Remember the early days of moving to the cloud? It seemed like there was nothing the cloud couldn’t do — and for less money than dedicated on-prem servers.  A lot has changed in just a few years. In the early days of cloud adoption, it was normal for businesses to have about five percent of workflows in the cloud. Today, that number is closer to 30 percent.

A 2018 cloud computing study by IDG Communications found that organizations continue to increase their investment and evolve their cloud environments to leverage the technology to drive their businesses forward. With 73 percent of the 550 surveyed organizations having at least one application, or a portion of their computing infrastructure already in the cloud, it is no longer a question of if organizations will adopt cloud, but how.

That increase in cloud usage has come with a similar increase in cost. Unfortunately, the cost hikes weren’t part of the plan.  Gartner estimates that by 2020, 80 percent of organizations will have overshot their cloud budgets, largely because they lack optimization1. A systemic failure to plan has led to cloud costs getting out of control.

The failure to manage cloud costs are attributed to three key challenges organizations are struggling to overcome:

  • Complex multi-cloud environments are becoming commonplace, and billing details can vary significantly depending on the provider.
  • Many I&O teams are operationalized for traditional data center principles rather than cloud IaaS, and they lack the organizational processes to manage costs in the cloud.
  • There are many options to address cloud expense management. As a result, I&O leaders may struggle to align options with their organization’s cloud strategy.

It’s a common belief that operating a data center in the cloud is always cheaper than on-premises. While this can be true, it’s not an absolute. In some cases, cloud operating costs can actually be higher. This can be caused by poor cost governance, misalignment of system architectures, duplication of processes, unusual system configurations, or increased staffing costs. Even IT pros who have been working for a long time in on-prem data centers fail to consider the costs of cloud computing services, so don’t do enough to deal with ongoing cloud cost management or usage monitoring. That is, until they get that $300,000 bill.

According to Gartner, cloud services can have a 35% underutilization rate in the absence of effective management, as resources are oversized and left idling. In the course of regular cloud operations, resources can be abandoned and accrue charges without contributing value.  This is consistent with our observations at Pepperdata. While working with organizations that are migrating workloads to the cloud, we often observe unnecessary over-provisioning of resources.

The good news is that controlling cloud costs is well within the capabilities of most organizations. The Pepperdata Capacity Optimizer provides a way for I&O teams to efficiently analyze and right-size their on-prem and cloud resources to more closely match utilization, which typically results in significant cost savings.  When used as part of an organization’s cloud usage management process, it can also help to keep cloud costs more predictable by tracking and reporting on-going usage.

Some public cloud service providers also have pricing calculators that can help you to estimate the costs you’ll face after a cloud migration vs. your current costs. The AWS TCO Calculator and the Azure Pricing Calculator are two available options.


1 Gartner – How to Identify Solutions for Managing Costs in Public Cloud IaaS; Brandon Medford, Craig Lowery, 22 September 2018

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