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How to manage the rising costs of cloud

10 April 2024

By Leo de Jager

- 1 min read

Cloud service providers are increasing their prices, straining the budgets of SMEs that are already finding it challenging to stay ahead. And thanks to almost prohibitive costs, repatriation to on-prem infrastructure isn’t a viable option for everyone (or even always a good idea). “Cloud has become essentially indispensable,” says Sid Nag, Vice President Analyst at Gartner.

Despite still being in its infancy, cloud has come a long way carried forward on the back of an attractive value proposition: infrastructure when you want it, as much of it as you need. And it’s affordable, too. This has given rise to a culture of innovation; now unrestricted by the cost and cumbersomeness of hardware, it’s easier to create new products and thereby new avenues of growth.

Nag continues that “…the tables are turning for cloud providers as cloud models no longer drive business outcomes, but rather, business outcomes shape cloud models.”

The prominence of cloud now necessitates that businesses seriously think about how they spend on cloud and, equally important, how they utilise cloud to maximise value.

Why Cloud Costs Are Rising

Some of the key contributors to rising cloud costs, according to Storm Internet CEO Salim Benadel, are rising energy costs and an increase in power consumption.

“We’re seeing an increase in power consumption as tasks generally become more complex and energy-hungry, AI, for example, is rather heavy on power,” says Benadel. “And we’re just recovering from the energy crisis following the start of the Ukraine war. Then there’s also the fluctuating availability of components such as semiconductors that can also have a deleterious effect.”

But these aren’t the only contributing factors according to Benadel. Wages needed to pay skilled staff can exacerbate the cost of cloud.

“Skilled cloud staff, particularly in security and also for AWS and Azure environments, are in demand at the moment, which has driven salaries for these roles up a good bit more.”

And yet, these increases sometimes pale compared to needless cloud spend. I’m referring to the overprovisioning of cloud resources, something which 70% of companies admit to doing, with 40% saying they use less than 60% of the resources they are paying for – this according to the Azul State of Java 2023 survey.

McKinsey says that many companies see their cloud spend increase by 20% to 30% per annum. Then there’s also the complex pricing models many of the bigger cloud service providers use that make it easy for unanticipated charges to drive up cloud bills.

When everything adds up, cloud can become very, very expensive.

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How to Keep Your Cloud Spend Under Control

The buzzword when it comes to controlling cloud spend is “efficiency”. Specifically, it’s a through-the-line efficiency that reaches from infrastructure right through to the code running on that infrastructure.

“Cloud costs can rise very quickly when you don’t follow basic best practices,” Benadel continues. “Overprovisioning is something we see a lot of, which is why we always recommend customers to come have a chat about their needs. Something we have less control over, however, is what’s sometimes called ‘immature consumption practices’, and refers to switching off or destroying virtual servers you don’t need anymore. Instead, they’re often left running, creating virtualisation sprawl.”

In this post, I used the statistic of 350 decision-makers, 82% of whom admitted to incurring such cost overruns.

Benadel suggests starting with an audit of your current cloud infrastructure (something your cloud service provider can supply if you’ve lost track) to determine which cloud assets are needed, which can be consolidated, and which can be powered off or destroyed.

Capitalising on scheduling (where resource availability can be scheduled) and autoscaling (where resource availability can be adjusted to meet in-the-moment demand) can go a long way to ensure optimal resource usage without human intervention. However, this requires that businesses relinquish their habits of manual scaling, and will also necessitate a closer look at applications migrated to the cloud using the “lift and shift” principle; such applications should be considered for refactoring where they consume too many resources. Technical debt is also relevant here and refers to the cost of reworking code that has been put together for the sake of expediency rather than optimal performance.

It’s also essential to create a cost-aware culture when it comes to the cloud. According to Amazon, a cost-aware culture “allows you to scale cost optimization and Cloud Financial Management (financial operations, cloud centre of excellence, cloud operations teams, and so on) through best practices that are performed in an organic and decentralised manner across your organisation.”

In practice, a cost-aware culture means that relevant outputs are continuously measured against cost / resource usage benchmarks and that those benchmarks are improved or optimised as frequently as possible. As such, code should be written for optimal performance using only the necessary amount of resources, and nothing more. At the same time, cloud assets should only exist when required, and destroyed or powered down when no longer needed.

Cloud service providers shouldn’t be omitted from the equation. On the one hand they can provide FinOps services that can assist with cost management and cost optimisation, as well as governance over cloud expenditures. At the same time, they bring cloud skills to the table – skill sets that are otherwise in short supply or expensive to acquire.

Finding you’re spending too much on cloud without getting the value you’re paying for? With Storm Internet we’ll not only create the ideal bang-for-your-buck cloud solution to deliver maximum ROI, we’ll also manage it. Find our more about our managed services, or talk to us.