4 steps to streamline enterprise cloud spending

The proliferation of cloud computing has fundamentally reshaped how enterprises handle their critical workloads, transforming the cloud into a strategic tool and business enabler. Hyperscalers — cloud service providers that offer scalable, flexible cloud computing solutions — such as Amazon Web Services, Microsoft Azure, and Google Cloud have revolutionized scalability and flexibility. Organizations can now deploy applications and services with unprecedented speed. This ease of deployment, coupled with responsible cloud economics, has empowered enterprises to reinvest in growth, new capabilities, and innovation. 

According to a July 2024 report by Wipro FullStride Cloud, 54% of surveyed organizations cite AI as the main driver of their cloud investments, and over half are increasing investments in both hybrid cloud (54%) and public cloud (56%). Effective cloud cost management strategies are essential for addressing this trend and garnering better financial control and resource allocation. 

In the AI era, leading enterprises are leveraging cloud economics to reinvent themselves. The Wipro FullStride Cloud report shows that investments in the cloud are accelerating data migration and the adoption of AI tools and platforms. By strategically managing cloud expenditures, businesses can unlock new services, experiences, and capabilities that drive innovation and competitive advantage. Cloud economics allow enterprises to operate with flexibility and resilience to deliver value faster and more securely.  

Despite these advantages, many enterprises are seeing cloud costs skyrocket due to the unique nature of cloud spending. Unlike fixed-cost models, such as on-premises enterprise resource planning (ERP) systems, cloud spending is consumption-based and highly variable. Additionally, multiple departments and business functions often use the cloud independently, leading to siloed management, duplicative spending, and inflated costs that dilute the business’s ROI.  

Common pitfalls in cloud cost management  

Organizations often face several common pitfalls when managing cloud costs without a centralized approach. Addressing these pitfalls through responsible cloud economics can transform cloud investments into strategic advantages. Common pitfalls include: 

Fragmented spending: Different departments may independently purchase cloud services without coordination, leading to duplicated efforts and increased costs. Effective cloud economics governance ensures coordinated investments to reduce waste and maximize value. 

Lack of visibility: Without centralized tracking, getting a comprehensive view of cloud expenditures is challenging and makes identifying and eliminating waste difficult. In-depth cost-tracking tools provide detailed insights for better management and strategic reinvestment. 

Inefficient resource utilization: Resources may be over-provisioned or left running when unnecessary, leading to excessive costs. Continuous optimization through finops and automation identifies cost-saving opportunities for reinvestment in growth and innovation. 

Misalignment with business goals: When technology and cloud investments are not aligned with business objectives, they can result in inefficient resource use and missed opportunities for ROI. Aligning cloud economics with business strategy ensures that investments drive value and support organizational goals. 

Optimizing cloud investments for business value 

Implementing effective strategies for managing cloud costs can help organizations achieve better financial control and optimize their cloud investments. The following approaches are designed to address the common obstacles and provide a comprehensive framework for cloud cost management. 

Step 1. Establish a cloud economics governance team  

Leading enterprises recognize cloud economics governance as essential for optimizing cloud investments and realizing business value. These teams ensure responsible management of cloud resources, enabling reinvestment in growth, new capabilities, and innovation. Over half of North American organizations have adopted cloud economics governance or established centralized teams to manage cloud spending, according to the Flexera 2023 State of the Cloud Report. These teams provide a coordinated approach to managing cloud investments to facilitate better negotiation with cloud service providers and revamp pricing models. 

Furthermore, cloud economics governance teams can help achieve business results by integrating technology budgeting with business strategy. This approach democratizes tech investments across the C-suite and line of business (LOB) leaders, ensuring that technology serves organizational and customer-specific needs. 

Step 2. Implement cost tracking, tagging, and allocation  

Cost tracking and allocation not only control expenditures but also empower enterprises to strategically reinvest savings into new services and innovative capabilities. The accuracy of these practices is fundamental to understanding and controlling cloud expenditures.  

