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This article was contributed by Lenley Hensarling, chief strategy officer at Aerospike.
Cloud adoption has been on the rise since the start of the pandemic, with Gartner estimating global cloud revenue reaching $474 billion this year and surpassing non-cloud enterprise IT revenue in several years.
Enterprises often move forward with cloud deployment strategies to reduce IT costs. New digital companies need to focus on cost of service. Large companies, which are becoming more digital, need to pay attention to the same cost of service drivers. Those that play in multicloud environments must reduce complexity and cost. However, if they don’t have adequate controls, the cloud won’t necessarily lead to savings.
As companies first stand up digital services, the focus is on growth rather than costs. But as a new service or a company grows, the question of profitability becomes central. Often, new digital service companies go public while still showing a loss. But at some point, the focus moves to how they can start to scale the top line faster than the costs are growing. Having a plan and understanding how the costs scale are central to generating profitable digital services and businesses.
Five management strategies enterprises should consider with their cloud deployments.
1. Decide where workloads should run
Enterprises should ask themselves if they have the elasticity of resource requirements to make the financial benefit of a cloud deployment work. If they have a stable workload, meaning a 24/7/365 workload that does not have peaks and troughs of resource requirements, it will be cheaper to run it on-premises or as a co-location. However, if they have those peaks and valleys and have an architecture that can release resources and scale them back in near-real-time, the cloud is the place for them. Selecting the appropriate cloud vendor is key as well. The difference in cost for a given workload may be more than 50% between vendors. Paying attention to how they will get to profitability can mean millions in the valuation of a company. Enterprises should think about it upfront and plan their bridge to profitability.
2. Identify instance types
If an enterprise picks a cloud vendor with the instance types it needs and knows their requirements and matches accordingly, it can run almost anything. There are differences in how best to deploy regarding networking setups, security (that may reflect into networking choices), and instance types. Enterprises have to identify the instance types for their particular workloads. If not, they may run into bottlenecks at the worst times as they scale, or they may get hit with a lot of traffic and be unable to respond to the demand. Identifying instance types they will need is key to selecting the proper cloud vendor. As a part of that, they need to look at the availability of those instance types. It is instructive to try to get access to certain instance types during different times of day and different days of the week. Are they available, or can the enterprise wind up spending time waiting for them? Or is the enterprise going to have to incur additional costs for reserved instances?
3. Balance performance against cost
Contrary to what many believe, moving to the cloud does not necessarily mean saving money. In fact, the cloud will typically be more expensive. Enterprises are paying for the ability to concentrate on their value-add and take advantage of the elasticity of resource use if they have that inherent in their application. Performance is often compromised in the cloud, but as noted above, if enterprises pick the appropriate vendor with the right instance types, network models, and bandwidth, they can achieve the performance they want. Does that mean that enterprises should try to handle a petabyte-scale database with 20 nodes? Not necessarily. They should think of what the appropriate unit of expansion is. How much will that incremental instance or system cost? Enterprises need to look for a unit of expansion (and contraction) that fits their workload and understand how a group of users, connections, or operations expands or contracts. The technology and the infrastructure should service the functional or business objective they are trying to attain.
4. Monitor cloud investments
Monitoring cloud investments is a matter of tracking spend against the different applications. The data is available, but some work needs to be done. Several new tools provide a framework for that. The main thing enterprises must do is track what they have deployed. Most enterprises have turned the corner and are doing this, but there is often a group that has deployed many instances, or migrated data between clouds or back to on-premises, and had no idea of the cost involved. If enterprises provision instances, they have to be able to track them. They have to determine which are still in use and deprovision them. If they don’t do this, they are in for surprises — costs can accumulate quickly. The cloud providers have monitoring tools. For example, an AWS Cost and Usage Report can provide the basis for such monitoring. Enterprises can create detailed custom billing rules that track back to business units within the organization. Surprisingly, many companies are not doing this. Giving business units visibility into their costs allows them to manage the cost of service and be more responsible. As companies go digital, this becomes increasingly important.
5. Track cost of service
Enterprises should be intentional in their choices of where and how they deploy the cloud and all aspects of cloud deployment strategies. The idea of the cost of service needs to be understood and tracked, just like the cost of goods for physical products. As discussed, cost management is not just IT’s issue. As companies go digital — offering new services that take the form of online software or online monitoring of equipment — IT costs become a component of a product offering. Companies need to manage them as such. The finance and line of business departments pay close attention to physical costs, but as the services accompanying products become digital, they also have to track the cost of service. That means that cloud costs have to show up as a component of the cost of service and be an essential line item on the bill of materials for offerings. Companies often require three bids for parts to be incorporated into a product. Enterprises should ask themselves if they should require the same number of bids, or at least investigate the cost models, across multiple cloud vendors.
To compete in today’s real-time digital economy, enterprises are turning to the cloud to tackle digital transformation projects like never. As they continue accelerating to the cloud in the coming years, these strategies can help drive operational efficiency and create new digital value.
Lenley Hensarling is the chief strategy officer of Aerospike.
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