Why many companies fail to control their cloud expense?
Some insights on consumption, resources waste and more. 28 May 2020
Do I know my cloud?
Today, companies understand better than ever, the advantages of cloud services. According a major Q1 2020 survey, the percentage of SMBs running public cloud workloads in 2020 will reach 70%, and that’s before accounting for COVID-19’s myriad effects on growth of online services and connectivity.
When approaching cloud migration/transformation, often a fairly standard set of IT/Cloud metrics are utilized, such as compute levels, storage requirements, anticipated growth rates, as well as licenses available to be utilized. Unfortunately, while trying to find the balance between the effort needed to gather these stats and standard assumption-making, this metrics-interpreting method often leads to erroneous conclusions.
Why so sure?
In early 2020, companies reported that their cloud services costs have exceeded their budget by an average of 23%, and now expect their cloud overspend to reach 47% in the next 12 months! To add insult to injury, organizations now estimate they waste 30% of their cloud spend on average. These numbers converge to the inescapable conclusion – that current methods of cloud cost control need to be fundamentally changed.
The here and now
Most of the given tools are quantitative, but politely reject the qualitative story behind the scenes. Each organization has its own behaviors: Multiple DevOps transformations to micro services, varied adoption levels of CI/CD methods as well as variations of standards between departments – all of which can create significant, yet unanticipated consumption, making it difficult to predict cloud service usage and thus spend. Ultimately, decisions are mostly based on visible factors, but miss significant valuable qualitative information that can often materially change the numbers.
Did I miss the signpost?
Let’s suppose we have resolved a decent number of arguments in order to improve our budget accuracy. Any deviation from our plan would become increasingly painful as time goes by, surprising us with peaks in compute costs, egress charges for unexpected data volume, as well as other expensive cloud services. Not being able to correctly forecast budgets – and monitor spend accurately – means you should expect an unhappy-looking CFO to appear at your office door.
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Has the Cloud itself gone viral?
The effect on Cloud Services and Usage in the era of Covid-19. 12 May 2020
The marked change in lifestyle forced upon millions of people around the world has had a significant impact on the adoption of cloud infrastructure and application services.
For example, Microsoft Teams usage surged to a record 44 million users daily in April and Zoom increased daily meeting participants to over 200 million in March.
Work-at-home explosion
Organizations have had to adapt nearly overnight to this explosion in demand for certain online services.
As online usage grows, extra capacity is and will be needed for cloud-based applications to meet increased demand.
Almost 60% of large enterprises who answered a question about Covid-19 expect cloud use to exceed plans due to the pandemic. This has clear effects on their budgets.
30% of large enterprises expect their cloud usage to significantly increase as a result of the Covid-19 crisis. Overall, for both SMBs and enterprises, a net 47 percent of organizations plan for increased cloud usage as a result of the virus.
End of the on-premises Enterprise Data Center or Colo?
There is a school of thought that Covid-19 will have a serious impact on reducing or ending the era of the Enterprise Data Center.
Given the shelter-at-home policies operational in many countries and states, having a physical network to maintain is a serious liability. If IT teams can’t access their own data centers, how will they be able to support the thousands or millions of people around the world who depend on these facilities staying fully operational?
The “new normal”
We may well see a bigger and more distinct separation of the physical and logical infrastructure.
Having physical Cloud infrastructure assets -- e.g. Servers, Storage Arrays and Switches that your company has to manage, with people onsite to maintain it -- could be seen as a liability. And the big beneficiary of this liability will be the big Public Cloud vendors, who have the mature capabilities to support their global cloud operations at scale while being able to adopt Covid-19 safety measures for their employees.
In the past few weeks, a well-known Collocation Data Center in New Jersey informed their customers that they have suspended 24x7 access due to Covid-19 sanitation needs. Their customers must now choose either a morning or afternoon 4 hour window to be allowed onsite to maintain their hardware infrastructure. This allows the Data Center to perform thorough nightly sanitization operations as well as a midday sanitization process between the two daily windows. This physical access limitation is having a major impact on their customers who a) can no longer guarantee to handle break-fix issues within their 4 hour SLA, and b) has turned a 12 hour onsite project from a same-day turnaround into a 3-day ordeal.
With no clear end in sight, this situation is causing many enterprises to reevaluate their Cloud hosting models.
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