Why Am I Not Seeing Cost Savings from My Shift to Cloud Infrastructure?
Many of our corporate Clients began moving production workloads to cloud infrastructure around five years ago. Cloud infrastructure in the form of on-demand servers and storage from AWS and Azure was sold to the enterprise with the promise of lowering data center costs. In the ensuing years, cloud infrastructure offerings matured and migrated workloads increased. However, cost savings remain elusive for some Clients. Below are the five areas that can drive costs higher than expected.
Dated Cloud Strategy
Setting the right strategy with limited data in a rapidly changing technology landscape is always hard. Costs may not be declining because the wrong workloads are being moved
to the cloud. If the cloud strategy is a few years old, now would be a good time to revisit it. The IT organization has gained business-specific cloud experience that can better shape the strategy. For example, some business applications may be sensitive to latency and therefore not a good candidate for moving to cloud infrastructure. In addition, the application landscape has likely changed based on other mature trends such as software as a service and application rationalization. Lastly, a new trend is emerging that will further impact the infrastructure footprint. Internet startups embraced container technology years ago and now early adopters in corporate IT are following (see Brendan Burns’ video for an overview of containers).
Poor Expectations Set in the Business Cases
Turning a critical eye to business cases for completed cloud migration projects can yield valuable insights. Variance analysis against projected volumes and provider costs can be especially helpful. It is not uncommon for teams to underestimate the volume of storage required or underestimate the cost to transition an application to the cloud. Identifying common business case challenges and communicating the findings will reduce future variances and help to set reasonable expectations with stakeholders.
Weak Controls for Demand
Spinning up servers when needed is one of the key benefits of moving applications to the cloud. Unfortunately, it also has the effect of surprising stakeholders who, for example, may not realize that performance testing will increase compute costs. Financial surprises can take other forms, like environments that continue to run when they are no longer needed, underutilized servers or sub-optimal pricing models (e.g., on demand vs. reserved servers).
Integrating cloud provisioning into IT governance processes can help to manage demand. An alternative is to create a monthly financial review process with business stakeholders to review cloud costs by project, explain variances and prevent run-away costs.
Unexpected Operations Costs
Cloud infrastructure may seem simple: “it is just servers running somewhere else.” But there is a ripple effect that should not be underestimated. Operational tools for monitoring, alerting, backing up and maintaining servers are different. Disaster recovery is different. Security tools are also different. These differences have obvious implications on software licensing costs but more important is the implication on operations personnel. IT organizations are faced with a choice of building a separate team to handle cloud infrastructure operations or training existing personnel on the new technology. Either approach requires an investment.
Misaligned Vendor Contracts
Companies that signed cloud contracts years ago should prepare to negotiate better terms when the contracts come up for renewal. Key to this effort will be an understanding of the current and expected workload, the marketplace for competing cloud services and estimated costs to switch providers. But it is not just the cloud provider contract that should be reexamined. As server volumes decline in the datacenter, overhead costs will need to be reduced to keep unit costs reasonable. This may require moving to a smaller datacenter and reducing other related facility services.
Summary
Determining the reasons why cost savings have not materialized from shifting to cloud infrastructure will require analysis and engagement with stakeholders. That said, the
investment can realign the organization with its cost savings goals and provide valuable insights that can be leveraged on future infrastructure shifts.