Cloud cost management: Strategies to save in 2024

Innovation remains critical with a staggering 94% of tech executives increasing their IT spending. But more spending requires a keen oversight of assets, expenses, and returns. Where do innovation funds flow? How effectively are new resources utilized? Is your legacy tech portfolio streamlined? How can IT waste be funneled into new investments? Without comprehensive visibility and insight into spending, companies can become crippled under a mass of technical debt that bars digital transformation. 

As 2024 unfolds, businesses need to ground their costs and direct budgets towards future opportunities. With cloud infrastructure and software leading IT spending trends, the first point of focus for any cost optimization effort should be the cloud.

5 challenges around cloud cost management…

1. As innovation broadens and diversifies, managing cloud costs becomes increasingly challenging. Companies struggle to keep a lid on new purchases and fail to use what they already own to its maximum potential, often resulting in overprovisioning and cost overruns. Today, a staggering 29% of cloud assets are unused or underutilized.
2. Generative AI gives rise to costs, which largely depend on cloud computing to power its workloads. The potential of AI is enormous, but investments must be framed around demonstratable business outcomes and returns.  
3. Just like everything, cloud computing is reeling from inflation. Companies are going through the wringer as top public cloud service providers work to sustain profitability.
4. Cloud sprawl – the expansion of cloud usage – is a major issue akin to accumulating items in a “junk drawer.” It’s easy to buy duplicates of what you already have when you’ve lost count of what you own, wasting funds and creating more clutter to manage.
5. Navigating the vast array of options to pinpoint the optimal pricing model for your cloud infrastructure service can be daunting. There can be tens of thousands of SKUs for a single hour or partial hour of service. This overload of choices demands flawless analysis – one only suitable for advanced AI tools.

…and 3 ways to solve for them  

Every cloud-enabled business needs to mind the meter and get savvier about implementing cost-cutting measures. Here are three ways to simplify, save, and optimize in 2024.

1. Leverage AI to optimize cloud assets and drive cost efficiencies

AI’s heavy reliance on cloud resources can unexpectedly spike costs, but the technology is also a lynchpin of cloud cost optimization. Machine learning and advanced algorithms consistently evaluate usage data, running what-if scenarios and identifying cloud use patterns on a massive scale to make cost-cutting recommendations in near real time.

• AI can root out savings and immediately pinpoint infrastructure waste with insights based on the comparison of millions of pricing schemas, then automation acts on these recommendations with one click of the approval button.
• AI is just as effective for Software-as-a-Service (SaaS). Software evaluates application usage data and user behaviors, flagging instances of redundant tools and unused licenses that can be reallocated to avoid unnecessary expenses. They drill down into security risks and fraud alerts with a clear view of known and unknown software and costs. Plus, they understand call detail records and find the root cause of any overage fees on your unified communications bill.
• Automatic alerts inform stakeholders of cost threshold violations so they can work proactively to avoid overspending.

2. Capitalize on shifting market dynamics to maximize IaaS savings

The upside of inflation is that it fuels business competition. In 2023, one of the clear frontrunners for public Infrastructure-as-a-Service (IaaS) reported its slowest revenue growth in at least a decade; meanwhile, its competitors experienced their highest growth rates. Intense market competition is bringing compelling offerings at new price points. Now is the best time to shop the market and negotiate the best terms using long-term commitments to optimize costs.

AI-powered cloud expense management software can quickly normalize unstructured data to bring forward apples-to-apples comparisons across multiple cloud service providers, so companies can see their spending trends based on each provider, understand where the best deals lie, and explore what future expenditures would look like under different purchasing scenarios. Tools also constantly monitor fluctuations in service prices across all major providers, enabling companies to strike while the iron is at its hottest.

3. Drive efficiency across the entire cloud cost management ecosystem

Savings and efficiencies skyrocket when IT and finance teams work in harmony to manage the seemingly infinite number of triggers and variables in today’s cloud cost optimization equation — from SaaS license management to infrastructure invoice processing to contract management and cost allocations. A centralized strategy and platform improve IT and financial operations by streamlining and aligning all cloud cost management tasks and workflows.

For example: 

• CFOs can integrate their financial systems and budgets into cloud expense management platforms to compare actual daily costs against projected spending. Just as IT teams can easily see consumption and waste across multiple cloud service providers, finance teams can easily pinpoint budget-to-actual variances.
• Finance and IT teams can set customizable business rules for cloud chargebacks, holding departments, lines of business, and innovation projects financially accountable for their infrastructure and software service costs. This tracks how cloud investments flow across the business and deliver tangible returns.
• Working from a single source of truth that bridges cloud spending and usage information with financial practices, budgets, and forecasts, cross-functional teams can work together toward the ultimate goal – lowering expenditures.

The red thread that links these strategies together is AI-powered transparency and productivity for cloud management, leveraging technology rather than manual processes to put comprehensive checks and balances in place. Companies that use AI for cloud cost optimization see +20% greater overall savings than those that don’t. Keeping all of this in mind, companies can easily trade technical debt for financial health in 2024 and beyond.

Accelerate your cloud savings and insights with Tangoe, the leader in AI-powered cloud expense management.