Rising cloud costs leave CIOs seeking ways to cope

If you’re stressing over cloud cost increases, you’re not alone.

Three out of every five organizations saw cloud spending increase in the past year, with nearly four in 10 who experienced price hikes saying their costs jumped by more than 25% — this according to a recent survey of IT professionals commissioned by cloud provider Civo.

Several factors appear to be driving cloud cost increases, including inflation, a rush to deploy compute-hungry AI, and energy costs, says Mark Boost, CEO of Civo, which bills itself as a low-cost competitor to the big three hyperscalers.

Some cloud providers also have “complex and opaque” pricing structures, Boost claims, adding that, in some cases, cloud providers charge customers for volumes that aren’t automatically removed when instances are deleted and for data transfers between cloud services and regions.

More workloads in the cloud

In addition, many companies are moving larger and more complex workloads to the cloud, says Mayank Bhargava, vice president and cloud modernization practice leader at CGI, a business and IT consulting firm.

“As organizations continue their digital transformation journeys, they are migrating more critical workloads and data to the cloud, which naturally leads to higher costs,” he says.

Another factor is the use of multiple cloud providers, Bhargava says. “As companies embrace multicloud strategies to avoid vendor lock-in and ensure business continuity, they often face challenges in managing and optimizing costs across different platforms,” he adds.

Cloud costs have risen for many of CGI’s customers in the past year. Sunrise Banks, which operates community banks and a fintech service, has also seen cloud costs increase recently, says CIO Jon Sandoval. The company is a recent convert to cloud computing; it replaced its own data centers with the cloud just over a year ago, he says.

Cloud providers aren’t the only culprits, he says. “I’ve seen increases from all of our applications and services that that we procure, and a lot of that’s just dealing with the high levels of inflation that we’ve experienced over the past couple years,” he adds. “Labor, cost of goods — everything has gotten more expensive.”

Cloud customers need to pay attention to the servers they stand up and the services they subscribe to, he says, because companies can ignore them when they’re used infrequently. Those forgotten servers can add sneaky charges to a company’s cloud bill.

As it moved to the cloud, Sunrise Banks first estimated its cloud usage, then reserved cloud workloads with a major hyperscaler to keep costs under control, Sandoval says. Additional costs come into play when the company needs cloud services beyond those pre-negotiated rates, he adds.

Finding wasted resources

Other companies are also noticing price increases. Globant, an AI and management consulting firm, has seen cloud costs rise about 20% in the past year, says Lucas Ortigoza, head of Cloud Ops Studio there. Some companies are pushing back by using cloud providers’ internal tools for managing costs, and others are working with third-party cloud cost management services.

“We are seeing some clients who are still putting efforts into reducing the waste of resources and inefficient usage of services,” he says. “However, there are others who have moved past that stage and are now focusing on architectural changes to achieve efficient cloud consumption.”

There’s a bit of an irony here, says Gayathri Rajendran, enterprise applications and programming manager at TransUnion, the credit ratings firm. Many companies have moved to the cloud to cut costs associated with operating infrastructure and applications on-premises, but now cloud expenses are increasing.

TransUnion has an in-house cloud cost management and FinOps team to monitor costs, Rajendran says. FinOps is a business discipline that blends finance and cloud operations to optimize cloud spend.

The cost containment team at TransUnion uses a cloud cost management tool with automated reporting of underused and unused cloud resources, she says. The team also engages in cloud consumption planning and forecasting, and it plans for resource use to avoid on-demand spending.

Be assertive

Cloud cost containment requires “assertive and sometimes aggressive” measures, adds Trude Van Horn, CIO and executive vice president at Rimini Street, an IT and security strategy consulting firm.

Van Horn recommends that organizations name a cloud controller, whose job is to contain cloud costs. “The notion of a cloud controller requires a savvy and assertive individual — one who knows a lot about cloud usage and your particular cloud landscape and is responsible to monitor trends, look for overages, manage against the budget,” she says.

The cloud controller needs to be “courageous enough” to reach out to business units that may be unaware that their activities are adding to cloud costs, she adds.

In addition, cloud customers can contract with vendors of cost consoles, cloud analyzer tools, or consulting services that can help manage cloud spending, Van Horn says. “But you’ll still need someone with the expertise to spot and act on those trends, and the influence and relationship skills to drive corrective action,” she adds.