Introduction
The cloud has been acknowledged as a key enabler for digital transformations. As a result, enterprises are able to move and scale faster than ever before. However, increased cloud adoption inevitably leads to increased cloud spending.
Budgeting and estimating cloud spending is complex and therefore meticulously planning and calculating costs for various activities on cloud has become crucial for finance teams. Creating a budget is an important part of planning, as is determining the right amount of capital needed to invest and allocate. The process of developing a viable cloud budget is very complicated but with continuous monitoring and optimization of costs, enterprises can devise apt estimates and budgets for immediate as well as long-term positive impact on business.
Therefore, implementing the right cloud governance and cost management practices in place is the key to ensuring optimized cloud costs and performance.
What is cloud budgeting?
A cloud budget is a financial plan that projects how much of a significant amount an organization will spend on cloud computing services over a period of time. Forecasting and allocating funds for various cloud computing components is considered as an important aspect of cloud budgeting.
Cloud budgets are different from IT budgets. All expenses for an organization’s IT department, including cloud services, are included in the IT budget. A part of the cloud budget is allocated to cloud software development to enable pooling of right resources and dynamically allocating them on need basis.
It is important to note that cloud budgeting is an ongoing journey and enterprises can typically reap the benefits as well as optimize costs within a year while also achieving their key milestones, provided, any highly significant discrepancy from the set business goal is addressed on priority basis.
How to establish a sustainable cloud budget?
Every business seeks to accomplish more with less spending on the cloud. Although there are practiced and well-versed techniques available for budgeting and forecasting OpEx (operational expense) spends, there are still various misconceptions when it comes to cloud financial management. Cloud budgeting and cost forecasting do not have to be difficult or complex to manage. Here are a few tips to keep in mind:
- Understand existing cloud bills: Based on the OpEx model, cloud costs vary as per usage. Additionally, instead of paying a fixed amount, organizations can choose to pay based on their utilization of services for each period. Therefore, organizations need access to information about how specific workloads are using the multiple cloud resources. If a business has the funds, cloud development expertise, and time, they can construct their own solution for end-to-end cost visibility. Working closely with the business and sales team is very important as it helps in estimating the business activity and cloud usage optimally.
- Plan and evaluate spends: Just moving to cloud does not guarantee financial savings. It is crucial to conduct a thorough cost-benefit analysis once on cloud. Enterprises should view cloud as a tool that offers potential savings, where you can first outline your existing resources and then gauge a best estimate of what the cloud operations would require over the course of the next one year. It is advisable to refine strategies by determining how long you need a particular resource and then purchase the necessary resources based on this information. By committing to resources and spending levels, enterprises can reduce their overall resource spending by at least one-third. Commitment (to obtain rebates) is only possible if the cloud consumption estimation process is robust, or else leading to overcommitment.
- Implement governance: All cloud deployment decisions have some cost implications. To prevent a project from spiraling out of control, the competent authorities must pay attention to each event on a regular basis. Governance, including administrative supervision through automated and manual audits, should be defined to monitor and enforce cloud budgets. Additionally, workload and resource changes, if any, should be identified and analyzed with respect to impact on consumption.
- Optimize cost allocation: It is vital to keep a check on enterprise invoices on a regular basis to detect areas in which your organization may be paying for services you do not need, or where you are being billed for underutilized services. This is however a full-time activity that requires a thorough understanding of cloud pricing models and, more importantly, the ability to look in the right places. Cost allocation and forecasting can be made more accurate by gaining complete visibility on an organization’s spending. This process can be further automated so that resources can be allocated as per actual usage to avoid under or over budgeting. Additionally, enabling effective tagging strategies to drive cloud cost accountability and better cost allocations ensure that enterprises are forecasting and estimating better, which in turn leads to better budgeting.
- If on-premise technology costs are being tracked on a regular basis, you probably already know how much to allocate to the cloud. If not then begin tracking your daily or weekly expenses on cloud. Cloud consumptions can be monitored using tools or intelligent cloud cost solutions that track cloud resource usage and application performances. The data collected from these tools are analyzed to provide granular insights and costs can be aligned to specific business areas. Tracking costs this way enables enterprises to provide real-time spend vs budgeted cost visibility to stakeholders.
- The identified cost dimension can be used to determine what is driving your cloud spending. If no changes are planned, it can be safely assumed that for the next billing cycle, the previous year’s consumption can be considered just as it is. Detailed insights help better in predicting how much additionally needs to be spent when onboarding similar clients or deploying more workloads.
Cloud cost management tools that help in budgeting
Today, multiple tools are available in the market to integrate, streamline, optimize and manage cloud costs. Choosing the appropriate tool depends upon numerous factors like – customer needs, size of the team, business model and its objectives and most importantly the allocated budgets. Since budgeting is an integral part of cloud cost management, it is essential for finance administrators to leverage tools that not only provide a holistic cost control mechanism but fundamentally provide powerful cloud cost forecasting and budgeting techniques that are customizable and can add significant value to their organization.
Budgeting tools or cost management tools with budgeting capabilities typically offer centralized real-time planning, rolling forecasts that generate reports based on historical cloud spend data to foretell future costs and budget templates to track if minutest of cost details are aligned to budget specifications. Cost management tools are embedded with financial intelligence that provide cost analytic dimensions, evaluation and metrics. From a holistic visibility viewpoint, these tools provide intuitive dashboards and reports as well as variance analysis that reviews progress and keeps track of planned versus actual costs.
List of some cloud cost management and budgeting tools are:
CloudEnsure
AWS Budgets
Amazon CloudWatch
nOps AWS Cloud Management
AWS Cost Explorer
Azure Cost Management + Billing
Azure Cost Alerts
GCP’s ParkMyCloud
CloudZero
Densify
Spot by NetApp
Apptio Cloudability
Harness Cloud Cost Management
Budgeting through Cloud Ensure
CloudEnsure enables enterprises to set financial budgets across hyper-scalers, accounts and subscriptions. When cloud spends exceed the defined budget limit, Cloud Ensure sets off an alert alarm that acts as an exclusive notification alert to users crossing the set thresholds.
The primary job of these alerts are to send out alert notifications via email. Budgets are a part of the ‘cost insights’ feature within the Cloud Ensure platform.
Conclusion
Laying down budgets and managing them in order to control cloud costs is an ongoing complex task for most enterprises. Many of them struggle to strike the right balance between creating optimum resources while not overshooting costs. Often, the time and effort taken to define and set a budget is underestimated and other challenges like being understaffed or having no adequate automated processes to setup and manage cloud cost controls add to the complexity.
In this blog, we have seen how cost planning and budgeting are vital and act as the first step to setting the right path to optimized costs. Budgeting, estimating and predicting costs using cloud cost optimization tools as well as implementing best practices to enhance your cloud budgeting and cost strategies are the key drivers to enhanced cost efficiency and maximized ROI on cloud.