April 20, 2020
Channel partners now have a new responsibility: helping clients curb COVID-19-spurred cloud overspending. The spread of COVID-19 continues to ramp up the number of global cloud deployments as organizations seek to provide full-fledged work-from-home capabilities to suddenly remote employees. In fact, the coronavirus pandemic will fuel 2020’s cloud IT infrastructure spending past last year’s. The figures will rise 3.6% over 2019’s $66.8 billion, for a total of $69.2 billion, according to research firm IDC.
The channel remains vital to those efforts — managed service providers, VARs, ISVs and other partners have proven essential in implementing and overseeing new cloud tools for clients. But the responsibility extends beyond typical administrative efforts; it also must include the financial side of the house. Worldwide, enterprises, nonprofits and government agencies are experiencing unprecedented economic pressures. They have to support as much ongoing work as possible while spending as little money as possible (and defending the money they do spend). Never has cost control been a more important initiative than it is now. The channel sits in the ideal position to help address this challenge, especially regarding the most in-demand technology: cloud.
Indeed, one could argue responsibility lies with partners to make sure customers avoid cloud overspending. After all, shifting capex expenses to the opex budget and trimming IT spending in general constitute two of the main reasons organizations generally choose cloud over on-premises counterparts. And clients turn to the channel for the most informed and unbiased advice about which platforms to use and why. Thus, partners must also take it upon themselves to offer the expertise, resources and recommendations that empower organizations to prevent unnecessary cloud consumption that translates into higher charges.
Enterprises’ monthly cloud overspending ranges from 20%-50%. That’s the compiled estimate from six sources, comprised of analysts, expense management vendors and cloud-centric MSPs. Perhaps not surprisingly, much of the waste occurs within late adopters.
Ensono’s Ben Wood
“They have less familiarity and knowledge around keeping cloud costs down,” said Ben Wood, vice president of advisory and consulting at Ensono, an Amazon Web Services Advanced Consulting and Microsoft Gold Hosting partner.
App Associates’ Bill Saltys
This sounds an alarm for partners. Organizations that have scrambled to get into the cloud amid COVID-19 may overlook critical areas. For example, overspending risks will increase “relative to the governance and control policies and methods in place,” said Bill Saltys, senior vice president, alliances at Apps Associates, an AWS Premier Consulting Partner, Oracle Platinum Partner and Salesforce Silver Consulting Partner. The takeaway? The channel must step in as guides, correcting cloud problems before they get out of hand.
Reasons for Cloud Overspending
There are myriad factors, typical and not so typical, that lead to cloud overspending. Partners working to identify the exact causes may have to invest a fair amount of time determining the causes. Plan to conduct as in-depth an investigation into the client environment as possible while adhering to social distancing and other COVID-19 safety precautions. With any luck, this section will help speed up the discovery process.
Common Cloud-Overspending Scenarios, Solutions
Apps Associates’ Pete Salamanca
Overprovisioning. Organizations often will build out virtual machines without undergoing the requisite due diligence — and then find themselves with more resources, at more cost, than they really need. With the cloud, services are so easy to turn up and down that “the ease of access may result in companies utilizing services that aren’t necessarily needed for their business,” said Pete Salamanca, vice president, cloud services, at Apps Associates.
“It’s easy to choose a general-purpose instance type and maintain a similar vCPU/memory sizing as worked on-prem, but doing so may not be the most cost-effective or performant choice,” he said.
Avoiding overprovisioning is tough, especially because cloud providers release new products and services all the time. This can make it harder for IT teams to understand what might make an optimal cloud choice from one day to the next, said Elissa Livingston, senior vice president of growth and strategy at cloud management vendor CloudCheckr.
“It is difficult to keep up, and overspend occurs when older, less efficient resources are deployed instead of the new,” Livingston said. “Complete freedom, without a comprehensive understanding of…
Cloudcheckr’s Elissa Livingston
…the many hundreds of available options, opens the door to inefficiency and overspend.”
Partners can assist by right-sizing clients’ cloud assets, regardless of how long those assets have been in operation, she noted.
Apps Associates’ Saltys further recommends partners help customers by instituting good change management and business justification. In addition, build a governance model that automates monitoring and send notifications of policy violations and budget overspend.
If a client spun up more cloud platforms because of COVID-19 without calling on a partner, and especially if any shadow IT activity is occurring, chances are there will be room for adjustment.
Resources lying fallow. The cloud makes keeping non-production, shadow IT and other platforms online around the clock all too easy; this puts them at risk of underuse. In other cases, organizations forget they have a certain resource altogether — and the meter just continues to tick.
