Why the Cloud May Not Be Cheaper


By: R. Scott Raynovich

Most technology is introduced for one of three reasons: to enable new products, to speed up the creation of services, or to produce a cheaper way of doing something. We now know that cloud infrastructure has produced an explosion of new apps and services – but we don’t yet understand its full impact on costs. As the cloud journey accelerates, so will the need to understand and manage its costs.

With the recent changes in the economic environment -- inflation, rising interest rates, and the adjustment to the post-pandemic environment -- there is a rising interest in containing costs. We expect this trend to continue in 2023, and much of the focus will be on Cloud Cost Management (CCM) and FinOps, two rising trends in the cloud management world.

Why Cloud Was Never Cheaper

During the nascent days of cloud adoption, there was the line being peddled that moving to the cloud would not only help companies to reduce the cost per bit of their compute and storage resources but also allow them to shift the finance burden from inflexible and unpredictable capital costs to more malleable and accounting-friendly operating costs. In practice only the latter proved to be true. Yes, cloud costs can be counted as opex, but most companies find them to be nowhere close to “cheap” compared to on-prem resources.

To be fair, cloud is broadly acknowledged as having provided increased flexibility in how compute and storage resources are purchased. It also provides agility to procure more IT resources to support R&D, ongoing product development, and internal digital transformation efforts. As one might expect, this flexibility and agility has come at a cost. In our conversations with large companies that have moved to the cloud, we have learned that most of these companies admit that as more workloads are moved to the cloud, those costs exceed what they are spending on their on-prem resources. And for cloud-native companies, having the majority of their cost of goods sold dedicated to unpredictable cloud costs can put a strain on their ability to finance day-to-day operations.

Today, as many companies are dependent on a more complex cloud operating structure -- more cloud data, more cloud suppliers, better cloud data management needs, better cloud security needs, etc. -- the financial implications of the myriad of daily decisions can have a profound impact on that company’s cloud bill and its overall operating budget.

Cloud Cost Remedies?

Ask an executive how to control something, and one of the top answers on the board will usually be “better governance." So how do managers control cloud costs at a time when business-led IT has become so pervasive that the tech budgets for many companies are not even governed by central IT? Even where cloud costs are managed through a central IT budget, how much cost control can be exercised when an engineer on almost any scrum team in the company can spend thousands of dollars by simply coding an API call? Moreover, how much cost control can be exercised when finance groups do not have the time or visibility to monitor cloud usage until the bill arrives, much less the technical expertise to understand the cost drivers?

We hope to answer many of these questions in a new area of coverage for us: Cloud Cost Management and FinOps. Futuriom is launching our Cloud Cost Management and FinOps report and coverage in 2023. Our first report on the topic will ship in April of this year.

Enter Cloud Cost Management

2023 may well be the year of the rise of CCM and FinOps solutions as categories that help organizations get a handle on cloud costs. These categories are gaining new support from organizations such as the FinOps Foundation. However, we have felt the need from our customers to provide meaningful insight into how companies are thinking about cloud costs and what can be done to manage them more effectively.

Futuriom will be publishing a report on this topic later this month -- "Cloud Cost Management and FinOps 2023." We'll dive directly into the key questions being asked by cloud managers today. These questions include:

  • What are the cost challenges of hybrid and multicloud, and why is awareness rising?
  • What is the current state of CCM techniques?
  • What are cloud suppliers doing to help manage cloud cost complexity?
  • What are the requirements for setting up a FinOps practice?
  • What does the market look like for third-party cost management tools?
  • What can FinOps do today? What will it be capable of doing tomorrow?

As we work on the finishing touches of this report, we’d like to hear from you. If you have a CCM practice up and running, great! We’d love to hear about your journey. Click here to reach out. We are also interested in hearing from you if you have a CCM solution that you’d like to brief us on, or if you would like to support the report with sponsorship.