Cloud budgets are increasing. According to the latest forecast from Gartner this year worldwide end-user spending on public cloud services is forecast to grow 23.1% to total $332.3 billion, up from $270 billion in 2020, Software as a service (SaaS) remains the largest market segment. Growth is expected to reach $122.6 billion in 2021 as the demand for composable applications requires a different type of SaaS experience. Technologies such as containerisation, virtualization and edge computing are becoming much more mainstream which is driving additional cloud spending.
The pandemic has also served as a multiplier for organisations interested in adopting a cloud approach and it’s set to continue. By 2022, SaaS is forecasted to increase by a further 18.5% to $145.4 billion with a total market spend of almost $400 billion.
Here are some useful management strategies to help enterprise organisations reduce costs when deciding to adopt a public cloud, private cloud, hybrid cloud or multi-cloud approach:
1. Public cloud:
Enterprises should consider how they design for a specific cloud with an awareness of how workloads match the provider’s cost structure. This is something organisations often fail to address, particularly when considering a longer term view.
They have to establish whether the dominant factor will be storage, networking, or compute. They also need to understand how their workloads fit with the cloud provider’s instance types. Do their workloads scale up on larger hardware instances, or do they best fit with smaller instances that must be scaled out? In that case, network bandwidth may become a factor. It’s possible to develop new applications to cost-optimise their performance and scalability requirements.
It becomes even more complex when moving legacy systems to the cloud or when preserving a portion of the systems or code already in place. Enterprises must evaluate the application’s architecture and delve into the cloud provider’s architecture and model the costs. This may lead them to rework parts of a legacy architecture or select a cloud vendor that best fits their workloads. They can’t assume pricing for a given workload will be the same for all cloud vendors.
For instance, it is important to understand how applications may experience increased demand and workload due to changing consumer behaviours and trends. This is particularly relevant as more and more applications are being developed using technologies such as AI, IoT and ML. By nature they have a significant demand on network and data storage and often take advantage of 5G. In addition, applications such as these are typically real-time in nature and therefore the demand on the cloud will increase by orders of magnitude in many cases.
Expenditure in public cloud spend is strong, as enterprises continuously migrate to the cloud as part of their digital transformation strategies. However, it is wise to consider if a public cloud will deliver at the scale and volume which is required for more demanding uses.
2. Private cloud
With a private cloud strategy, organisations need to follow the public cloud’s model of automation, management and attention to building the right infrastructure for their workloads. They can manage workloads that don’t require a significant level of elasticity better in a private cloud.
Attention to the units of composition is key. Should they have small converged components or allow for larger instances? Should they have storage as part of the instances or as a separate service? There isn’t one answer. Different applications and infrastructure components will require different architectures, and that will dictate the instance types, storage, and networking to be used. Getting this wrong can impact utilisation rates and costs which can spiral out of control and lead to unexpected billing.
When planning their architecture enterprises should build with an understanding of current workloads but also consider future requirements. For example where they project their architecture to be in the next two to five years – and in some cases beyond. They’ll need to design cost-efficiency into the architecture upfront and should expect to manage many trade-offs. Attention to this kind of detail can provide significant cost benefits. Digital business offerings have real infrastructure costs and companies with cost advantages can translate that into profit margin.
3. Hybrid cloud
Enterprises can have the best of both worlds. Workloads that are well understood and stable in terms of scale can be best optimised on their own hardware. The cloud is flexible and agile, but it is not free. The task is to optimise across the opportunities presented for cost savings by both the public and private clouds. Enterprises need to consider the additional ingress and egress
costs imposed by the public cloud provider on shared data between the private and public components. They’ll have to reduce that traffic, which will lead to compromise on where they put different workloads, as these costs can be large.
This kind of addition outlay may surprise many organisations and unsurprisingly they fail to take it into account in their designs. For companies with existing systems core to their operations, this is a problem that needs to be solved. Organisations that have substantial elasticity in their infrastructure demands can realise increased savings from a hybrid cloud design that leverages the public cloud. And they’ll avoid missing out on seasonal opportunities as they design with elasticity in mind.
4. Multiple clouds
When using multiple clouds, enterprises should match their workloads to the best architectures and pricing models. They have to understand the requirements of their workloads and have confidence that they’ve designed them for efficiency. Then they must investigate and have a complete understanding of each vendor’s pricing model. As they look at different offerings within the vendors’ product lines, they’ll often see that many vendors have subtle differences in how pricing works. It is also very important to understand the networking between the cloud providers and ensure they offer the required performance.
Understanding the breakpoints for operating at scale is also important. Will they meet the quotas to gain the pricing they’ve modelled? And what happens if they don’t? More organisations are starting to investigate arbitrage and matching workloads to cloud vendors’ pricing models. But they need to be careful to ensure they’re not missing volume-pricing advantages, which might negate these savings.
Enterprises have new support for operating in a multi-cloud environment. For example, the Cloud Native Computing Foundation (CNCF) is a group of cloud vendors, software vendors and end-users who are collaborating to deliver a standards-based stack for orchestration and management of workloads in the public and private clouds. Intiatives like this provide the tools necessary to operate better while creating a virtual cloud infrastructure that hedges its bets on pricing, availability and the trajectory of innovation.
As enterprises migrate to the cloud, they’ll need strategies to help keep cloud costs under control. The cloud is a model that has cost-efficiencies designed into it. With the proper attention to these details, increased margins and new digital value can be created.