Rein in Runaway Costs Through Cloud Financial Management MARKET TRENDS REPORT
Executive Summary Runaway spending has become one of the most common problem in cloud infrastructures. As enterprises increasingly move operations away from onpremises data centers to take advantage of the cloud’s many benefits, the unexpected and unseen costs of migrating to and operating in the cloud can push systems over their allocated budgets. For federal agencies, this becomes an acute problem when it approaches the fixed cost included in contract awards. Agencies do a good job with managing production and maintenance costs, but the cloud has a different set of challenges. For example, developers regularly experiment in the cloud, adding new capabilities and services that involve various costs. And as an agency’s cloud infrastructure grows, it becomes significantly more complex, often part of a hybrid environment involving multiple providers. That complexity, combined with the elasticity and scalability of the cloud, can make it difficult to track the cost of cloud operations — and to know whether that money is being spent efficiently. The answer? Cloud financial management, which should be an essential component of any cloud operation. This isn’t a simple process; agencies need to take the right approach to get the results they need. To learn more about cloud financial management, GovLoop developed this report with IT and cloud solutions provider Varcons, an Amazon Web Services (AWS) advanced consulting partner. The report examines the reasons behind runaway costs and the tools and processes necessary to rein in spending.
2
MARKET TRENDS REPORT
By The Numbers
$6.6 billion 35% U.S. federal government spending on cloud computing in the 2020 fiscal year.
of organizations projected their 2020 cloud spending to be over budget by 20 to 40 percent.
$7.8 billion 64% projected federal spending on cloud computing in 2022.
60%
of organizations say cost management and containment is their biggest concern with running big data applications in the cloud.
of cloud cost overruns will impact organizations’ on-prem budgets by 2024.
36%
the potential cost savings from rightsizing workloads and using automation.
REIN IN RUNAWAY COSTS THROUGH ADD TITLECLOUD HERE FINANCIAL MANAGEMENT
3
From Tracking Costs to Optimizing the Cloud Challenge: Costs Can Get Lost in the Cloud
Solution: Follow the Money
Though cloud computing provides many efficiencies, there are several reasons why spending can exceed plans. Developers will develop: Developers tend to focus on improving service and adding capabilities, rather than worrying about costs. Especially in an agile, continuous integrations/continuous delivery (CI/CD) environment, that kind of innovation can take a program’s costs beyond its allocated budget. The downside of scalability: One of the strengths of cloud computing is its nearly infinite scalability — but that can also add unexpected costs to a project. In situations like a pandemic, the demand for data from other agencies and the public can grow quickly. The cloud makes it simple to meet that demand, but not without a cost. “The cloud is so agile, elastic in nature, that if the demand keeps coming, you just keep on spending the resources,” said Venkatesh Krishnaiah, Varcons’s director and founder. Systems that don’t meet agency needs: Government’s focus on selecting the lowest-price bid that meets its requirements — within a fixed price — can sometimes result in solutions that aren’t quite right for the demands an agency will face in a shifting cloud-based environment. Whether it’s an application that doesn’t follow AWS best practices or an unnecessary storage system, working with a poorly planned solution can increase costs. Lack of visibility: As cloud infrastructures grow, one of the biggest challenges is maintaining visibility into the enterprise. Agencies can lose track of abandoned cloud instances that still take up some of the budget. The complexity of the infrastructure also can make getting accurate information on spending difficult to come by.
4
Cloud financial management is about knowing how money is being spent and what you’re getting in return by using effective metrics — which can be easier said than done. “Basically, they need to monitor the usage cost of the billing data,” Krishnaiah said. “You need to measure what you are managing.” The scalability and the pace of agile development in the cloud, however, has given many enterprises the idea that the cloud isn’t really measurable. Krishnaiah disagrees. “You can measure” with the right tools and processes, he said. “You can deliver the project within a predictable budget.” Among the key steps involved: Tagging: Implementing an effective cloud cost modeling and budget management system starts with assessing the system, Krishnaiah said. And that starts with tagging, using labels to apply customized metadata to cloud resources. Tags can be used on any type of resource — like user groups, databases or virtual machines — and make them easier to manage, search for and filter. They provide visibility into the enterprise and help optimize costs across cloud providers. Controlling resource usage: Managing resource capacity is an essential element. Agencies need to be able to estimate the resources required for a cloud instance and shut them down if needed. Most government work is handled during business hours, but the cloud runs 24/7; plus, developers can spin out new capabilities at any time. Shutting down those resources for the night can save 1.5 times or more over the costs of business-hours consumption. Monitoring: Monitoring, with data analytics and the dynamic ability to enforce resource limits, also helps keep usage and costs in line. Keeping track of billing by interactively and dynamically controlling resource usage is key to cost optimization.
MARKET TRENDS REPORT
Best Practices in Cloud Financial Management Make Optimization a Priority The first step to making cloud financial management a reality is to implement a cost billing model and a budget management system. Comprehensive cost analytics can generate accurate spending information across multiple environments. A cloud-cost billing model can capture billing data across those environments and perform advanced data analytics to identify inefficiencies that add to system maintenance costs.
