November 2018

The cloud is here – but managing its costs and optimizing benefits is up to you

By Amanda Vernazza

A decade ago, early adapters enthusiastically embraced cloud computing, but the larger business world waited skeptically with questions such as ‘how safe is this?’ ‘How much will it cost?’ ‘Will it really improve productivity?’ ‘Will it give me a competitive edge?’

Today, there is still some hesitation around migrating to the cloud. Because the cloud is still considered fairly new technology, there hasn’t been an established trust in it yet. Some organisations maintain the “don’t fix what’s not broken” mentality, arguing that on-premise infrastructure has worked effectively. Others are generally uncomfortable with having major pieces of the business running in the cloud. And the potential security risks in transferring data between on-premise and public clouds concern nearly everyone.

Yet more organisations are moving to the cloud because of the increasingly apparent benefits: greater reliability, in-depth analytics, mobility and cost-savings (usually). As the “2018 State of the Cloud” report by RightScale found: “When comparing cloud adoption in large and small companies, it is interesting to note that for the first time in 2018, a larger portion of enterprise respondents are in the two most mature stages.”

So, your organisation is now on the bandwagon and needs to build out a cloud infrastructure. Where do you begin?

A recent Forrester study found that only four percent of organisations run their applications exclusively in the public cloud. Seventy-seven percent are using multiple (hybrid) types of clouds, both on-premises (private) and off-premises (public). Gartner expects almost half of all business users to move their core collaboration and communications systems to public clouds by the end of this year, and more than seventy percent of businesses will be substantially provisioned with cloud office capabilities by 2021.

The up-front costs for setting up a private cloud may be too much for organisations with smaller budgets, which is why most organisations are adopting a hybrid cloud solution. Hybrid cloud technology allows for flexibility in the organisation without migrating everything to the public cloud and the ability to keep secure information on-premise. But hybrid cloud can also bring security risks, issues with legacy systems and budget challenges.

Migration to the cloud will change organisations’ IT role in many ways:
• Managers will need to become more business oriented – as in assessing the needs of the organisation and creating new processes to meet them
• They may lose control over certain resources i.e. internal networks, servers, operating systems, storage and applications that will be controlled in the cloud
• They will find that clouds eliminate the need for ongoing maintenance, lead to figuring out how to deploy applications faster and add value to current applications

Once your company has migrated, you may not notice the complexities in managing the cloud right away. But they are there: lack of visibility into usage and expenses, assets, costs and usage and other processes. Most companies don’t realise the need to bring in a management system until costs and applications have gotten out of control.

An example: companies that are used to having bills in the hundreds of dollars may suddenly start seeing costs coming in at $40,000 a month. Bills and Invoices will be difficult to understand. Unbudgeted costs may be incurred. Forecasting will be more difficult. It can get overwhelming quickly.

The best way to manage it before it gets to that point is including a cloud expense management (CEM) system in place upon migration (or as early as possible). A good CEM will not only manage expenses and financials but will:
• Provide the visibility needed for control and forecasting
• Help identify billing errors and overspending
• Identify cost-savings opportunities

Gartner predicts that by 2020 organisations that lack cost optimisation processes will on average overspend by forty percent in the public clouds. Thus, your organisation could benefit significantly through a partnership with a managed services provider that knows expense management and can provide additional services to address needs outside of what the CEM system. This includes – among others — negotiating contracts and ensuring that you’re being charged correctly; providing analysis of your spending; looking for cost savings; and integrate other internal systems to work with the CEM system.

An IT expense management partner who understands these complexities can assist enterprises in driving value and improving governance of these rapidly growing expense categories. Getting ahead of the complexities the cloud brings with a CEM program will not only manage expenses but to increase the visibility into usage and costs to optimise the benefits the cloud can bring to your organisation.

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