The creeping cost of cloud – and 5 ways businesses can reduce their bills

In 2016, as many companies were searching for ways to move their infrastructure to the cloud, Dropbox began an infrastructure optimization initiative to drastically reduce its use of the cloud. The move to repatriate most of its workload onto tailored infrastructure in colocation facilities saved the file hosting service nearly $75 million in two years – a stark contrast to the prevailing narrative of cloud as a cost-effective solution.

As the industry’s close relationship with cloud has progressed, its long-term impact on profit margins as well as IT budgets has become apparent, and companies have started to reassess its role in their business.

There is growing awareness around the issue of increasingly large long-term costs of cloud when businesses scale and their rate of growth slows down. These costs are now eating into margins by significantly adding to the cost of revenue (COR) and/or costs of goods sold (COGS), negating the cost benefits of the cloud.

In this article, we look at how and how much cloud could be costing companies at scale and illuminate five key strategies they can leverage to help balance its impact on their budgets.


Is cloud computing a catch-22?

The indispensable advantages it brings to young companies, yet the strain it places on margins as they grow, make the cloud seem like a paradox.

For companies in their early stages, cloud-hosted workloads are a cost-effective no-brainer. But for scaling companies with slower growth, higher costs for migration, as well as for talent and cloud operations, drive down profit margins. This means that these companies, for whom short-term efficiency is a key measure of market value, now face a knock-on decrease in their market capitalization.

A recent analysis found that across the top 50 public software companies, the impact of public cloud costs compared with running the infrastructure themselves amounted to a $100 billion reduction in market value. This is not an issue limited to SaaS companies;
this goes for most companies with considerable cloud spend, who will stand to make financial gain from cloud optimization.

However, by the time the cost impacts of cloud appear, the task of restructuring for infrastructure optimization is huge. While many of the cloud’s benefits are still valid at later stages of a company’s growth, unless they action strategies to optimize their infrastructure and cloud dependence early, millions of dollars could be locked out of their market value and capitalization.


Is repatriation the answer?

For some companies the answer is to repatriate most of their workload to specialized on-prem facilities. But for others, this is unfeasible due to the resources and effort required.

Rewriting infrastructure management in a scaled company requires a strong team of specialists, who may not be readily available. It may also be interpreted as going against the grain of best practice in an industry that has championed cloud implementation for over 15 years.

Other opt for the hybrid approach using a mix of on-prem data centers, private and public cloud services, that presents short and medium-term cost management benefits.

Because the cost of cloud has reached such a high for scaling businesses, almost any amount of spend on optimization, such as through system re-design, re-architecture, and changes to workload distribution, is justifiable.


How can scaling businesses minimize the cost of cloud?

Interest in the issue of cloud costs is driving better practices in IT infrastructure optimization, which offer value to many large companies wanting to reconfigure their dependence on cloud and reduce its associated costs.

  • Use Right Sizing tools

    Businesses can cut their cloud bills by using Right Sizing tools. These tools, such as the one provided by AWS, allow monitoring of CPU utilization to optimize servers for memory, storage capacity, throughput and disk I/O, to find the correct instance size to operate with the most efficiency.

    This data can be used in an evidence-based approach, to enable companies to make savings by resizing their workloads across their on-prem IT infrastructure, and free up extra capacity.
  • Plan for future repatriation in advance

    Planning for the cost of cloud helps to mitigate its impact. Building the possibility of repatriation into your business plan and informing your system architects and maintenance team will aid the process if it’s needed in future.

    Incremental investment in modular architecture before ramping up company operations can reduce the resources required for repatriation. Architects can move portable workloads to more efficient locations and avoid cloud vendor lock-in.
  • Measure and mitigate cloud spend

    As the impact on cloud on margins has become apparent, cloud spend is being treated as a KPI, helping businesses measure and mitigate the impact of the cloud on their financial and market performance.

    Elevating cloud spend as a primary metric of success encourages the entire company, not just IT engineers and finance teams, to take a more rigorous and proactive approach to infrastructure optimization. Company-wide awareness of the long-term impact of cloud means greater incentive to collaborate in mitigating it.
  • Unlock discounts with single vendor services

    The multi-cloud option gives access to the diverse range of infrastructure services offered by different providers and helps to avoid single vendor lock-in. However, companies can miss out on significant discounts offered by single providers for loyalty to their service.

    These discounts equate to considerable savings in overall cloud spend and may also gain the company preferential status with the provider to access extra benefits. Single cloud offers further savings from not having to train staff on multiple systems or pay for network traffic across clouds, as well as avoiding operational hurdles when switching between them.
  • Repatriate workload in stages

    If repatriation is found to be the best way to tackle mounting cloud spend, it doesn’t have to take place all at once or be an all-or-nothing move. Resources needed to repatriate workload can be distributed in manageable, incremental stages, as part of a hybrid approach.

    Unless a business’s workload is extremely resource-intensive, a hybrid approach to repatriation is often the best way to maximize savings while minimizing performance disruption.


How Ynvolve can help optimize IT infrastructure expenditure

When it comes to repatriation, planning in advance will be the best option to mitigate its impact on your cost and productivity. Additionally, if going (partially) back to on-prem is the next move for your organization, our team of experts can help assess your short and long-term needs and help you craft a repatriation strategy.

Our team can help you optimize your infrastructure spend by offering refurbished hardware across technology generations. The ultimate goal is to reach the optimal balance between cost and the desired performance. Furthermore, having an infrastructure that is fit-for-purpose will improve TCO (total cost of ownership) and add increasing value to your lifecycle interval.


Know more : 

Website : Ynvolve

LinkedIn |Gerald Dulac 

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