Right-Size Resources One of the advantages of gaining visibility into infrastructure is the ability to identify and rightsize resources. In addition to eliminating abandoned resources (like test sites, older applications or unused storage), agencies can right-size over-provisioned resources, such as a system that is taking up a large chunk of the budget while only using 10 percent of its resources. Visibility also allows managers to realign misconfigured storage by correcting misclassification of data or assigning infrequently used data to warm or cold storage.
Monitor With Teeth Monitoring and data analytics, fueled by artificial intelligence, can help govern resource usage. Usually, agency managers find out that a system has exceeded its budget when they get an email telling them it’s already happened. An effective system can establish application frameworks and usage parameters, and employ monitoring and advanced analytics to send system spike alerts and stop activities that are taking a system over its budget. For example, it could stop a system when it gets to 90 percent of its budget allocation and flag it for review. Application monitoring can also identify and analyze performance issues to eliminate downtime.
Conduct Regular Reviews Sticking to the operational plan is essential for keeping any system within budget. But in the cloud, that can be hard to do without tools to control spending. Each agency operates differently, depending on its own culture and mission, and inefficiencies can surface when integrating a cloud solution into its framework. It’s important to take advantage of the costcontrol features from providers like AWS. A cloud financial management solution can identify where inefficiencies are located and recommend how the agency can make better use of the tools it already has.
REIN IN RUNAWAY COSTS THROUGH CLOUD FINANCIAL MANAGEMENT
5
Case Study: Agency Increases Services, Not Spending In June 2019, a federal agency that handles secure document transfers wanted to expand a small cloud operation it had started several years earlier — but was concerned about staying within its budget. The agency wasn’t sure how heavily it wanted to use the cloud due to the challenge of predicting the total cost of ownership — including migration, implementation and usage costs—while working within a budget established six months ahead of time. It couldn’t be sure of either the costs or potential savings. The agency enlisted IT professional services company Varcons, which implemented a cost-control and management system that provided a predictable way of managing spend with best practices. Varcons was able to show the agency where costs were coming from and where it could save more. When it started, the agency had 20 accounts with a monthly bill of $180,000. Now, the system is up to 70 accounts — but the monthly bill amount has stayed the same. The agency is now expanding its cloud use to other areas and is able to plan its budget. Whenever the agency adds a new application or migrates an existing application to the cloud, its IT leaders know they can predict what the budget will be and understand how to stay within it. They are able to scale cloud operations without necessarily seeing a corresponding hike in spending.
6
HOW VA RCO NS HE L P S Varcons’ CloudThrottle framework for cloudcost modeling, budget control and management gives agencies the tools they need for cloud financial management, such as comprehensive cost analytics, Cloud budget planning, and a cloud-cost billing model that captures data across multiple cloud environments. It enables agencies to right-size resources and use advanced analytics to break down costs by service, storage type, resources and projects, putting that data into a single dashboard. Its monitoring tools and analytics keep close track of resource usage and can shut down unnecessary operations before they exceed budget limits. As a certified AWS advanced consulting partner with a focus on the public sector, Varcons’s experience with cloud services and its approach to cloud financial management can give agencies a new level of control over cloud spending. In the fixed-price world of government agencies, Varcons can help keep cloud systems within their budgets. Learn more: https://varcons.com/cloudthrottle
MARKET TRENDS REPORT
Conclusion Implementing and maintaining cloud services in a continually growing and changing environment requires effective cloud financial management. For agencies to control their costs, they need visibility into their infrastructures, the ability to control their resources and knowledge of where money is being spent — or should be. A framework for cost modeling and budget management, with granular monitoring and advanced analytics, is essential to staying within budgets now and in the future.
ABOUT VA RCO N S
A B OU T AWS
ABOU T GOVLOOP
Varcons offers innovative, customized, and cost-effective IT modernization strategies for commercial and public sector clients. No matter where you are in your transformation journey, Varcons experts will help create and execute the most optimized, budget-conscious solutions for your organization. Varcons patent-pending dynamic Cloud cost control and budget management “CloudThrottle” framework provides robust, actionable multi-cloud cost control and analytics under a single dashboard.
Amazon Web Services (AWS) is the world’s most comprehensive and broadly adopted cloud platform. Millions of customers, including government agencies, are using AWS to lower costs, become more agile, and innovate faster while powering infrastructure and providing reliable, mission critical services.
GovLoop’s mission is to “connect government to improve government.” We aim to inspire public-sector professionals by serving as the knowledge network for government. GovLoop connects more than 300,000 members, fostering cross-government collaboration, solving common problems and advancing government careers. GovLoop is headquartered in Washington, D.C., with a team of dedicated professionals who share a commitment to connect and improve government.
Learn more: varcons.com/cloudthrottle
Learn more at www.aws.amazon.com.
For more information about this report, please reach out to info@govloop.com.
REIN IN RUNAWAY COSTS THROUGH CLOUD FINANCIAL MANAGEMENT
7
1152 15th St. NW Suite 800 Washington, DC 20005 P: (202) 407-7421 | F: (202) 407-7501 www.govloop.com @GovLoop