Today's CFO's Guide to Perfected Cloud Cost Management6 Jun 2017
Now’s the time to make sure that you have control over your business cloud cost accounting as well as cloud cost management. If you tackle the matter early, it won’t be very difficult. But if you let it sit for too long you could be facing insurmountable technical debt. Moreover, cloud computing has been a growing phenomenon, and now 85 percent of businesses are using cloud technology, up from 82 percent in 2016.
Because cloud computing has been quickly evolving and is a fairly broad concept for enterprises, it’s important to choose the right type of cloud platform for the appropriate business workload and enterprise application needs. As a CFO, your decisions impact all aspects of your business including the ROI. Therefore, you should be ready to manage cloud costs effectively while bringing the IT agility for your business to drive up the innovation. This article serves as a guide to perfected cloud cost management and will cover certain concepts, challenges, and keys to cloud management.
New Digital Era, But Same Problems
It’s a well-known fact that businesses must constantly improve and innovate to stay competitive. In many ways the cloud has transformed business culture, ranging from increased speed, IT agility, business disaster recovery to creating mobile workforces. The cloud is a cost-saving and time-saving technology, enabling enterprise applications and data to be more easily shared, which in turn allows more efficient allocation of resources.
Additionally, the cloud has spurred new innovations by lowering the cost of starting a business or experimenting on new ideas within large enterprises. Cloud technologies allow independent businesses to share their collective infrastructure to reduce the cost and difficulty of small business partnerships.
Even with the benefits such as the ones mentioned, there are challenges and concerns of having company functions in the cloud. These challenges include:
- Cloud Security
- Business IT Integration
- Cloud ROI – Longterm Cost Management
When it comes to CCM and IT, the underlying problem with cloud management is that IT ends up having to give up control as different business and technical teams can directly consume and use the cloud infrastructure. In an enterprise company environment where the cloud has been adopted, developers/engineers have the ability to provision resources on a self-service basis to bring agility, rather than IT enforcing policies by carefully reviewing developers’ provision requests, as would be the case in a cloud-free environment.
In an environment where anyone can provision and consume Cloud infrastructure, it’s important to ensure that your organization has governance control over its cloud costs requires your ability to identify all of the organization’s cloud resources. This can be quite challenging if the company has commissioned resources in multiple clouds or accounts. You must also have the ability to map cloud resources to specific owners, teams and business group purposes, which allows the finance department to break down the company’s bill by business unit or department to understand who is using what?
Enterprise Cloud Cost Management (CCM) Challenges
In continuance with discussion of business challenges and governance concerns, there are two significant cloud cost management challenges we’ll also look at:
- Predicting cloud spending, internal chargebacks and allocating budgets accordingly
- Lack of financial transparency due to scattered usage
Enterprise Cloud costs are hard to predict and hard to understand, creating the need for CCM tooling and application to help business users with visibility and full control for governance. With traditional infrastructure capacity you have a pre-determined price that’s independent of actual usage, but with cloud technology you have a pay-per-use model that entails extensive variation on a day-to-day basis. The variance in the spend due to OPEX model is a evolving challenge for most enterprise CFO teams.
As enterprises use different types of clouds, things get more complicated. This prompts the CFO’s need for summed up information about the costs. Based on location, clouds can be classified into the following types:
- Community cloud
Based on the service offered, clouds can be classified in the following manner:
- SaaS (Software-as-a-Service)
- IaaS (Infrastructure-as-a-Service)
- PaaS (Platform-as-a-Service)
- or, Database, Information, Storage, Security, Integration, Application, Process, Testing, Management-as-a-Service
There are security risks with data in the cloud, just like the potential risks in data centers. Many Internet users are oblivious to the fact that ransomware can easily seize control over files stored on the cloud if there is a centralised compromise around access keys or root cloud accounts. The best defense against this threat is a good set of security protections, following cloud vendor best practices and critical business data backups that are made daily. It is preferred that these backups are made to a device that is not always connected to the network or isolated into another cloud account with lock-down access.
Cloud Cost Analytics and Spend Visualization: The Key to Optimization
As mentioned previously, cloud computing has many benefits for businesses. Some more major benefits include:
- Capital cost reduction (no need to buy hardware, data center space, cooling and power)
- Faster deployment of infrastructure and business applications
- Can be used as a test bed for the development and testing of application prototypes
- Reducing/eliminating operational costs through cloud automation
While many advantages are offered, cloud computing is not a panacea for all IT challenges faced by modern enterprise businesses. It’s critical that you know who is using the cloud, how much, and for what business purposes within your organisation through automated governance provisions. Lack of awareness in these areas leads to losing money instead of improved ROI that could be used for other projects within your company.
An effective Cloud Cost Management is a matter of what, where, how, why and managing it can be more effective when you use the following important tips:
- Understand the cost structure. Some general cost model classifications are user licensing, all inclusive, and resource by the hour.
- Use cloud tagging to spot cloud resources by teams, business groups.
- Get a complete picture of current use and costs through effective tagging for chargebacks
- Reduce sprawl and cut costs by practicing cloud resource management.
- Enterprise level visibility and automated governance for ROI
The cloud can bring many advantages to your business. With that being said, a CFO needs a clear understanding of the cloud and how to get the most out of it so money and resources aren’t wasted. You must choose the right type of governance controls for your cloud and implement the effective management measures to make sure everything runs efficiently for your business while taking advantage of cloud benefits as a company.
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