The fix is simple: “Enterprises can now save significantly by turning off or destroying non-production systems when they’re not actively in use,” said Nerdery’s Feeney.
Achieving this end requires thorough investigation from the partner, but it will pay off. Fallow assets “may not represent the largest source of spend but [they] will be low-hanging fruit,” said Apps Associates’ Saltys.
Putting all workloads into the cloud. Thanks to the hype surrounding cloud, many executives now think all applications have to run in the cloud. This “is simply not the case,” said Ensono’s Wood.
Analysts at Enterprise Strategy Group concur. For example, “static” programs, whose information does not change, do not need to live in the cloud, said Kevin Rhone, senior partnering consultant at ESG.
ESG’s Mark Bowker
Mark Bowker, senior analyst at ESG, added that some IT leaders field mandates to move to the cloud but they do not perform initial assessments that verify the validity of such a decision. This can lead to shifting a workload back to an on-premise model, which is costly and time-consuming.
“When IT operations, application developers and information security teams are not aligned, businesses suffer with spending time, resources and investment in cloud that could be avoided with improved organizational synergies and team communication,” Bowker said.
The channel is well situated to provide guidance about which workloads make sense to operate in the cloud and which to keep in-house.
Overlooking volume discounts. “At least 50% of enterprises are overspending on cloud each month if they’re not fully leveraging committed-use discounts,” said Nerdery’s Feeney.
Cloud vendors offer significant discounts to enterprises that pledge to spend a specific amount of money over a specific amount of time. This enables the providers to better plan their data center capacities, and it helps organizations do more with less, Feeney said.
“The single biggest mistake enterprises make is not fully taking advantage of these discounts,” he said. “Any time a workload will be online more than half the time, it’s a good candidate for these discounts, which come in one- and three-year terms.”
Plus, he added, cloud vendors have grown more flexible with these discounts over time. Google Cloud, for instance, automates them via Sustained Usage discounts, “while AWS allows for instance changes and even abstracts the discount from the region and workload specifics.”
The catch, of course, is that discounts don’t extend from one vendor to another.
“Selecting a single or preferred cloud provider with which to aggregate resources and spend will create significant and unmatched opportunity for cost savings,” CloudCheckr’s Livingston said. “In the absence of private pricing or commit-based agreements, companies are more likely to pay on-demand list rates; the delta between the two is overspend.”
Channel partners will need to pinpoint which cloud makes the most sense for a discount commitment.
Tangoe’s Robert Tammaro
Failing to tag. Lastly, not tagging resources creates one more opening for cloud overspending, said Robert Tammaro, director of channels at Tangoe, an expense management vendor. Tammaro encourages enabling cost center allocation and expense management tagging. There is more to the process, though. The more tags in place to categorize cloud assets and their volumes, the greater the results, said Nerdery’s Feeney.
“Tagging is at the core of how you make sense of your bill and organize these budgets and alerts, so you’ll need to determine how the organization wants to segment cloud…
…workloads and then ensure every possible resource that can be tagged is tagged,” he said. “Tagging should become part of your deployment process, not an after-the-fact or one-time activity.”
Cloud Overspending Oversight Doesn’t Just Happen Once
Finally, with cloud overspending problems solved, partners may feel tempted to move to the next project. But wait, there’s more.
Every source recommends, to one degree or another, that partners offering cloud services and products also include a management platform — preferably with as much automation as possible – in the sale. Optimizing cloud resources must happen on a regular basis because platforms are so scalable and elastic; they change constantly. Not only does management software aid in tracking inventory, consumption, cost, and more, it also highlights gaps and keeps problems to a minimum.
For example, many cloud deployments lack policy management controls, including those tied to archiving and backup, sources say. Retention, for instance, “may be too frequent, too long or ineffectively sequenced from hot to cold backup store to meet recovery, contractual or regulatory requirements,” said Apps Associates’ Saltys, adding, “Governance policy and management is a foundational step for control.” A solid management platform invites the enterprise to establish, monitor and adjust these policies.
As another example, a well-designed cloud management system will pinpoint duplicate services. Relying on more than one cloud provider for storage, creating multiple disaster recovery instances and forgetting to clean up activity across regions all pave the way for cloud overspending. If prevention is the best cure, then clients need cloud management that averts these circumstances. The enterprise IT team or the channel partner can set alerts, which should trigger in real time.
“There’s no need to wait until the end of the month to be surprised by your cloud bill,” said Nerdery’s Feeney. “You can generally get the thrill of that surprise hourly.”
From there, IT or the partner can tweak cloud services as needed and stave off any shocks. After a few months of these on-the-fly adjustments, the management platform could even pay for itself.
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