The Existential Spend-Control Threat
April 15, 2019

Everyone loves surprises, when they’re good. But in business, surprises are usually bad. Sometimes very bad. A failure to carefully control spend on externally provided services like cloud services can easily turn into a very bad surprise. This is especially true when the service has consumption-based billing and your customer suddenly receives an unexpected bill for tens or even hundreds of thousands of dollars for unanticipated overages. Here’s how to keep control over cloud spend and avoid potentially career-threatening surprises.

The way we work has changed, much for the better, thanks to cloud computing. So has the way in which we operate changed, especially the way we operate our IT systems. While much of what we do in this new operating environment is the same as we’ve ever done, and much of our effort has been removed, new responsibilities have arisen that we need to make sure we’re paying attention to.

What the Transformation Looked Like

The “digital transformation” that many are talking about was always intended to transform the way we work, improving our productivity, our efficiency, and our satisfaction with our own work. This was accomplished by switching from the way things had been done for decades to a new way.

Prior to the change we operated IT on equipment installed in our own offices. Perhaps it was a “network closet”, perhaps it was under someone’s desk, or perhaps your company’s needs required an entire data center. You installed servers, storage, switches, power conditioning, and all the other equipment required to process data. It was a major investment that you could expect to make all over again a few years down the road.

You probably hired people to operate and administer your network. You also paid for electricity and cooling for your network equipment, internet connections, maintenance and service for your equipment, and a few other monthly costs. These costs recurred monthly, and could vary considerably depending upon what happened that month.

The Transition from CapEx to OpEx

Then came cloud, and once you completed the migration to cloud services you sold off all your on-premises equipment, shut down your data center, drastically reduced your power and cooling expense, ended your maintenance agreement, and released much of your IT operations staff.

In place of all these investments and variable expenses you now had a monthly operating expense. Ideally, you replaced a lot of capital expense (CapEx) with much less operating expense (OpEx).

Many of the “core chacteristics” of cloud computing were very attractive. Your people appreciated the convenience of the self-service portal. Your finance team loved the idea of sharing from a pool of resources that could be requested and released upon demand, especially because you only paid for what you used and only when you were using it.

And that’s where the big problem reared its ugly head.

The Hidden Danger of Consumption-Based Billing

“Turn the lights off when you leave,” is a request we’ve all received, and given as well. It makes tremendous sense because electricity is another service we pay for based on our consumption.

Yet, how many times have you encountered an empty room and found the lights to be on. If you’re the one paying the bills, it irritates you. You work so hard to keep expenses down, and here’s a classic example of pointless waste. It’s all too common.

It’s really no different with cloud services. When users need more applications, more storage, more memory, more processor power, they simply visit the aforementioned self-service portal and request it. Rather than wait for hardware to be ordered, received, installed, and tested, the user enjoys instantaneous access to those resources. Fabulous. Powerful.

They then go ahead and do their work and move on.

Whoops.

Yes, whoops, you’ve probably already realized the step they skipped. They didn’t release the resources they had previously requested. So, you keep on paying for them and paying for them until someone, somewhere along the line, realizes there are idle resources active in the cloud.

The Nasty Surprise

In many cases that realization only comes when the bill arrives for your consumption-based billing. It may be a surprise of a few surplus thousands of dollars in overage, or it may be a “tens of thousands of dollars” surprise, even a “millions of dollars” surprise. Many early cloud adopters slammed headlong into a wall like this.

Some of those surprise surplus invoices ended careers. Nasty.

Innoculation through Administration

The simple solution is to establish a regular process of reviewing what cloud services are being consumed and have been consumed month-to-date. Which departments are consuming these services? For which projects? By which users?

You quickly identify your “frequent flyers” and can proactively manage the situation by either reaching out to them and prevailing upon them to do the right thing, or simply doing it for them. The former offers the additional advantage of letting users know their utilization is being observed. This should motivate them to exercise greater vigilance in making sure resources are released when no longer in use.

How to Keep Cloud Consumption under Control

Optimizer for Office 365 from Accordo keeps careful track of all cloud consumption. Thresholds set in Optimizer send alerts when acceptable capacities have been exceeded. Reports tell you who is walking away from their work without releasing cloud resources.

Talk to your Accordo representative today to learn how to put an end to cloud consumption waste.

Waste not, spend not!

Tony Sparks
Chief Product Officer at Accordo Group Ltd..