A practical guide to IT cost optimization in the cloud

• What is IT cost optimization?
• The overall context of IT cost optimization
• 9 Practical ways to optimize your IT costs

What is IT cost optimization?

IT cost optimization is the process of continually evaluating and configuring all the cloud resources that drive the applications, infrastructures, and workloads of your business. It is a theme that should be front and center of every enterprise's IT business strategy but often isn’t. This paper outlines the most important aspects of IT cost optimization. The advice will help you reduce your infrastructure and maintenance costs, meet performance and scalability requirements, and enable timely data-driven decisions.

We focus on the importance of operational governance and budget predictability to ensure you can achieve a better return on your overall technology investments. What will become obvious is that IT cost optimization is not just about avoiding the costly mistakes businesses routinely make in the cloud. Rather, it is about implementing a solid cloud strategy and a robust asset management strategy. IT cost optimization is dependent on this. 

Cloud spend is growing

The spectacular growth of public cloud services shows little sign of easing. According to Deloitte, the main cloud providers are expecting annual revenues in the sector to grow by at least 30% through to 2025 and beyond. This dynamic billion-dollar industry is driven by the fact that more organizations are keen to leverage the agility, flexibility, and speed of execution that leading-edge cloud services can deliver.

Hybrid and multicloud solutions are a core part of these growth trends, with Flexera estimating that 93% of enterprises have a multicloud strategy and 87% a hybrid cloud strategy.

Governance and strategy have never been more important

The downside of this positive growth trend is the extent to which businesses are not properly utilizing their cloud spend. According to Gartner, organizations that lack appropriate cost optimization processes will overspend by about 40% in the cloud.

This unproductive spend manifests itself in many ways:

• Computing resources are purchased but underutilized
• The benefits of automation the cloud offers are under-exploited
• Storage solutions are chosen that are inappropriate for a company’s needs
• License and service discounts are needlessly overlooked

The reason for mentioning these examples is to underline the point that to take full advantage of the growth potential the multicloud/hybrid cloud offers – and to avoid the inefficiencies – cloud and software asset management needs a coherent strategy that encompasses the entirety of your IT estate. 

9 practical ways to optimize your IT costs

Whether you land on Microsoft, AWS, Google, IBM, or Oracle – or a combination of any of those – you will need to consider how you will handle administration, cost optimization, and procurement across the platforms. Here are nine strategies to save your business money.

Rightsize your resources I

A clear picture has emerged which shows that companies purchase too much computing power in the cloud – an issue that is called over-provisioning. They buy too much CPU, RAM, and network utilization (to name but three problems). As cloud experts, Crayon can ensure your migration to the cloud or your switch to multicloud is rightsized from the start.

Rightsize your resources II

Rightsizing is especially relevant with regards to what is called RI, or Reserved Instances. RI is for applications with steady usage (24/7) and which therefore require reserved capacity. Committing to one or three-year contracts can deliver related cost-reductions. A classic problem, however, is that businesses purchase too much RI capacity, at the wrong price, and don’t monitor their services. Crayon can supply metrics to identify underutilized instances, that can be downgraded, changed, or deactivated. It's all about insight and analysis. Crayon routinely discovers optimizations of 20-35% by determining the optimal RI capacity.

Establish general estate governance

Do you have non-core servers that can be shut down through effective resource scheduling? 90% of businesses are closed at weekends. What can you shut down? What can be reduced and better managed? You need good governance and frameworks in place to take advantage of these issues. We have the tools available.

1. Use pricing models efficiently to lower the unit price of cloud consumption. It’s a startling fact that getting the pricing model right on the resources you use can deliver cost savings of up to 80% on certain cloud resources.
2. Pay as you go services: These are best for applications for short-term, spikey, or unpredictable workloads. Are your business divisions and employees using them for the purposes they were intended? Have you fully understood the pricing models? Are they being sufficiently monitored?
3. Reserved instances/commitment-based Reservations

Do you understand how these operate and how they are priced? There is no shortage of businesses that do not. Can you deliver further discounts by committing to three-year contracts? We can align your costs to your needs.

Get storage services right

It’s a common refrain from consultants that companies buy too much cloud storage. Are you matching your services to the demands of your business or are you overprovisioned? Also, there are four different types of storage that are priced according to the levels of performance your business requires. Do you have the right product at the right price? We know we can help you lower the unit price of your resources because for our customers we have regularly achieved cloud storage savings of 20-35%.

Business development / new business: Assign roles and responsibilities

When business-development teams commissions new servers in the cloud for projects or campaigns, are these servers adequately managed and monitored? Who will be responsible for decommissioning the servers when the project is completed? The opportunity for optimization and efficiency gains here are not insignificant – and very simple to achieve.

Consolidate and balance subscriptions across the enterprise

IT departments very often assign cloud subscriptions to users who do not need them. A related problem is that certain departments or divisions may have excess subscriptions, whilst another does not have enough. Balance and efficiency are easily reached. Evaluate and verify hybrid benefit use rights

Hybrid benefits arise when a client can use the licenses they have bought for their on-premises servers/applications in the cloud. Not all licenses qualify for Hybrid Benefits and it can be a complex process to understand and execute properly. It's all about the level of operational insight you can achieve into your software assets. Is your business fully using its benefits and therefore utilizing investments you have already made in the cloud environment? We can undertake a thorough assessment of your IT estate to highlight all the investments for which you have dual-rights usage. The cost-savings can be significant.

Validate prices and exploiting promotions

It is an unfortunate fact that many resellers are not so efficient when it comes to passing cost reductions onto clients. And they are equally lax when it comes to highlighting various promotions that can reduce the prices paid for cloud and software assets. Crayon makes a commitment to all its clients with regards to transparent purchase prices to ensure clients can validate the prices paid for cloud consumption.

Consolidate small agreements

The dynamics of cloud consumption are such that licenses and subscriptions can often be bought on multiple small agreements from the same vendor – often by different business units. Crayon’s business was built on its license management expertise. We can guide you through consolidating multiple licensing agreements with one larger agreement.