How Do You Budget and Forecast for Future Cloud Needs?

7 May 2019 | Posted by Josh Bouk

Every enterprise wants to do more with less – it’s simply good business. However, while there are time-tested, well-established methods for budgeting and forecasting traditional OPEX costs, when it comes to cloud financial management, confusion reigns.

With 83% of enterprise workloads set to be public cloud-based by 2020 – and as much as 35% of all cloud spend globally going to waste – being able to accurately budget for what you’re spending on cloud costs and plan for the future has never been more important.

But where do you start?

Inventory Management

Starting off simply: do you know who in your business is spending what and where? This might sound obvious, but, if you don’t have complete visibility of your cloud spend then budgeting and forecasting are near impossible. After all, you can’t predict what you can’t measure.

There is any number of ways you could be paying more than you think. For one, spending that happens without the oversight of the IT department – and cloud services are a prime candidate for this. People hate red tape, and most organizations allow anyone with their own budget access to a company credit card, creating the perfect conditions for unplanned spending. Before you can start accurately budgeting you need to know whether the workforce has been buying extra cloud instances without telling anyone.

It could even be something as innocuous as a cloud engineer setting up a test instance, getting distracted, clocking out for the day, and leaving the instance up and billable – despite never intending for it to be actively used.

The point is that before you can even begin trying to budget or forecast spending, you need an up-to-date record of your cloud resources. This is something you could do yourself or through the proprietary capacity monitoring software offered by most cloud providers, however, both have their drawbacks. The former is time and resource intensive, while the latter is only as effective as your understanding of its recommendations – it’s not uncommon to see businesses using these tools and only implementing 25% of the actions prescribed.

A great alternative is to enlist the help of a third-party cloud management service provider. A good provider will be able to track any changes to your inventory as they happen and keep you updated in near real-time – saving you any nasty bill-shocks and allowing you to be proactive about providing staff with the tools they need, long before they ever reach for the company card. 

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Track Your Trajectory

The next logical step once you know what you’re spending and where is to establish your budget. But once you’ve optimized existing cloud overspend, how do you stop your enterprise from going over budget again?

The answer is to monitor the trajectory of your cloud usage in real-time. With access to consumption-to-budget data, you can track when your outlay is coming close to or exceeding your upper limit. Again, this is something you could do in-house, provided you’re able to track how much you’re using at any given time and have a good idea of what that represents in financial terms.

This is completely possible using capacity tracking tools like AWS CloudWatch, nevertheless, it is time-consuming and requires almost constant attention. Like your inventory management, it’s far easier, quicker, and less risky to entrust a third-party to do it for you. What’s more, it’s likely to yield far more impressive results.

A cloud management provider with a budget tracking service should be able to offer automated notifications to tell you when spend trajectory indicates you’re likely to go overboard – long before it actually happens. In addition, a comprehensive third-party service will include regular reporting from your provider, vital in mapping your overall trajectory and giving you the data needed to accurately forecast what you’re set to spend in 1,2, or 6 months’ time.

Conduct Regular Invoice Analysis

Like the other suggestions on this list, auditing your invoices must be a continual process if you’re going to stay within budget and accurately forecast your cloud costs.

Cloud service providers tend to have complex pricing models based upon multiple usage metrics and update these prices frequently. This means that what may be the most economical use of your resources today might not be tomorrow. As a result, staying on top of ever-changing pricing scales requires a level of attention most in-house IT teams are ill-equipped to provide on top of all their other responsibilities.  

Conducting regular invoice analysis is also vital to identify where you might be paying for instances you don’t need and even those you weren’t aware were in use and billable. But, it’s also a full-time job and requires an intimate knowledge of cloud pricing structures and, more importantly, knowing where to look.

This is where enlisting the expertise of a managed service provider can really help. Not only does working with a third-party remove the resource burden from your finance department, but they’ll also be able to deep-dive into your invoices with a level of knowledge you're unlikely to find internally.

Digging into your spend on a granular level can give you a more accurate approach to allocating and forecasting costs. For example, basing budgeting upon which department consumes which service at what rate, rather than focusing on your overall bill. Furthermore, a management service can help you automate this process, so you allocate resources based upon real-time consumption as opposed to under or over budgeting – allowing you to run your cloud less like an operating expense and more like a business in its own right.

Use an Independent Management Service

Lastly, if you do decide to use a third-party management service, then – and we can’t stress this enough – go independent. Most cloud providers offer cost optimization and budgeting services or tools, however, you have to question how impartial they can really be – they run businesses after all.

Likewise, many cloud management providers, while appearing to offer neutral counsel are often tightly entwined with one of the big cloud providers. There’s nothing wrong with this per se, but you have to be aware that any advice you receive will potentially have an ulterior motive and may involve selling you additional services from their partner company.

To avoid this, seek out a management service that acts independently of the big 3 cloud monoliths. That way you can be sure that reducing your bottom line is the ultimate end being worked towards.

 
Ultimately, budgeting and forecasting cloud spend is a complex and continuous process and these suggestions are just starting points. However, as we've demonstrated, the process can be made far less resource-intensive and more likely to deliver the savings you set out to achieve with the help of a specialist cloud management service. To learn more about cloud management and how to harness the options available, download our whitepaper

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Topics: Cloud Management Services

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