As organizations invest more in their cloud infrastructure to meet market and customer demands, optimizing cloud costs can often be an afterthought. This article covers key principles of cloud cost optimization and best practices to evolve your cloud financial management strategy.
Last week, we had the opportunity to present alongside AWS during a webinar on cloud financial management. In case you missed the session or are unable to watch the full recording, we’ve provided the key takeaways below.
As organizations invest more in cloud infrastructure to meet market and customer demands, optimizing cloud costs can often be an afterthought. One of the speakers on the session, Nathan Besh, Cost Lead for the Well-Architected Program at AWS, referred to an informal poll taken during a session at AWS re:Invent last year as evidence. When asked who among the audience had established cloud security and operations practices within their organization, the majority raised their hands. When he asked the same about cloud financial management, noticeably fewer people raised their hands, and some even laughed at the question.
Clearly, financial management is an area that needs to be addressed as part of a holistic cloud management program.
What is cloud cost optimization?
Cloud cost optimization is achieving business outcomes at the lowest possible price point. The most common mistake people will make is looking at cloud cost optimization as a billing exercise by only looking at the total cost of their cloud resources. Successful cloud cost optimization’s cloud spend is aligned to business outcomes and that you aren’t spending money on cloud-based infrastructure you don’t need. Your organization can still spend more on the cloud and optimize costs if those increased costs are justified for business goals and designed to align with resource utilization.
What is cloud financial management?
Cloud financial management is the practice of integrating cloud spend into critical business decisions, which includes not just cost optimization but also granular visibility and organization-wide governance. A critical component of cloud financial management is your people and processes. A successful cloud financial management practice aligns your teams on KPIs related to cloud spend and empowers your teams to think about costs when making decisions about cloud infrastructure.
How do we get there?
To help organizations build and operate secure, high-performing, resilient, and cost-efficient workloads, AWS created the AWS Well-Architected Framework. Built upon years of experience and thousands of customers, the Framework outlines key concepts, design principles, and architectural best practices for building and running workloads in the cloud. It consists of five pillars: Operational Excellence, Security, Reliability, Performance Efficiency, and Cost Optimization.
In the Cost Optimization Pillar of the Well-Architected Framework, there are more than 45 best practices! Although all the information in the Framework is beneficial, it can be difficult to know where to start. Nathan recommends starting your cost optimization journey by implementing effective goals and targets.
Implement effective goals and targets
By definition, a goal is something that provides direction to your organization and people, whereas a target is a measurable outcome that is aligned to a goal. Targets help track if you’re going in the right direction towards your goals and by how much.
Besides measuring progress, goals and targets are a good way to align and motivate your organization. For example, without financial accountability measures in place for developers, there’s no motivation for them to build cost-efficient systems. By implementing defined cost optimization goals and targets, everyone in the organization can align under the same priorities and progress together in the same direction.
Cloud financial management tools
Hand in hand with setting effective goals and targets is your tools. Effective tools are critical for the visibility you need into your cloud environment to set targets and measure progress. While there are many benefits of a cloud financial management tool, the most prominent are the following:
- Provides increased visibility and insight into your infrastructure
- Reduces costs and time to analyze and act
- Frees employees to focus on innovation and customer service
- Enables your organization to scale
- Saves money spent previously on wasted cloud resources
- Reports accurate cloud spend and usage for budgeting and forecasting
When looking for the right tool for your organization, there are a few things to consider. Look for a solution that covers each area of excellence in the cloud maturity framework: cloud financial management, cloud operations, and cloud security and compliance. Even if you have other tools in your cloud management portfolio for specific, targeted functions, your overall management solution should offer a consolidated hub across all solutions with integrated reporting, robust analytics, optimization recommendations, and policy-based governance and automation.
IDC says that in order to make best use of the cloud analytics and automation tools available, businesses need to invest in solutions that have open APIs, strong support for multiple clouds (including on-premises private clouds and public cloud providers), and the ability to integrate workflows and analytics across traditional and modern applications and infrastructure.
To build a successful cloud financial management practice, start with a comprehensive cloud management tool, and then align your people with effective goals and targets.
For more information about how to optimize your cloud costs, see our whitepaper: Building a Successful Cloud Financial Management Practice
