Economic cost management eludes all vertical markets globally. Historians will undoubtedly speak of the 2020’s as one of the most disruptive decades. For business and technology leaders, this means a need to optimize costs and resources.
This has driven executives to seek ways to more intelligently use their existing technology infrastructure, services and suppliers, as well as maximize opportunities for modernization and innovation.
Over 80% of organizations are worried about unidentified rising cloud computing costs as a primary impediment to innovation. With major SaaS application providers announcing increased service pricing due to underlying costs – it is no surprise that executives are increasing their focus on IT cost optimization. About 34% of business technology leaders told the Enterprise Cloud Index report that managing cloud costs was a daunting challenge while also trying to innovate.
As a result, 55% of executives plan on improving visibility into cloud consumption and costs over the next 12 months and over 50% plan to implement technology and strategies to minimize cloud waste.
Coupled with increased visibility, organizations are moving applications onto purpose built or optimized infrastructure, though costly, leaders state the moves should pay off and stem the runaway costs. However, these new, distributed workloads often require adopting a hybrid multi-cloud computing strategy as they strive to reduce cloud costs which require capable cost and resource management tooling that can be simply managed without having to manage the complex, native cloud tools and reporting.
The challenge for business technology leaders is that their organizations and senior leadership teams continue to increase their demands for digital transformation.
According to analysts at Gartner, 75% of organizations will have a digital transformation in place that is “predicated on cloud as the fundamental underlying platform.” And while not surprising to those of us who have been immersed in the cloud for years,, the cloud transformation is still underway.
AI initiatives will, and currently are, magnifying these costs by an order of magnitude. Previously, DevOps and related teams had general familiarity with cost expectations. With the advent of AI, we have intelligent teams trying to deliver AI-based functionality without knowing best practices and if or how costs can be managed. It will take time, and FinOps techniques are already being applied, but the focus is definitely currently on innovation.
The complex landscape of cost control and rising digital transformation demands will increase the CXOs to be more knowledgeable and aware of the impacts of their decisions. They will need to align technology and team to business outcomes and FinOps based data will provide a benchmark for making the right decisions.
Gartner states “Drive cost optimization by monitoring utilization and capacity metrics” and CXOs need to schedule and right-size allocation-based services, as well as use savings plans and modernize infrastructure to make the most use of provider-managed services. Cloud cost management is not just an operational issue, but a strategic differentiator.
Cost optimization requires tight collaboration and involves strong governance, architecture, financial, product, and application management – all disciplines that require good input from the stakeholder using the application to deliver business outcomes. And, importantly, this affords R&D to track and enable innovation, not stifle.
“Correlating cloud costs to business KPIs allows organizations to manage spending in respect to its return on investment (ROI),” according to Gartner. “It also enables organizations to assess the business impact of cost growth and optimization. Driving costs down as a principle must not be done at the expense of being unable to fully support the business goals.”
Executives already pursuing cost optimization are struggling with risks such as data security and data recovery. This is leading to over half of organizations refraining from change or using more than one IT infrastructure solution because a single environment cannot meet the needs of the business at the budget point required
As a result, many enterprises are using a mix of private and public cloud computing, or multiple public clouds. This complexity will only enable CXOs to optimize their costs in the near term as operational management needs to scale without equal efforts in implementing the proper oversight and tools.
Despite the chaos of the 2020’s with the disruption of AI, remote work, global expansion, and dramatic changes in costs; technology leaders with strong management of the technology at a cost level can leverage their knowledge to innovate their business process and customer services. This data provides necessary inputs for on-demand ROI, trade-off analysis for driving innovation or streamlining operations. Inflation will continue to increase costs for suppliers and internal IT resources, but with a constant insight afforded from optimization efforts, organizations can use the latest disruption to drive change.
