore, having continuous rightsizing not only helps reduce the cost but also improves the functionality of the applications.
Reduce Cloud Costs using Automation
Automation is another key strategy that enables SMEs to optimize their cloud cost spend. It is done via tags that help categorize resources and build policies to automate resource scaling based on requirements. It also helps in the automatic termination of unused resources to save costs. There can be policies around terminating resources after a specific time if they remain unutilized. Using a cloud cost management tool, the automation of cloud cost is done effectively.
Key Metrics to Use While Implementing Cloud Cost Strategies
The following metrics must be considered while ensuring the smooth implementation of cloud cost strategies:
- Cloud cost per unit shows how much spend is done on each cloud unit incorporating GB of storage or CPU hours utilized
- Cloud cost per application shows data on how much each application is adding to the total cloud spend
- Cloud cost per user helps identify users utilizing cloud resources more and vice-versa
- Cloud utilization shows metrics on total resource utilization and also brings forth underutilized overutilization, and unutilized resources
Moving Forward with Cloud Cost Optimization Tools
Many cost-optimization tools are available in the market. SMEs have used cloud cost optimization tools and benefited from the usage to a certain extent. Still, there are gaps in optimizing the usage of these resources, and it’s crucial to fill those gaps with the right tools. The latest releases of cloud cost optimization tools offer added capabilities, and SMEs can leverage the latest releases to reduce cost, optimize cloud resource usage, and gain operational efficiencies.
Latest Releases by Top Cloud Cost Optimization Tools
As SMEs scale, they focus on balancing functionality and pricing; they constantly struggle to find a perfect solution. Their unending quest will be answered with the releases of top cloud optimization tools. The leading cloud optimization tools in the market have released new features that can benefit SMEs.
- Cloud Zero: Released New Feature of Cloud Visibility. This feature provides businesses with a comprehensive overview of their cloud usage, encompassing data from all their cloud providers. It can help enterprises to identify and eliminate unnecessary cloud expenses. With the latest feature, businesses can have more profound insights into cloud spend of their resources in different regions and also help calculate the cost of each workload.
- Amazon Cloud Watch: Released New Feature CloudWatchSynthesis. It creates automated tests for monitoring cloud applications, identifying bottlenecks, and taking immediate measures. The tool uses canaries to monitor the cloud applications by running periodic tests to check the latency, availability, and performance. With its ease of usage, the latest feature enables businesses to reduce their cloud spending more effectively.
- Azure Cost Management+ Billing: Latest Release-Cost Analysis: This feature offers businesses valuable insights into their cloud costs, including the costs associated with specific services, regions, and workloads. In addition, the new feature enables businesses to manage their budget on cloud spend, forecast future requirements, generate alerts on overrunning the estimated budgets, and tags that help SMEs manage their resources proactively.
- Harness- Latest Release: Continuous Delivery- It helps automate cloud resource deployment and saves cost and time. The new feature provides automated features to accelerate continuous delivery with pre-built pipelines for deploying to AWS or Kubernetes. The provision of templates helps reuse configurations for cloud resources, enabling error-free and faster processes. The monitoring tools support having a check over any discrepancies in the deployment process, saving resources.
- Apptio-Latest Release: Cloud Spend Analysis enables SMEs to segregate their cloud spending by region, workload, and service. The latest addition also provides businesses with recommendations based on Machine Learning algorithms to reduce their cloud spend. The updated user interface is more user-friendly and has added capabilities to analyze and bring out anomalies and trends, enabling SMEs to make informed decisions about their cloud spend.
Benefits of Using Cloud Cost Optimization Tools
The latest feature additions in all the aforementioned tools have enormous benefits for SMEs that help them manage their resources more efficiently and reduce their spending.
So, let’s look at the advantages of using cloud cost optimization tools offering the latest features.
- Reduce Overspending: SMEs can plan and budget their cloud resource requirements using the right tool with added capabilities. These tools enable businesses to dig into a detailed analysis of their cloud spend and help them figure out areas where the spending can be reduced and use their resources more judiciously.
- Enhanced Visibility: With the latest feature addition, the tools provide complete transparency into the cloud cost by segregating the spending into each workload, service, and region. It helps SMEs track all their expenditures and identify unnecessary spending patterns.
- Forecasting to Assess Future Needs: These tools provide a detailed view of all the cloud spending, and considering the historical data, future requirements can also be predicted. It helps businesses to lay out the cloud resource usage plan and estimated budget for the same.
- Improved Utilization of Resources: As the tools bring insights into each aspect of cloud spending, businesses clearly understand how their cloud resources are used and whether they are under or over-utilized. These insights help identify areas where under or over-utilization of resources occurs, and SMEs can plan to divert these resources to areas where they are most profitable.
- Enhanced Innovation and Efficiency: Businesses can drive innovation and efficiency by diverting their under or over-utilized resources to the projects that can lay the foundation for the future. The latest features in cloud optimization tools enable businesses to make the most of their cloud spending insights to ensure that resources are not wasted and diverted to more relevant areas or predicted concerns that businesses may face in the future.
- A small marketing company was sending emails via an automated platform. As its customer base wasn’t that extensive, a few hundred emails were sent monthly, resulting in paying more for underutilized resources. They used the Cloud Zero tool that helped them understand their usage by gathering the data on cloud usage, identifying unutilized resources, and reducing their usage accordingly.
- A mid-sized software development company opted for a cloud-based dev environment due to expected projects. But, due to a delay in the project, their cost for unused cloud resources went uphill, and they paid for unutilized resources. They used Demsify to optimize their resource utilization as the tool provided insights into their current usage and recommended cost-saving measures by helping resize their unused resources.
- A retail store with many branches used the cloud-based point-of-sale solution to handle the payments. A peak in store was expected during the holiday season, but that didn’t happen. As a result, the store couldn’t utilize the cloud resources fully, which it could have used to manage its inventory. It used Amazon Cloud Watch to gain enhanced visibility into operations that helped track the performance of these resources, saving time and cost.
In conclusion, as businesses forge ahead with accelerated cloud adoption, the effective provisioning of cloud resources becomes paramount. Meticulous scrutiny of cloud expenditures empowers SMEs to unlock the full potential of their cloud assets. SMEs can achieve optimization by assessing current resource utilization and strategically planning projects that enhance business value.
Trigent is a reliable technology partner with a proficient team and deep domain expertise. We offer tailored cloud-managed services for SMEs spanning diverse industries. Our solutions empower SMEs to strike a harmonious equilibrium between managing intricate enterprise applications and nurturing innovation. With dedicated support and maintenance, we foster agility and accelerate time-to-market, ensuring your business remains at the forefront of digital transformation.