As budgets get tighter, leaders are feeling pressure to curb spending, and tech teams are no exception. Many companies have invested heavily in the cloud during the pandemic and are now looking for ways to optimize resources.
According to a recent report, no less than 81% of IT leaders have been driven by their C-suite to reduce or halt cloud spending, which equates to 30% of IT budgets. It’s a critical time for CIOs and other tech leaders to take stock of their cloud and IT budget and usage.
While it is not advisable to give up cloud-first strategies in favor of on-prem or hybrid infrastructure, it is possible to significantly reduce cloud spending. Databricks recently reduced our total cloud spend by 25% and we are following to reduce total SaaS IT spend by 30%. We achieved this by democratizing cloud spending data: by providing insight into where and how the team spent money, we were able to bend the cost curve.
Here’s the framework we’ve used for successfully reducing cloud spend, what the team learned, and how leaders can integrate data democratization into their cloud spending strategies.
Step 1: Understand the bill
When it comes to cloud spend, the first step is to get a clear picture of what you’re paying for through cost allocation tagging. This is easier said than done: tagging a single invoice from a cloud vendor is quite an undertaking in itself, so multicloud organizations will find that this step can be two or three times more complex and time consuming. But the output is valuable: This approach – and the data it allows you to collect – offers three main benefits.
Don’t take it lightly: Reducing cloud spend should be more about optimizing budgets for long-term ROI than short-term cost savings.
First, it provides insight into who owns each resource, what feature it supports, and how much the team uses and spends. Second, it allows you to view your spending in a variety of ways, such as organizing the data by service type, cloud, database, network, or department, or view month-over-month trends to understand patterns.
Third, investing time in cost allocation tagging allows building an infrastructure to automatically tag future expenses and easily understand bills on an ongoing basis.
Step 2: Take advantage of your new field of view for discounts
Now that you have sufficient and reliable insight into your cloud billing, you can investigate where you can leverage and leverage vendor native tools to do this.
The goal here is to find the balance between compute time horizon, high utilization and discount offers. This methodology revolves around economies of scale or making sure the team is really getting the most out of their tool choices.
Then identify the least expensive option that meets your needs. Whether it’s adjusting for timing (scaling up during cheaper time frames, like weekends) or geography (cloud providers often charge a premium for certain regions), there are different ways to go about this, but there can be hidden challenges based on your roadmap or workflow. You may want to use more cost-effective regions for testing, but it’s essential that your product works in the region where you’ll be deploying it – so do this methodically.