How to Achieve Optimal ROI from the Cloud

Companies would not implement cloud solutions if they did not provide value to the business model. But there is a big difference between simply adding value and providing optimal, cost-effective support. Unfortunately, many enterprise executives are not getting the expected ROI from their cloud investments, with some slowing deployments as a result. 

According to KPMG’s most recent Annual Technology Survey, upwards of 67% of tech leaders in the U.S. have not seen a significant return on their cloud investment yet. Furthermore, a recent McKinsey survey found that 75% of business respondents went over budget on their cloud migration process and 38% were behind schedule. 

Slowing Demand

While cloud spending is projected to jump 17.5% percent over 2021 to reach $830.5 billion this year (International DataCorp Group), this represents a slowdown from last year’s growth rate of 18.3%, with 2023 is expected to wane even further to just 16.3%. This conforms with another recent study from Wanclouds that found more than 80% of IT leaders say their top brass is calling for leveling off or even reducing cloud spending going forward. 

This seems to run counter to the basic premise that the cloud should be cheaper. Bit for bit, cycle for cycle, when architected properly, the cloud is cheaper than on-premise resources as well as more flexible and scalable. The difference lies in the lack of visibility and control. Far too often, business units go outside of normal IT channels to create their own support structures for the cloud. This makes it difficult for organizations to manage their cloud spend or even gain a full understanding of where, when and how cloud resources are being consumed. Without the right governance in place, that basic premise can quickly break down. 

This is more than just a financial problem, of course, because it introduces a wide range of security risks, compliance issues, governance challenges and a lack of integration, creating the same problems that exist in most silo-based data centers, but on a global scale. 

In order to have an effective cloud then, the enterprise must develop an effective cloud strategy, one that supports an overall healthy IT and development environment. Achieving this state is no easy feat, however. Rather than laying some basic ground rules and deploying a new platform, organizations must commit to a broad-based transition to cost-efficient strategies and continual maintenance and management of cloud-based infrastructure. 

A good place to start is a thorough audit of all cloud resources and services, particularly those that are underutilized and not delivering the value required of the business model. Some estimates hold that as much as 40% of cloud-based instances are at least one size too big for their intended purpose. This is a result of the tendency to overprovision to minimize risk of performance issues or outright failure. But overestimating has real cost consequences that can cause leadership to question the value of the investment.

Keeping Control

Effective governance is a key element for an efficient, highly functional cloud. This can be a daunting task given that cloud architectures tend to support numerous stakeholders, sometimes across multiple departments. Also, policies run the gamut from infrastructure design and application monitoring to security and programming. 

Keep in mind that proper cloud management does not necessarily mean lower costs, only that the costs will more closely align with the benefits intended for the deployment. Cost may rise as productivity increases, which will ideally be offset by increased revenues or decreased costs elsewhere in the data chain. Cloud costs that increase 25% from year to year would still be a win if linked to a 50% increase in sales. 

Rather than focus on the cloud itself, the emphasis of proper management should be to gauge overall value. Cost-containment is a key part of this, but it should focus on the targeted elimination of wasteful spending, not just blanket reductions to top-line or bottom-line costs. 

Many cloud providers offer a wide range of measures to ensure clients do not overspend for their infrastructure. The ease at which new cloud instances can be created by rival providers offers a strong incentive to keep existing clients well-satisfied, and failing to identify idle or underused instances is a sure way to fail in that regard. If your provider offers cost-control and other management services, take advantage of them. If not, find a new provider.

One facet of cost optimization is operational efficiency gained by enabling your staff to do more with less overhead, adding value in new areas and building efficiency into your operational scale. In addition, right sized resources, auto-scale solutions (which can include spot instances) and financial agreements on commits or EDPs, Savings Plans and RIs are also taken into consideration. A good provider partner can help manage spot instance usage and deliver savings while minimizing risk, and this complexity is best suited to the experts to help get that right. 

Cloud infrastructure is not only increasing in scale, but complexity as well. As new workloads migrate past the local data center out to the network edge and all the way to the user device, the cloud has become a critical waypoint for the delivery of new services and the accumulation and analysis of user data. In this environment, it is very easy to lose sight of cloud consumption and proper governance overall. 

Fortunately, the same basic principles of ROI exist no matter where infrastructure is located or how it is architected. It just takes the right strategy to achieve optimal results. The focus on cloud should be value creation for the business, not just cost. That’s the real measurement of success.