Cloudy with a chance of savings: why cloud cost optimization matters

Ask any consultant for advice on how to use technology to future-proof your business, and they’ll probably tell you to migrate fully or partly to the cloud.  

It’s great advice: the cloud delivers many benefits, and even if the migration involves some short-term business disruption – which you can minimize with the help of a managed cloud services provider – it will be worth it in the long run.

But what if you find your new cloud setup costs far more than your on-premises data center ever did, and you have no idea how to contain those costs without limiting or undoing the business progress you’ve made?

Managing costs will always be a primary concern in any business. As organizations increasingly adopt cloud-first strategies, understanding and controlling cloud costs will feature more and more in budget and return-on-investment discussions.

If you embark on a cloud-migration strategy with a simple lift-and-shift approach, you’re likely to see an initial surge in spending. However, these costs can quickly spiral out of control if you don’t have access to the expertise to do something about it.

• ALSO READ → Break through business as usual with cloud

What is cloud cost optimization?

Cloud cost optimization is a key part of cloud-native modernization. It’s about making sure that every cent is optimally spent, allowing you to maximize the efficiency of your cloud spending while still achieving your business goals. 

This involves identifying mismanaged resources, eliminating waste, finding opportunities to negotiate higher discounts and right-sizing your computing services.

When you calculate the total cost of ownership of cloud, you should include not just the costs of the cloud services you’re using but also the operational costs of running solutions in the cloud rather than on-premises (or a mix of the two). Cost optimization will take all of these factors into account.

Where you’ll see the value of cloud cost optimization

if you have optimized your cloud costs, you’ll see benefits that include:

• Lower operational costs: Your cloud expenses won’t grow exponentially, eat into your profit margins or divert funds from other critical initiatives.
• Efficient use of resources: You won’t end up paying for cloud resources you don’t use or don’t need due to overprovisioned services, idle resources or redundant cloud instances that can be consolidated.
• Accurate budgeting: With visibility and predictability in your cloud costs, you’ll find it easier to budget accurately and make informed financial decisions.

Also keep in mind there is a global shortage of skills in managing cloud-based environments, particularly in areas like DevOps, DevSecOps and site reliability engineering. This gap can further inflate costs if your organization lacks the skill to design and launch cloud management and optimization strategies.

4 strategies for effective cloud cost optimization

For cloud to make both financial and operational sense in your organization, consider the following strategies:

1. Implement FinOps practices: FinOps – a combination of “finance” and “DevOps” – is an operating model that emphasizes cross-functional collaboration between your finance and IT engineering teams. All teams and resources involved in your cloud operations should take ownership of their cloud usage and costs.
• ALSO READ → What is FinOps and how does it help you control your cloud costs?
2. Modernize processes and applications: Cloud-native modernization is about the end-to-end transformation of business processes and applications to help your organization adapt swiftly to new challenges. It includes aligning your applications with cloud-native principles or replacing them altogether with cloud-native technologies or software-as-a-service products – and everything in between.
• ALSO READ → 8 essential ingredients of successful cloud-native modernization
3. Be smart with AI: The latest AI platforms and solutions can help you optimize cloud costs and improve your operational efficiency. For example, AI and GenAI tools can automate many cost-optimization tasks, such as identifying idle resources or suggesting instances for consolidation.
4. Don’t go it alone: Our fourth recommendation is all-encompassing. An experienced managed cloud service provider like NTT DATA will take care of your FinOps, cloud-native modernization and AI strategies on your behalf. This means you neatly side-step the cloud skills challenge and achieve a faster return on your cloud investment.
   
   You get access to round-the-clock monitoring and support of your cloud environment, which eliminates the risk of wasted or idle resources, and your cloud consumption model can be fine-tuned to your organization’s needs and budgets.
   
   At NTT DATA, we also leverage our close relationships – and therefore buying power – with major vendors like Microsoft and VMware to secure cost savings and better service terms for our clients.
   
   Furthermore, our global reach means we can draw on deep, industry-specific expertise within our organization to help us with change management and process optimization in our clients’ operations.

The full power of cloud

We know our clients face significant cost pressures, but that doesn’t mean they can’t spend money – as long as they can demonstrate the value they get in return. By working with us, they can channel the savings made on their cloud investments to other initiatives – innovation or customer experience, for example.

Remember, cloud cost optimization is not just about cutting costs but also about making strategic decisions that align your cloud spending with your business goals. In this way, you get full value from your cloud strategy without succumbing to the potential financial pitfalls.