Lately, it's hard to open an economic website without encountering news of hi-tech employees being laid off. These headlines reflect the mood in companies all over the world -- streamlining. The reduction in personnel is just the tip of the iceberg of a much more comprehensive process, which includes all units in the organization. It's safe to say that today there is almost no CEO in the world who is not turning his company upside down in an effort to find excesses that can be cut.
But there is one sphere in which companies are not making cuts; instead, its share in companies' investments is actually growing -- cloud services. In the past decade, companies have been transferring their operations to the cloud, and this trend is expected to continue this year as well: according to the research firm Gartner, investments in products operating solely in the cloud (PaaS) and software services in the cloud (SaaS) will increase by 23.2% and 16.8%, respectively, in 2023. "The transition to the cloud is not going anywhere," the Gartner researchers conclude.
This is for a simple reason: investment in the cloud is essential to continue generating revenues and grow in the current period, as well as helping streamline costs. And yet, even this crucial expense can be handled more efficiently, thus saving large sums of money. As someone who deals every day with streamlining cloud costs of hundreds of Israeli companies, I have assembled here a few of the ways that companies can save on cloud costs in 2023:
Instill an organizational culture of responsibility for cloud spending
In the study "The State of the Cloud" (published by Pluralsight), administrators in technology firms who use the public cloud in the U.S. were asked to what extent the monthly bill for their cloud services matched their prior expectations. 70% were unpleasantly surprised by the size of the bill, 30% said that it matched their expectations, and only 1% said they were pleasantly surprised. This situation applies to Israel as well: in most organizations, there is no ongoing, day-to-day tracking of cloud expenses. Technology people do what is needed, without checking the costs, and the bill goes to the CFO at the end of the month when he really has no idea how high it will be.
It is impossible to set a cap on cloud service costs, such that the company would stop using them as soon as it reached that ceiling since whole systems operate in the cloud -- from sales to customer service. Restricting cloud use in this way could disable services and damage a business.
So, what can be done?
Conduct training for technology people on ways to reduce costs and get them used to checking the cost of the operations they are performing in real-time, by administering an appropriate organizational culture, measuring effectiveness and use of the cloud services at the levels of development teams, units, and departments, and presenting this data to employees on a regular basis.
Drive to the grocery store in an Autobianchi, not a Mercedes
Make sure that the cloud resources you're paying for by the hour are being fully used. Thus, for example, the computing power of a virtual machine located in a server farm is measured, among other things, by its number of processors. It is not rare to see instances in which a software solution can manage with 4 processors and 16 gigabytes, but the organization actually implements a virtual machine of twice that size (in the best-case scenario!), paying for 8 processors and 32 gigabytes, just "to be on the safe side". This is a wasteful use of cloud resources.
Another example: in a server farm, disks that store companies' data are being "dusted off", for pay of course, but the disks are not connected to the virtual machine and hence the information is not continuously accessible to the organization. Sometimes these are disks or copies that have been "forgotten", other times it is information that the organization needs only rarely, and therefore deletion of the disks is avoided for fear of losing critical information. Sometimes this information is unnecessary and can be deleted, but even if not, there are cheaper ways to save it than holding it on a disk in a server farm.
Disconnect from the cloud any services that operate at night and on weekends
Some of the company's services that operate in the cloud do not operate at night or on weekends -- for example, development and testing environments. Disconnecting these services from the cloud at night and on weekends will cut more than 50% from their cloud usage time and thus save significant sums of money.
Transfer information that is not immediately needed to an archive
Another way to improve the use of the cloud is to adjust the information storage method to the information's frequency of use, importance, and the level of urgency with which it is required (in professional language this is called "storage lifecycle management"). The information can be divided into 3 categories, based on the frequency it is needed by the organization: high, medium, and low. The information with low frequency can be stored in an "archive" in which the information is not immediately available and every information call operation is expensive, but the storage cost is significantly cheaper. Significant savings in cloud expenses can be realized if you keep track of the access frequency to various types of information and move types of information between different storage levels, according to the need for the information.
You can also save money on the information stored in the archive. The company must decide for how many years it wants to save the information, without access to it even once -- mainly in response to regulatory obligations on saving information. The information can be stored in an archive -- but it is important to define the desired period of time for which it will be stored.
Manage commitments wisely
You can reduce the price by proper management of commitments to purchase cloud services from the cloud platform. An organization can, for example, commit to using the services of a certain machine, which costs $30 per hour, throughout the year -- and get a 40%-70% discount on the price depending on the length of the commitment.
Update the product's architecture
Changing the architecture of a product that operates via the cloud can significantly reduce the costs of cloud services without harming the company's operations. Thus, for example, a marketing chain uses cloud services in the systems for stock management, employee management, online orders, scheduling drivers, and more. The architecture of these functions may have not been updated for a number of years. By improving the use, as well as using more modern services, which are sometimes cheaper than the existing ones -- cloud expenses can be reduced.
Written by Baruch Toledano FinOps Manager at Sela.
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