Controlling Cloud Costs: The Role of Cloud Governance in Cost Optimization

By Cloud and Data Center Transformation
6/4/2020

When it comes to IT modernization, cloud computing plays an undeniably important role. The rise of private, public, hybrid, and multicloud models, and the proliferation of vendors and providers, give today’s IT decision-makers more options than ever.

Despite the range of cloud solutions available today, our Insight-commissioned IDG survey, “The State of IT Modernization 2020,” found that nearly 7 in 10 organizations have experienced higher-than-expected costs associated with public cloud — even as 92% of organizations report that they have increased (or are increasing) the number of workloads deployed in the public cloud. Too often, when IT leaders look at their invoices, they lack a clear understanding of what services are being consumed, what new services have been added on, and the breakdown of the sources of consumption and costs. 

So, how can organizations take advantage of all the benefits of cloud solutions while still maintaining control of costs? 

In a recent LinkedIn Live session entitled, “Take Control of Your Cloud Costs,” CDCT experts Peter Kraatz, Scott Cameron, and John O’Shaughnessy discussed this question. And repeatedly, their conversation turned to the importance of cloud governance as one of the primary ways of optimizing cloud costs.  

What is governance in the cloud — and why does it matter?

Simply put, cloud governance is an extension of IT governance to the cloud. For organizations looking to control costs, cloud governance creates a structure to measure IT investments against business objectives. Creating a formal governance framework allows organizations to measure results against strategic goals and to ensure that all IT investments — across all platforms and environments — support business objectives. This formal framework incorporates input from all stakeholders and can be modeled after existing IT governance models in order to meet organization culture and needs. 

In order to support cloud cost optimization, however, strong cloud governance requires a few key components: a swift process for cloud adoption, predictable change and configuration management, reporting and analysis capabilities, and optimization recommendations. 

Governance as a means of preventing overutilization

Overutilization is a common problem that leads to overspend — and one that can be easily addressed by strong cloud governance. As Scott Cameron points out, “The problem is the organic growth that you get. It’s like dominoes.” He points to SharePoint, noting that it’s a fantastic collaboration tool but, without governance, lends itself to overutilization. “All of a sudden you’ve got hundreds of undocumented SharePoint sites that have no controls, governance, you don’t even have a way to track them.” This leaves IT staff to deal with them on the back end, wondering what’s necessary and what can be eliminated. 

Instead, Cameron and John O’Shaughnessy believe organizations should use their governance structure to set up controls on the front end. This can require a shift in leadership mindset and culture. As O’Shaughnessy states, “The consumption model is so different.” In the past, IT leaders would budget for new hardware, pay for it, and then not worry about it again. “In the cloud model, you’re paying every day based on what you use, and it’s such a different model that a lot of IT leaders are having difficulty making that mind shift to that new world.”

Luckily, cloud platforms include controls within their basic design to limit, track, and manage consumption — if they’re set up on the front end. 

As Cameron states, “There’s nothing worse than finding out that you’ve got something running in the cloud that you didn’t even know existed and that’s consuming a huge amount of the price that you’re paying to the platform, when perhaps you could have identified that before you even moved it and not moved it.” 

Strong cloud governance prevents these sorts of situations from occurring and eliminates the need to try to go back and retrofit controls that keep spending from surpassing expectation.  

Workload alignment: Setting up for success from the outset 

Workload alignment is another area where strong governance can prevent overspend and optimize costs. According to the IDG survey, 72% of IT leaders struggle with workload decisions. The complex IT landscape, the expectations placed on IT and its role in serving the business, and the variety of solutions and options available create organizational confusion about the best way forward. 

Strong governance and workload alignment work hand in hand, making sure that as operational processes change, all resources are aligned and prepared to support new IT models. 

O’Shaughnessy believes that workload alignment is “hugely beneficial” and recommends that an organization conduct a workload assessment before moving to the cloud to make the best decisions ahead of time. For organizations that have already deployed cloud solutions — it’s not too late. “Go ahead, do it now,” says O’Shaughnessy. “Look at your workloads, tear them apart, break them down, see where the usage is.” This process can identify which applications run in the cloud around the clock and might be better suited to an on-premises plan. 

Cameron agrees: “One of the best ways to reduce cost in the cloud is not to move anything up there that doesn’t belong there in the first place, and then have to move it back on premises, which means you’ve got not only the cost of running that resource in the cloud, but you also have double the migration cost.” 

Instead, a workload alignment, under the direction of strong governance, aligns applications, solutions, and resources to specific business outcomes and strategic goals. It allows for a full understanding of the IT landscape, identifies current costs, develops a high-level application of lifecycle/cloud migration plans, and determines the financial implications of alternative hosting scenarios. Together, this information creates a business case for workload transformation that aligns with the aims of the cloud governance structure.

Operationalizing the cloud: Appointing a cloud champion 

Finally, operationalizing the cloud represents another way that cloud governance supports cloud cost optimization. 

“Governance is a big one for that,” says O’Shaughnessy. “A lot of people think about security with governance, which of course is very important. But when you think about the operational side of governance [it means asking questions like], how are we going to do change control? How are we going to authorize people to spin up resources in the cloud? Is it carte blanche for everybody, or is it perhaps limited either by role or by amount of activities people can do?”  

To this end, Cameron suggests creating a cloud advisory board or assigning a cloud champion. “There needs to be a process that you follow and someone responsible for making sure you follow that process,” he says. This ensures that there’s always someone asking the right questions. 

An executive cloud sponsor would be focused on received value from the cloud platform, says Cameron. “They're going to do that through a combination of cost management and net new capability, because remember the way to get the most out of any platform is to maximize the capabilities that you're driving out of it. Having someone on the front end sponsoring and tracking and driving — that is going to make a big difference for organizations.”

O’Shaughnessy concurs: “Building the stuff up front is not necessarily sexy, but it’s what gets the job done and allows you to have that cost control.”