September 2019 | Point of View

Establishing a CCoE can secure your cloud cost savings

CIOs who made, or are considering making, the move to the cloud need to consider these three best practices to achieve real cost savings and efficiencies

Establishing a CCoE can secure your cloud cost savings

With more legacy IT infrastructure environments moving to the cloud, many CIOs are enjoying the benefits of flexibility and speed. But some are also facing the classic cloud risk factor: a very large, unanticipated bill. It is not uncommon these days to find CIOs having to justify a $5 million-plus cloud invoice, with little visibility into where the drill-down costs are occurring.

For enterprises that are spending 1% to 2% of their IT infrastructure budget in the cloud, it is critical to secure cloud cost control through effective cloud governance. This will not only help mitigate out-of-control cloud spending, but also ensure greater visibility into cloud usage.

Here are three cloud cost control governance practices that can cut cloud run rates by up to 50%, if implemented in parallel. 

1. Establish a cloud center of excellence

A cloud center of excellence, or CCoE, operates as a group of in-house consultants and translates cloud capabilities to the various business and IT functions. Business stakeholders within the enterprise can go to the CCoE with a business problem, and the CCoE can then determine if and how a cloud service can address the problem. This allows the enterprise to take advantage of the speed, flexibility and cost-effectiveness of cloud delivery.

The CCoE can also identify which applications would make cost-effective use of cloud infrastructure. It determines and makes decisions on which applications to move to the cloud, which applications require rebuilding, and which applications should be lifted and shifted. Usually made up of cloud subject-matter experts from IT infrastructure, security and application development, the CCoE is the group tasked with interpreting and implementing strategic enterprise cloud policies.

The CCoE would likely sit high within the engineering group. The CCoE’s roles and responsibilities should include solving problems for business and IT between 60 days to two years out.

2. Measure, track and attribute cloud spending to the right parties

IT departments not measuring, tracking and attributing cloud spending to the right parties should start doing so right away. Because engineers and developers utilizing the cloud don't often see the cloud invoices, the enterprise needs to ensure internal alignment of chargeback; people who have access to the cloud need to have responsibility over the corresponding spending. This is where the CCoE comes in.

For enterprises that are spending 1% to 2% of their IT infrastructure budget in the cloud, it is critical to secure cloud cost control through effective cloud governance.
Charges should go to those who have control over the spending, so the business can validate cloud-invoiced costs and determine to whom the costs should be internally charged. Finance doesn't necessarily have visibility into how much is being spent and by whom. Therefore, expectations of cloud cost have to be communicated and forecasted accurately.

Enterprises require a monitoring and measurement offering to track utilization and spending, as well as to identify who is spending or using the cloud resources. With proper utilization documented, the infrastructure environment can then be right-sized. This includes turning off server instances that are not being used, resizing the infrastructure to increase the compute utilization and changing the storage allocation, which typically saves 20% to 30% of the unmeasured infrastructure run rate.

If the enterprise is using hyperscale cloud providers, such as AWS, Google or Microsoft, finding and interpreting the utilization data can be difficult for those with less experience, and purchasing a cloud management-level service from the cloud service provider may be in order. Alternatively, the enterprise should use third-party cloud optimization software, such as Densify or CloudHealth, for utilization and cost analysis to optimize the cloud environment.

3. Assign or hire a director of cloud cost control within the CCoE

Enterprises should assign or hire a director of cloud cost control or cloud cost governance to measure, track and ensure the cloud costs are under control. This person can be part of the CCoE organization, as the director will drill down to determine which corporate entities spend the most and find ways to reduce cloud cost.

It's important to note that establishing a cloud cost control role is only cost-effective if the enterprise is spending at least $1 million a year in the cloud. The cost savings are usually 25% to 30% of the cloud spending and must be at least $250,000 a year to justify the director cost.

Identifying a cloud application architect either in the CCoE or engineering department can also be helpful for determining the rules for turning cloud usage up and down and monitoring the software to ensure it is achieving the desired application outcomes, while maintaining the cost flexibility of the cloud infrastructure.

Cloud cost control through the CCoE

Completing the above steps can be effective for temporarily securing cloud cost savings and rolling back unexpected cloud spending. Once your enterprise has control of its cloud spending and has positioned itself to run effectively, securing permanent cloud cost control will require ongoing cloud governance and cloud spending discipline as part of baseline corporate financial planning.

Self-service provisioning, coupled with chargeback and financial accountability, is critical to continually realizing year-on-year savings. Enterprises must shorten their turnaround time in all business processes that affect cloud infrastructure -- procurement processes, for example -- so cloud infrastructure resources can be turned on and off in minutes, not days; cloud financials can be tracked monthly, not quarterly; and cloud usage can be reported in days, not weeks or months.


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