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TDWI Upside - Where Data Means Business

The Importance of Seeing Cloud Costs in Business Context

Cloud cost optimization is a necessary part of your digital transformation and the only way to ensure cloud investments achieve their promised economic benefits.

To make the smartest decisions about cloud costs, businesses need near-real-time visibility into cost and usage information so teams can charge back to the appropriate entities. However, such visibility is not easily achieved.

For Further Reading:

Why Your Cloud Expenses Are Rising: Blame Cloud-flation

The True Cost of Moving to the Cloud

Solving the Cloud’s Elasticity Problem 

Many organizations misunderstand the interdependent nature and multiple operational levels of their cloud infrastructure. Knowing these is critical to aligning your cloud provider bill with your operational goals, as well as planning and setting cost expectations, not to mention scaling and scheduling services.

To take control of cloud costs and optimize spending, there are three ways departments need to break down cloud costs:

  1. By cost center or business unit
  2. By product or engineering team
  3. By application, system, or service

Organizations with multiple stakeholders might view cloud costs through different lenses, for example:

  • A finance perspective might break down costs by COGS, tenants, or end customers
  • A business owner might prefer visibility broken down for each product line
  • Engineering may need a service-based and containerized view of costs in order to understand where spending is being wasted

For customers with containerized workloads spanning multiple cloud providers, gaining granular cost attribution for shared container resources is vital. When cloud infrastructure spending is not granular, it becomes challenging for developers to determine the cost.However, if all teams know the details of utilization and have a complete picture of the cost of those services, it will raise awareness and accountability for their cloud spending and guide smarter decision-making.

1: Understanding Expenses by Cost Centers and Business Units

Finance chargeback must be connected to a business’ cost management product through a single pane of glass. This unified view of costs incentivizes users when information matches the amount they are charged at the end of the month.

Senior leadership also needs to be connected to that single source of truth to inform their directives and decisions about cost optimization. Using an alternate source of truth (such as a spreadsheet) to judge the success or failure of initiatives is a big mistake. Having a single, common source of truth allows teams to self-assess, track, and improve without having their attention split or contradicted.

2: Calculating Accurate Value: Seeing Costs by Product or Engineering Team

In order to calculate accurate profit margin or revenue figures for the products or services built for end users, businesses need cost information broken down by product or engineering team. First, determine which products are performing well and which need help.

Finance and engineering need to recognize effective trade-offs among speed, reliability, and cost and be on the lookout for a bias toward speed and reliability because these data points are easier to measure and manage on an ongoing basis. Costs may not be represented accurately at the level where these decisions are made.

3: Gaining a Unified View: Seeing Costs by Application, System, or Services

Engineering teams need to see costs at the most granular level of operations, where applications are being built and run. This enables quick identification of cost-inflating anomalies at the level where they are most likely to occur. When you can see granular cost-optimization opportunities that apply directly and are relevant to a specific function, you can decide quickly whether to work on them or not. By visualizing these opportunities, teams don’t waste time data crunching by identifying which applications are the highest-value targets for efficiency improvements.

A single-pane view for multicloud usage costs, including containers and Kubernetes, lets enterprises manage bills and payments and also monitor, analyze, and allocate charges to the appropriate business entities, such as teams, projects, applications, or products.

A Final Word

There are many ways to think about your costs, but the three listed above are critical because they connect finance and engineering operations. They enable the ideal granularity and relevance for decision-making by subject matter experts at the edges of an organization, and they form a connection between the core details of how a business is run and its cloud cost management tool. That’s why a single source of truth is crucial for each organization’s most important business decisions.

Rather than flying blind, enterprises need to pay attention to cost-centric design and economics. Cloud cost optimization is a necessary part of digital transformation. Increasing your cloud cost management IQ is key to ensuring the investments in these services are living up to the economic benefits often promised as part of their value proposition.

About the Author

Asim Razzaq is the CEO and founder of Yotascale. In his career, Razzaq was senior director of platform engineering (head of infrastructure) at PayPal, where he was responsible for all core infrastructure processing payments and logins. He led the build-out of the PayPal private cloud and the PayPal developer platform generating multibillion dollars in payments volume. Asim has held engineering leadership roles at early-to-midstage startups and large companies including eBay and PayPal. His teams have focused on building cloud-scale platforms and applications. You can reach the author via email, Twitter (@asimrazzaq), or LinkedIn.

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