5 Ways to Lower Cloud Costs While Realizing Value
AJ Wasserman, Product Owner of Cloud Financial Operations at Liberty Mutual
AJ Wasserman, Product Owner of Cloud Financial Operations at Liberty Mutual
As cloud costs continue to rise, many tech leaders are looking for ways to control expenses, but without compromising business resiliency or agility. While the cloud is able to generate tremendous value for companies when done well, controlling and monitoring usage can be challenging and expensive. In fact, Gartner predicts that through 2024, 60 percent of infrastructure and operations leaders will encounter public cloud cost overruns that negatively impact their on-premises budgets.
With more than 70 percent of our workloads in the cloud through a hybrid, multi-provider approach, today Liberty Mutual is one of the most experienced and advanced cloud adopters in the U.S. We expect that momentum to continue, despite the macroeconomic environment. In fact, we’re currently on track to reduce annual IT expenses by 28 percent by 2024, with the goal of eventually eliminating as much as 40 percent of fixed-run costs through cloud computing.
But how? We’ve been deliberate with our strategy, maximizing the total value by leveraging multiple cloud providers, while optimizing our existing footprint. Throughout our decade-long cloud journey, we’ve learned how to find significant savings. Following are five things to help tech leaders follow a similar path.
Budgeting should be a team effort
Cloud migration is not without its challenges – particularly with keeping expenses in check. According to McKinsey, many companies see their cloud spend grow as much as 20 to 30 percent each year.
Understanding the complexities around costs, we created a dedicated Cloud FinOps team. The strong partnership between FinOps, architects, finance, and engineering teams was critical for building the enterprise budget. We have found that the key to success is to partner across our organization to understand workload plans, specifically regarding the cloud provider of choice. This provides a solid baseline for forecasting, which can then be used to drive budgeting. Other companies may consider a similar approach, organizing a cross-functional team to co-create their budget.
Creating Cost Transparency Through a Single Pane of Glass
Early on in our journey, we built a single pane of glass to create cost transparency across all cloud providers – to better understand our bills, what’s important to customers, where our costs are, and how we can optimize. This was important for our leadership and engineering teams to understand the financial impact of their design and deployment decisions as they built and managed solutions for the organization.
But, none of the cost and optimization level transparency would be possible without a solid tagging strategy. The public cloud providers supply massive amounts of valuable billing data, but without a strategy to enhance this with other metadata, it can be challenging to use the data effectively and efficiently.
The tagging allows us to align resources and spend at the application level driving accurate chargeback and KPI reporting at all levels of the organization.
Optimization Basics
When looking across enterprise cloud programs, there is often a broad range of cost- and performance-optimization opportunities. Here are some of the ways we’ve been able to cut our cloud bills by 20 percent:
• Provision only what you need and leverage auto-scaling
• Consider smaller sizing in non-production environments
• Shut resources down when they are not in use
• Leverage storage classes to take advantage of lower prices for less frequently accessed data
• Revisit instance types: the public cloud providers are constantly rolling out new instances that may be cheaper and offer more value (e.g., memory, vCPU, etc.)
• Delete and remove resources that are no longer needed; even if you stop resources, you still may be incurring storage charges
• Leverage open source if possible
• Make sure to understand software license implications for running in the cloud compared to on-premise
• Leverage discount pricing options for commitments like Reservations and Savings Plans
Once a baseline level of optimization is achieved, the FinOps team can continuously scan for new cost-reduction opportunities and track the results of optimization efforts.
Engineering Empowerment
With a global technology team of 4,000, our engineers play a critical role in managing cloud costs. To maximize exposure to cost and optimization opportunities, we embedded information right into the engineering experience. Our engineers see their monthly spending and trend along with right-sizing recommendations when they log into their developer portal. This has resulted in improved cost management and the adoption of right-sizing recommendations.
Cloud migration is not without its challenges – particularly with keeping expenses in check. According to McKinsey, many companies see their cloud spend grow as much as 20 to 30 percent each year
Ongoing education for our engineering teams has been important for understanding the public cloud variable expense model and how they directly impact costs. With unlimited resources and capacity available at the click of a button, they are the front line to ensuring cloud cost optimization. We’ve seen strong engagement with continuous lunch and learn training sessions along with running optimization contests. This gamification has enabled enriched education as teams compete to complete optimization tasks in pursuit of prizes and friendly competition.
Automate, Automate, Automate
Automation is the final lever for scaling your FinOps operation and facilitating quick action to address cloud waste, while driving value maximization. A few key areas we’ve automated:
• Sending monthly financial statements to our application owners, which include usage trends and optimization opportunities.
• Anomaly alerting communications to get these out quickly to address runaway spend
• Stopping idle resources
• Deleting any unused/old storage
Many organizations have been on their cloud migration journeys for years with the hope of increased flexibility and performance, and with the goal of realizing cost benefits along the way. The current challenging economic environment puts the cost at the forefront. But, through a few steps, companies can optimize spending, cut costs, and build business value.
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