In the early days of the cloud, many business and technology leaders agreed upon a cloud strategy that resulted in investing and deploying workloads to the cloud en masse, given the benefits of innovation and speed to market. Companies encouraged growth in the cloud without getting too hung up on cost. Inevitably, the downside of this unrestricted growth and expansion in the cloud becomes manifest: bloated infrastructure, cost overruns, inefficient use of resources, and triggering the pendulum to swing the other direction. Then, leaders begin beating the drum of cutting costs, consolidating workloads, and being more efficient with resources.
If asked the question whether or not you need to strategically invest in the cloud or reduce cloud spend, your answer is likely to be that you need to focus on both and do both well. But the truth is, even the best companies have a hard time doing both. Leaders race to produce material cost savings, causing slowdowns in time to market, disruptions in service quality, and innovation begins to stagnate.
Defining the goal of polarity management for cloud cost optimization
Is cloud cost optimization really a problem that can be solved? Is there a best “right” answer that can be discovered with the right expertise? Cloud cost optimization is not just another problem to solve; it’s a set of polarities to manage. Polarities are pairs of positive opposites that are both strengths or values needed over time for a healthy, integrated system.
On the surface, we may think of cloud cost optimization concepts as seemingly opposing ideas in conflict with one another, things that require trade-offs and either/or thinking. In fact, polarities are complementary and interdependent and demand both/and thinking. The goal of polarity management applied to the cloud is not to achieve “balance” but rather to manage a dynamic equilibrium. The cloud footprint of an organization and the organization itself are complex adaptive systems that are ever-changing. Therefore, the actions needed to maintain a thriving system will change over time.
5 steps to get started with polarity management
- See both perspectives of a polarity clearly and simultaneously
- Think through how the polarity has manifested as ebbs and flows in your organization
- Document the positive results of focusing on a pole and the challenges to avoid over-focusing on a pole
- Identify action steps to take to achieve the benefits and early warning indicators that signal you will need to adjust your strategies and tactics
- Adjust your organizational design, including roles and accountabilities, to create a thriving cloud ecosystem within your organization
5 essential cloud cost optimization polarities to manage
Pariveda has defined five cloud cost optimization polarities based on our experience working with our clients that, when managed well to a dynamic equilibrium, lead to increased performance, flexibility, innovation, and optimization of cloud costs over time.
On-demand vs. reserved instances
On-demand instances offer flexibility for short-term and irregular workloads, but they come at a cost. Reserved instances provide significant cost savings over on-demand instances, but require paying up front for specific instances for a 1-3 year term.
Auto-scaling vs. fixed resource allocation
Auto-scaling typically reduces costs compared to fixed-size resources but can complicate deployments and configuration. Fixed resources provide the desired capacity without delay but can cause performance degradation if under-provisioned for the workload and costly if over-provisioned.
Cost reduction vs. quality of service
While it is important to reduce costs and be more efficient using cloud resources, doing so haphazardly or too quickly can result in degrading service levels. Taking a hard-line stance on quality of service across the entire application portfolio may guarantee adherence to SLAs but limits the ability to find optimization opportunities that reduce costs while maintaining quality.
Cost management vs. innovation
Implementing cloud cost dashboards and reports allows companies to manage cloud costs at a granular level and provide visibility to cloud cost drivers to key stakeholders. However, this increased visibility and traceability of cloud spend can stifle and limit innovation. Focusing on innovation allows for testing of new cloud services, which can result in long-term benefits, but over-rotating on innovation without controls can lead to rapid increases in costs in the short term.
Centralization vs. decentralization
Centralization of cloud management can provide better controls and easier management of resources to the organization but can lead to rigid policies and governance procedures that slow down and limit application development teams on the ground. Decentralization of cloud management provides flexibility and more rapid decision-making but taken to the extreme, the cloud becomes the Wild West, leading to duplication of effort and an increased security risk profile.
Benefits of polarity management applied to cloud cost optimization
Applying polarity management to cloud cost optimization can lead to many benefits:
- Improved decision-making: By accepting the value of both cost reduction and strategic growth in the cloud, organizations can make more informed decisions about their cloud investments, given the holistic view of the system and broader time horizon.
- Increased resilience and adaptability: Identifying action steps and early warning indicators to find equilibrium between the poles of cloud cost optimization can help organizations proactively adapt to changing situations instead of reacting too late.
- Enhanced value creation in the cloud: By embracing a both/and mindset, strategies to achieve cost savings AND greater ROI can be achieved simultaneously in ways that cannot be when traditional problem-solving approaches are applied.
Building a business case for cloud cost optimization capability
Cloud cost optimization is an essential capability that organizations must build to navigate the turbulent macroeconomic environment and to increase resiliency in the face of uncertainty. The business case to build this capability is strong. Common research points to 10-20 percent of cloud spend being wasted, and some companies experience upwards of 20-30% growth in their cloud spend year over year.
If you’re the type of leader that wants to deliver immediate cloud cost relief in the near term, partner with application development teams to modernize your usage of the cloud, and build a cloud cost optimization capability for easier long-term cost inflation controls, then Pariveda has a bespoke offering that leverages polarity management to co-create a comprehensive cost optimization model and business case.