As IT departments prepare their 2019 budgets, we assess how to avoid paying too much for cloud services.
Infrastructure-, platform- and software-as-a-service (IaaS, PaaS and SaaS) free business users from the constraints of IT, but without suitable oversight, costs can quickly get out of control.
As initial costs are relatively low, business managers can sometimes end up being in control of their own cloud budgets, which is both a good thing and a bad thing.
The organisation can work unhindered by IT, but business managers may not have the expertise to manage cloud contracts effectively. Some may buy a cheaper lower-level service or use a free subscription, then pay a premium when they ramp up usage, rather than moving up to a more economical service that meets their scalability requirements at a better price.
Agile methodologies used to speed up software development through DevOps empower developers to enable their applications to request IT resources programmatically. But although such an approach offers huge benefits to the business, enabling pilots and projects to consume cloud resources and run unhampered by IT bureaucracy, agile can leave a gaping black hole in the IT budget, with IT managers unable to gain an accurate insight into how much is being spent in the public cloud by their in-house DevOps teams.
Earlier this year, a survey by Densify reported that a quarter of IT departments have little understanding of how much is actually being spent on public clouds such as Amazon Web Services (AWS) or Microsoft Azure.
For central IT, this lack of visibility on overall costs means companies can end up paying far more than they need for cloud subscriptions and cloud-based services.
Itam Review industry analyst AJ Witt says it is generally acknowledged across the industry that there is about 30% wastage in cloud subscriptions, much of which comes down to buying too much. “For instance, you buy a bundle and don’t use all the products, or you’ve got 100 seats and only use 70 of them,” he says.
Just as when a software asset manager assesses on-premise licences against actual usage, Witt advises business users to evaluate how they actually use their cloud subscriptions. “A single Adobe product [such as Photoshop] is cheaper than buying the whole bundle,” he says. “The other pitfall is buying the wrong product, such as a full version of AutoCAD when, for most users, an AutoCAD LT subscription will do, or sometimes even a free viewer is enough.
“The issues we had with on-premise software in this regard are still present with subscription-based licensing.”
Because it is so so easy to buy SaaS, a business may find that marketing, sales and engineering all have their own subscriptions and user counts, and each will have unused subscription, which could be pooled if there was only one contract, says Witt.
SaaS is so easy to procure and deploy that it often bypasses procurement and IT policies, says Witt. “Most of the SaaS optimisation tools providers focus on discovering this uncontrolled spend by scanning expense and accounts payable records first, rather than looking at more formal stores, such as a contracts database or asset register.”
Without central control and a single record of supplier engagements, says Witt, there is no way of knowing whether the business is paying the right price or using the subscriptions it has purchased. “You also lose any economies of scale and have less leverage with the supplier, with piecemeal department-level engagements,” he adds.
Over-provisioning
Another problem is over-buying. For instance, traditionally, IT departments would buy resources such as enterprise storage up front, and this investment would support the company’s data growth for a number of years, by which time the initial investment would have been written off. Clearly, the elasticity of IaaS means it makes no sense to buy up-front more than is actually required.
David Chamberlain, general manager of Licensing Dashboard, says IT can sometimes be over-cautious. “IT people can be worried about things like an Exchange server going down, so there is a tendency to over-provision, and then people will forget to decommission the cloud service when it is no longer needed,” he says. “The cloud is very elastic and is easy to throttle up, which is a big change from on-premise servers.”
For Witt, virtual machine (VM) sprawl has always been an issue on-premise, even when companies have had good processes in place. “It is always easier to spin a VM up than it is to decommission it,” he says. “Most datacentres will have a significant proportion of unused VMs – in my experience, it’s around 30-40%.”
While on-premise, only a fraction of storage and compute is consumed for these unused VMs, in the cloud, the VM is charged per second, he points out. “You’re charged for the VM size regardless of whether it is fully utilised,” he says. “This is waste with an exact, measurable and recurring cost associated with it and, as such, controlling sprawl in the cloud will yield immediate cost savings.”
Minimum spend limitations
Witt adds: “Some suppliers get you to commit to a minimum number of users, with a minimum growth expectation. Salesforce contracts are often structured this way.
“So you buy up-front and maybe it takes six months to deploy them all, but then your focus changes and you don’t use the product as much as you expect to, and you’re locked into a three-year commitment.”
While the major software providers have been looking to migrate their customers onto cloud subscriptions, Witt says it is worth checking exactly how much cloud is included with existing enterprise deals. For smaller software providers, there may be an overlap, and customers end up paying twice.
“The key takeaway is that the cloud is the strategic priority for all suppliers,” he says. “Use that to your advantage and get your procurement teams to structure the contract so that duplication is limited and you don’t end up paying for subscriptions you haven’t yet deployed.”
“You can often get a credit for the unused Software Assurance maintenance portion of your on-premise licences if you commit to cloud. And certain perpetual licences come with cloud deployment rights, if you have active maintenance [Windows Server and SQL Server, for example].”
Witt says he has also encountered situations where there has been a trade-in offer, with the customer receiving a discount on the first year of a subscription. “If you’re in the EU, the other option is to resell your old perpetual licences on the secondary software market,” he says.
Challenge of visibility
So, the nature of cloud services and SaaS means that business users can buy subscriptions and consume cloud resources directly, without IT’s control, which means IT lacks a single view of usage across the IT estate, says Witt.
“You are paying on a monthly basis, so how do you know if you’re still using a particular product or service?” he says. “And if so, how many users are using it, and for how long?”
Although all the cloud providers have their own management portals to provide usage information for their own service, “even if you know which suppliers you are using, it becomes an impossible task to track all this information manually each month”, says Witt.
A recent Forrester report, Cloud cost monitoring and optimisation, Q2 2018, noted that while many organisations turn to the cloud to reduce their spend on infrastructure or to avoid steep up-front costs for new investments, this is hard to achieve.
“Success depends more on the maturity of cloud management and governance practices than the nature of the workload,” wrote the report’s author, Forrester principal analyst Lauren Nelson. “With cost complexity continuing to increase alongside growing usage, users, accounts and instance types, IT professionals increasingly depend on tools to enable visibility, consistency and scalability of management practices.”
Software asset management tools
Forrester has identified a category of software tools, including Apptio, CloudHealth Technologies, Densify, Rightscale and Turbonomic, which aim to provide software asset management-like capabilities for cloud resources.
According to Nelson, these tools’ central capability is to focus on increasing visibility of cost and user dynamics across cloud platforms. In the report, she wrote: “As management practices mature, this information will become a critical element of governance and automation programmes, as both efforts rely heavily on consistent availability of data.”
What is clear from the experts Computer Weekly has spoken to is that the best practices of software asset management need to be applied to IaaS, PaaS, SaaS and other cloud resources, so that IT can understand what cloud services are being consumed and for what purpose.
Witt believes that departments procuring their own SaaS will not necessarily have the skills to manage such products and services, and this is where IT has a chance to take control. “For IT departments to re-engage with the business, they need to provide a service the business requires,” he says. “This requires a step out of the traditional role of an IT department into budgeting, compliance and supplier management.”
This article originally appeared on ComputerWeekly