It’s no secret that the CFO’s playbook for cost cutting involves these core tactics:
- Slash expenses
- Control or freeze hiring
- Reduce headcount and boost productivity
Labor costs are the easiest target to attack with the hope that the remaining staff will figure out how to absorb the workload. This tactic mathematically boosts productivity if everything goes according to plan, a rare occurrence. Essentially, the remaining staff is forced to adapt to the reduction in force without warning or a prior plan in place.
The CFO is at a huge disadvantage when attempting to reduce cloud costs which rank second to labor costs for some firms. Cloud cost complexity is rooted in technical understanding. Is it reasonable to expect the CFO to be an expert in that understanding?
Unlike slashing labor costs, cutting cloud costs indiscriminately does not result in the cloud figuring out how to adapt. Instead, collateral damage of customer performance or outages is the likely result. Nonetheless, CFOs may still attempt a strategy of wholesale percentage cuts to overall cloud spending in the same way they approached labor costs.
Term commitments are the CFO’s one-time easy button
A Do It Yourself tactic is to reach for the easy button of cutting cloud costs without attempting to understand the complexity. A one-time option is to move from expensive on-demand purchasing and commit to a term in exchange for a discount on unit prices. No technical understanding required. Every cloud provider has their own version of term commitments and they are happy to work with you to get you on board.
Have you picked all the low-hanging fruit?
Cloud resource waste in compute and storage is another easier target to squeeze out costs. As others have discovered, cloud waste is driven by failing to govern the provisioning process, ignorance about utilization of existing resources, no capacity planning strategy, and the common practice of over-provisioning at the birth of the cloud resources.
Practical steps include:
- Turn off the resources you don’t use. It might surprise you to learn you’ve never even logged into machines you pay for monthly.
- Find and address all the low utilization resources in your environment.
- Inspect the storage tiers you use and downsize those that don’t require high-cost solid state drives for their workloads.
- Reduce the storage debris you continue to pay for but do not use.
Stop compensating for software performance disappointments
Another common practice is to increase cloud spend to compensate for software performance instead of actually debugging the software. Unhandled exceptions, excessive memory usage, poor database query optimization, and outdated component libraries are just a few of the culprits that never seem to get addressed. It’s easier to ramp cloud spending to compensate for poor software.
No easy buttons or quick fixes here, and the cloud spend continues to compound unchecked unless and until you address the software root causes.
Few travel where complexity and organizational politics lurk
The harder road, rarely traveled, is to actually understand your cloud consumption in technical detail. It’s the rare CFO that’s going to die on this hill. Why should they? Shouldn’t the technical executives already have a handle on this complexity and be offering solutions?
Perhaps. But in periods of downsizing, fear and mistrust permeate every transaction. CFOs who want instant ideas for cloud cost cutting will be frustrated and disappointed that meaningful deep dives require a disciplined approach instead of the slash and burn approach of cutting labor costs.
Things get even messier when this journey exposes gaps in the firm’s management of their technical infrastructure. Missing governance processes, and perhaps exposure of some executives with only a superficial understanding of cloud technology puts these executives immediately on the defensive to block outside inspection.
If your firm is unable to classify which costs contribute to growth, how will they avoid cloud cost cutting mistakes that drag down earnings and threaten profitability?
Is it heresy to leave the cloud altogether?
Where do your workloads really belong? That’s not a trivial question that gets answered for a quick win to cut cloud costs. Leaving the cloud haphazardly is done all the time but it doesn’t mean it’s done well and without collateral damage to the firm.
When your workloads are not benefiting from the promised cloud benefits, would it be a bad idea to explore your other options using a disciplined approach?
Firms that do leave the cloud using a disciplined approach save handsomely while still benefiting from the cloud-like agility an alternative solution provides.
A Cloud Exit might just be the superior long-term move that propels your firm forward.
Perfect is the Enemy of Good
The longer it takes to identify cloud cost reductions, the less impact those steps have on the bottom line. Perhaps it’s past time to start solving instead of endlessly studying the problem?
Here are three ways to get started now:
- Take the one-time term commitment reductions available and stop paying on-demand pricing. Then dig deeper into your cloud complexity for real savings initiatives including analyzing a Cloud Exit option.
- Decide if your DIY strategy to identify cloud waste is working to reduce costs or if it’s time for outside help.
- Don’t underestimate the sabotaging effects of internal politics and the practice of dodging responsibility. Cost cutting often amplifies existing internal rivalries that slow or crush important initiatives.
Blaine Berger is an accomplished CTO and veteran multi-cloud practitioner. You can connect with Blaine on LinkedIn or via e-mail: cto@e-oasis.com