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Understanding the real cost of migrating to the cloud

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ORGANIZATIONS in the digital age often have complex IT infrastructures with many elements and moving parts, some on-premise and some on the cloud — with many integration points.

The sheer complexity of the systems makes it difficult for business leaders to track IT spends and accurately determine the return on investments (ROI).

Among them, tracking cloud spending is especially more troublesome, and given how some US$206.2 billion will be spent on public cloud service in 2019 according to Gartner, having a handle on the cost and benefit of cloud deployment is vital.

While the rising cost of the cloud is just a small fraction of overall IT spend, organizations could rake up big bills, and this especially true for larger enterprises where tracking spending could be even more challenging.

In addition, big organizations tend to be more careless with their cloud utilization, may it be the developer or individual business unit bypassing central IT budget to acquire SaaS, or lift and shift project that from one location to another.

Further, according to one report, about 40 percent of IaaS (infrastructure as a service) were provisioned with more spec than required, leading to wastages.

The harsh truth is, enterprises are still struggling to manage multiple cloud hosts and find themselves relying on traditional and manual methods involving spreadsheets, which are ineffective and often counter-productive.

Some cloud providers offer billings APIs and portals with visualizations to highlight underutilization and alert users on services that companies pay for, and not use.

But to use these tools for effective budgeting and spendings, companies also need to have proper SOPs in place to manage the cloud resources. For instance, cloud resources could be tagged for every usage by different projects, or adopting a standardized  SKU across the organization, to eliminate duplication of entry.

Increased visibility to control costs

Deployment of SaaS also presents similar issues to issues to organizations whereby, due to its nature, the services may not be visible to anyone in IT, procurement, or finance.

This lack of visibility presents cost implications for any organizations as in the end it is the IT team that allocates user licenses, negotiate services prices with vendors, and deals with chargebacks.

If they are in the dark, they will not be able to gauge the utilization or productivity.

Beyond that, companies also need to be aware of the metrics that cloud services are based on. The last thing any organization wants to find is being locked into a long term SaaS contract with the pricing based on metrics that the business cannot control.

For example, if the vendor levies charges per transaction, a slowdown in economic activity may reduce the number of transactions and revenue, but the cost will remain the same. Having a dedicated team to manage SaaS contracts proactively and engage with alternative solution providers may come in handy for companies.