Why Enterprises Are Overspending in the Cloud

Written by Jacob Simkovich

While cloud computing sounds like the “economical” way of scaling a business, often the opposite is in fact true. According to a CIO article based on the HashiCorp-Forrester report, 94% of respondents are overspending in the cloud. The survey, which included over a thousand IT decision-makers, indicated that these overspendings were avoidable and the result of underused and overprovisioned cloud resources and lack of utilization.

Especially now, with the market downturn and fears of recession continuing to increase, organizations across a host of industries are more concerned than ever about managing their costs. As cost-cutting measures become a major priority, organizations will need help managing their expensive, resource-intensive workloads across all compute environments.

This blog takes a look at the top reasons enterprises overspend in the cloud, as outlined in the CIO article, and indicates how to avoid them.

1. Overprovisioning: Waste of Resources (and Money)

In cloud computing, provisioning is the principal act of reserving cloud resources such as CPU cores, memory, disk capacity, and network bandwidth. When companies book more resources than their actual usage, they end up overspending and burning their budget. According to the HashiCorp-Forrester survey, 59% of respondents had overprovisioned resources, making it the leading cause of overspending.

Optimize cloud with Granulate

Without a robust set of metrics and visibility over cloud resources, there is a high likelihood of reserving more resources than required. Measuring, tracking, and analyzing the actual usage of applications through performance optimization, continuous profiling, and network control makes it possible to fine-tune the amount of provisioned resources and to optimize cloud spend. While this may seem like a daunting task, the benefits that come with optimization are far more approachable when autonomous solutions are employed.

2. New Technologies vs. Lack of Skills

How many services does Amazon Web Services (AWS) provide today? AWS globally provides and supports more than 200 services. The question then becomes how organizations can find the most appropriate service for their business needs. When organizations dive deep into their cloud services and features, they will discover that the cloud is a platform with interconnected resources such as servers, virtual machines, containers, serverless functions, networks, and load balancers. 

Orchestration platforms like Kubernetes create yet another layer in front of cloud provider APIs. For instance, when deploying just a database application into Kubernetes, it will create containers, storage disks, and load balancers in the cloud provider—without even asking. Building a team that knows how to best use each of these technologies and to learn every new entry to the cloud tech stack can be a tall order.

According to the survey participants, a lack of needed skills is the third most common cause of overspending and issues related to skills and team management are even more problematic. Over one in five companies (22%) finds it difficult to source the skills required to staff a platform team. Although 59% of the respondents attempt to standardize their cloud computing models with shared workflows, the skill gap has not yet been filled and continues to be a major contributing factor to overspending.

This is where autonomous features become an important factor to consider in selecting new technologies. There is an understandable hesitancy on the part of DevOps teams to add new solutions to their tech stack because of the often tedious and complex onboarding required to get up to speed. If the solution is autonomous, continuous and requires minimal efforts on the part of R&D, then it goes from being a time sink to a time saver.

For example, Granulate’s gMaestro solution is able to autonomously orchestrate Kubernetes resources to fit actual usage, a task that would take up a lot of time from an R&D team.

3. Rapid Cloud Migration with Duct-Tape Solutions

Companies are shifting more workloads from their on-premises systems to the cloud. According to the HashiCorp-Forrester report, from 2021 to 2022, there has been an 85% increase in the estimated workload transfer into public clouds. Due to market pressure and the agile mindset, companies are shifting to the cloud quickly using duct-taped solutions. The result is misconfiguration of cloud services and unanticipated cloud usage. Among respondents, 47% noted the primary cause for this was a lack of required skills, while 37% attributed this to manual containerization.

There is often such a rush to move to the cloud that infrastructures remain far from optimized, costing companies millions. If these inefficiencies aren’t fixed, the costs caused by wasted resources will only continue to grow. That’s why it’s important to adopt a number of optimization and cost reduction solutions. Some solutions like Granulate are previous initiative agnostic, meaning that no matter what tool was applied in the past, there is potential for additional performance improvements.

4. Cloud Cost Management: FinOps

When the monthly bill from the cloud provider arrives, often, it is not clear which teams, applications, or environments—development, staging, or production—are responsible for the total cost. The fundamental difference between the traditional procurement model and the pay-as-you-go model of public cloud providers makes it difficult to trace and assign cloud costs. 

FinOps represents a cultural shift in financial management by fostering collaboration between finance and DevOps teams. This creates a centralized decision-making team while making reports accessible and meaningful for the entire company. Most importantly, everyone takes ownership of their cloud usage and optimizes their spending.

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Summary

Cloud computing has unlocked new opportunities for companies, enabling them to achieve global scale while increasing innovation and agility. However, the cost of cloud computing poses a new challenge for organizations as they need to contend with overspending, lack of visibility, and outdated cost-management policies. Refactoring and reworking current applications as well as developing modern cloud-native microservices come with costs as well. 

Furthermore, organizations need to find the best cloud 3rd party solutions and talent for development, operations, and even finance. Being sustainable and profitable while relying on cloud services requires companies make cloud cost decisions based on the actual value of the cloud services.

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