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Spiralling Azure costs don't necessarily mean a cloud strategy is off course

George McKenna, Head of Cloud Sales, Ultima (www.ultima.com) explains why many companies may be experiencing spiralling cloud costs, which is putting a dampener on their cloud strategies.

Spiralling Azure costs don't necessarily mean a cloud strategy is off course

"We have found that companies who adopt cloud and find their costs spiralling upwards have what we term cloud shock where they start to lose confidence and then cut their costs right back. "
George McKenna, Head of cloud sales, Ultima

Moving to the cloud seemed to promise so much – from longer-term savings to increases in efficiency and productivity. According to Flexera, in 2020 six out of 10 businesses moved their work to the cloud, and IDC predicts that by 2022, 90% of enterprises across the globe will be using multi-clouds.

But there is a problem. Feedback from clients is that many companies are experiencing spiralling cloud costs, in particular, Azure costs, which is putting a dampener on their cloud strategies. IT teams are coming under increasing pressure from their boards to justify their cloud spends and show real ROI.

While costs are initially high for some time it results in a lack of confidence in the end result – improved business agility and improved efficiencies – which is really hampering cloud adoption. Many companies are ‘dropping out’ of their cloud strategies because they don’t understand the cost cycle or have the confidence to stay the course.   

We have found that companies who adopt cloud and find their costs spiralling upwards have what we term ‘cloud shock’ where they start to lose confidence and then cut their costs right back as they don’t have the confidence to wait and see the benefits in the longer term. It’s a bit like a frog jumping into hot water – it wants to jump right back out again – and it takes a long time for businesses to regain their confidence.

The diagram below demonstrates how a drop in confidence results when cloud costs appear higher than expected and leads to a panicked cost reduction. The drop in confidence is represented by the grey line. With the right cloud strategy and a good cloud management platform in place the initial costs will be more controlled to start with so confidence will grow faster – represented by the yellow line in the diagram. With a good cloud management platform, you are able to optimise costs from the beginning. You can see where you are spending, optimise that spend and optimise how you are using cloud. You are able to demonstrate to your board good ROI. Over time because you have confidence in the cloud you are likely to spend more but this will ensure further improvements in agility, flexibility and productivity.

So how do you plan your cloud strategy effectively and ensure you’re on track right away?

First, make sure you are ready for the cloud. Ask yourself these questions to see if you’re ready; have you maxed out your IT budget? Are you struggling to keep the lights on and keep contracts up to date? Do you have the right staff with a comprehensive cloud skill set? Do you have visibility over what is happening in your IT estate? Have you tested your disaster recovery recently? Do you have gaps in your IT security? Do you have an excellent back-up system in place?


Understanding costs

Once you know you’re ready for cloud, then it’s really important to understand how cloud works, what the costs of moving to the cloud are, how costs might increase over time versus savings made by improvements in productivity and what you need to do before you can move your systems and apps to the cloud, for example sorting your data.

It’s worth talking specifically about set up or migration costs and what they will look like initially and then how they will likely dip then potentially rise over time but alongside improved efficiency gains. A clear idea of when your ROI is going to be achieved should be part of your planning process. If you know what to expect then your confidence is not going to drop when you suddenly see a rise in costs. You will know when they’re expected to rise – most companies gradually move more services and more users to the cloud, so costs do increase if the use of systems and apps is not optimised, but these rises should sit alongside strong improvements in productivity, scalability and security.

Working with a good cloud services provider will help you identify what it is you are trying to achieve and the likely costs over time. If they don’t discuss this with you, you are probably going to be in ‘cloud shock’ before you know it. Being prepared about how costs will rise and fall will mean you will be more confident in your strategy.

Effective cloud migration

The best cloud service providers can take you to the cloud through automated migration. For example, they will provide a fully working Azure data centre environment designed to industry best practice with absolutely no setup or upfront costs. If you wish to then migrate some or all of your IT services from on-premises into your new Azure environment, they will do that through a highly automated low-risk service. This means saying goodbye to looking after and buying hardware, sorting out those power and cooling needs, capital purchases, security and networking. It’s all provided for you and importantly if you need more resources they can scale at speed.

Cloud cost visibility and optimisation

Where costs can spiral out of control is when you don’t have full visibility of cloud spend across your estate and don’t optimise it. The latest cloud management platforms will give you visibility across your entire estate. As they are automated, they will give you visibility in real-time and show you where your Azure costs are being spent. The different functionalities of the platforms mean you can control your costs. They can reduce cloud management costs by up to 46% and reduce consumption by 30% through automation.

Not only do they have leading-edge security features like automated patching and monitoring but can flag when something in your cloud estate is being paid for but is redundant. They will make sure all the elements you are paying for in your Azure cloud are being used and make recommendations for reducing spend. For example, an overview of virtual machines will show whether they’re online, what appliances are excluded and what had degraded from a monitoring perspective. In addition, good platforms will monitor serverless or platform services for customers, providing them with a centralised source of truth for their entire environment.

Impeccable cloud security

Security is of paramount importance to businesses, yet daily we hear of security breaches as hackers become more and more sophisticated. A good cloud management platform will constantly monitor for breaches and automate patch management. At present, though, it's hard for customers to align their infrastructure in the cloud with best practice because it changes so quickly. As a result, it's easy for businesses to drift away from security best practice and they often find themselves wasting time on activities that aren't important. The best cloud platforms will solve this problem, scanning a customer's environment weekly, and automatically assessing what security improvements need to be made to keep in-line with industry best practice.

When flaws are found in software, we know companies become vulnerable, and Microsoft vulnerabilities have recently been a hot topic in the media. The best cloud management platforms provide real-time information about Microsoft security vulnerabilities. Using multiple industry-leading sources, they extract the high and medium Microsoft vulnerabilities and centralise the information in a searchable list to empower businesses with the most up-to-date and critical information at their fingertips.

Disaster recovery included

In these uncertain times, disaster recovery of your core infrastructure services will be one of the major factors keeping corporations up at night - and for very good reason. 80% of businesses affected by a major incident either never re-open or close within 18 months. However, the good news is that 94% of organisations who have invoked a successful business continuity plan agreed that they had significantly reduced the impact of the disruption.

As part of your cloud strategy its crucial to factor in disaster recovery, if you don’t, you’re leaving your business exposed. Your plan should be tried and tested regularly too. Talk to your cloud services provider about how they can help. With the latest automation technology your service provider can build you a best practice IT “data centre” environment for your on-premises workloads ready to go in hours, rather than days or weeks through automation. Your cloud provider should be able to do non-disruptive testing of your virtual machines with no risk or downtime, with all the requirements and solutions built for you.

Pay-as-you-go keeps costs down

The latest cloud services are consumed and billed for on a pay-as-you-go basis. This should help you plan your IT spend better and stop Capex expenditure using up all your budget at once. By paying for what you consume when you consume it, costs will be kept to a minimum. Spiralling costs are often as a result of paying for capacity that you are not making use of. Make sure you have agreed costs upfront with your service provider for increasing capacity, and similarly reducing costs for reduced capacity all of which will help stop costs spiralling out of control.

With the right knowledge, planning and a good cloud services provider by your side, your cloud costs should never come as a surprise. You should understand how they will start off and that they may decrease or increase over time, why they will do this and how improved agility and productivity rises ensures that your cloud strategy is providing the right ROI. Any potential lack of confidence in your cloud strategy should be in the past and your costs maintained at an appropriate level.




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