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Unexpected Cloud Costs Are Rocking the Enterprise

As enterprise IT spend flocks to the public cloud, many organizations are in for a shock when the monthly bill comes due. Actual usage exceeding forecasts coupled with cloud mismanagement leads to significant unbudgeted spend.

Consider that AWS revenues for 2018 increased 47% to ~$25 billion and that AWS, Microsoft, and Google account for a combined 59% of cloud services spend overall!

Recent data published by The Information illustrates just how dramatic these cloud bills can rise when demand forecasts fall short, forcing consumption of higher-priced “on demand” cloud capacity. These five companies account for ~$300 million in overspend.

Think it can’t happen to you? This quote should drive home the potential impact in dramatic fashion, “But it also stumbled as it began using both AWS and Microsoft’s Azure cloud service. In one case widely discussed inside the company, an Adobe development team last fall unintentionally racked up $80,000 a day in charges for a computing job that ran on Azure and wasn’t discovered for more than a week, said the person who has worked at Adobe.”

That is around $500,000 in spend somebody had to answer for. Perhaps since Adobe’s spend with AWS increased by 64% to over $220 million year-over-year it may catch a break on that one.

There are numerous causes for overspending in the public cloud:

  • Inaccurate forecasts that result in the under purchasing of highly discounted reserved capacity usually paid in advance.
  • Lift and shift of legacy applications to the cloud without refactoring those applications leads to wasteful resource consumption.
  • Lack of oversight and management of the cloud environment in general. Who can raise a cloud instance? Who ensures that developer environments are shut down at the end of the day?
  • Lack of implementation of auto-scaling solutions.
  • Inadequate or missing cloud architectures result in sub-optimal application footprint.

Our Take

Cloud cost management is quickly becoming a key focus for IT asset management and procurement functions as poor process controls lead to out of control cloud spend. IT leaders must manage the consumption of cloud resources with the same rigor and discipline as traditional spend categories. The tooling, technology, and processes are available to enable innovation, provision resources, and control costs collectively.

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Visit our IT Cost Optimization Center
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