By tagging resources and allocating costs to specific departments or projects, organizations can gain detailed insights into where their money is going. AWS Cost Explorer, Azure Cost Management, and Google Cloud’s Cost Management suite are invaluable for detailed reporting and helping identify areas where costs can be reduced.  

Step 3. Leverage finops and automation for continuous optimization 

Finops and automation tools continuously optimize cloud resource usage, revealing opportunities for cost savings. These savings can be reinvested to drive innovation and create flexible, resilient capabilities that let businesses operate and deliver value faster and more securely. Finops is a crucial component of cloud economics that focuses on the operational aspects of cloud financial management. It uses a three-phase iterative approach: inform, optimize, and operate. This methodology helps organizations identify areas of overspending, take corrective actions, and reinvest savings for growth. By implementing finops practices, teams can focus on small sections of a cloud program at a time, making incremental changes that deliver significant value. 

Automated tools can further boost cloud efficiency by monitoring usage patterns and providing recommendations for cost savings, such as right-sizing instances or shutting down unused resources. 

According to Gartner, worldwide spending on public cloud services is expected to grow 20.4% to total $675.4 billion in 2024, up from $561 billion in 2023. This growth is driven by generative AI and application modernization, making cloud capabilities key differentiators and strategic competitive advantages. AI-powered algorithms and predictive analytics can provide more accurate cost forecasting, anomaly detection, and optimization recommendations, aligning cloud spending with business goals and adapting to changing needs. 

Step 4. Foster a culture of cost awareness  

Creating a culture of cost awareness within the organization ensures that cloud investments are aligned with business goals, promotes responsible usage, and empowers enterprises to reinvest in growth and innovation. This is a must for managing cloud spend effectively. Achieving such a culture involves educating teams about the financial implications of their cloud usage and encouraging them to consider cost as a key factor in their decision-making processes. Regular training sessions, clear communication of cost policies, and incentives for cost-saving initiatives can help build this culture. 

Adding a chargeback or showback model can further enhance cost accountability by making departments directly responsible for their cloud expenditures. Such transparency creates more mindful usage and encourages departments to actively seek out cost-saving opportunities.

From runaway to refined cloud spending

The rapid deployment capabilities offered by hyperscalers have undeniably transformed enterprise IT, but they also pose significant challenges in managing cloud costs. By establishing cloud economics governance teams, integrating robust cost tracking and tagging mechanisms, employing automation and analysis tools, and fostering a culture of cost awareness, organizations can transition from runaway to refined cloud spending. These strategies guarantee that cloud investments are optimized, sustainable, and aligned with the organization’s financial goals. To summarize:

Implementing chargeback models holds departments accountable for their cloud spending and promotes responsible usage. 

Cost-tracking and tagging tools provide detailed insights and reduce unnecessary expenditures. 

Leveraging analysis and automation tools optimizes cloud resource usage and identifies cost-saving opportunities in real time. 

Regular audits of cloud resources help identify and eliminate underutilized or idle instances contributing to unnecessary costs. 

By adopting these cloud economics strategies, enterprises can transform the cloud into a strategic tool and business enabler. Effective cloud cost management not only optimizes cloud investments but also unlocks business value, driving growth, new capabilities, and innovation in the AI era. With the right strategies in place, the benefits of cloud computing can be fully realized without the burden of uncontrolled costs. 

Jo Debecker is the managing partner and global head of Wipro FullStride Cloud.

—

New Tech Forum provides a venue for technology leaders—including vendors and other outside contributors—to explore and discuss emerging enterprise technology in unprecedented depth and breadth. The selection is subjective, based on our pick of the technologies we believe to be important and of greatest interest to InfoWorld readers. InfoWorld does not accept marketing collateral for publication and reserves the right to edit all contributed content. Send all inquiries to doug_dineley@foundryco.com.