As cloud use has increased, so have the costs associated with it. In 2020, surveyed organizations reported being over budget for their cloud spend by an average of 23%. Most are spending more than they expected, and to top it off — they don’t feel they’re getting value from that spend.
Since our inception, CloudZero has been on a mission to solve that disconnect by providing organizations with what we call cloud cost intelligence: a set of organized cloud cost data that can help your team make educated technical decisions and achieve better business results.
Our customers have experienced the benefits of cloud cost intelligence firsthand. They continuously save both money and time with regard to managing spend; they also know exactly what they’re spending on at all times and can easily understand which areas of expense are producing value for the business.
If you’re new to the world of cloud cost intelligence, you may not intuitively know how to put together a system that connects the what of cloud spend with the why.
We put together this guide to answer some common questions about cloud cost intelligence strategy, for any organization, whether you have a mature approach to cost or are just getting started.
3 Q&As About Cloud Cost Intelligence (And How To Get Started)
1. Is cost intelligence the same thing as cost management and optimization?
Absolutely not.
When most people think of cost strategy and analysis, their minds immediately jump to the question of how to save the most money. It’s not uncommon for finance leaders to feel some sticker shock from a huge number on their bill year and think “we need to cut spending!”.
But what if, given a bit more context, you could have seen that spending more on a particular service or item in the short term would result in huge payoffs down the line?
Or, imagine you run a startup with seemingly unwieldy cloud costs that doubled from last year to this year. Standard cost optimization would have you cut out extraneous spending to try and get the budget below a certain goal number.
With better context, you might have realized that your revenue tripled within the past year, so that doubled budget is actually a strong sign you’re doing things right.
In those and similar cases, simply cutting things out of the budget to save a buck will ultimately cost your business more in lost revenue. The solution to this problem is cost intelligence.
While cost management and optimization can help you cut unnecessary spending and tighten your budget, cost intelligence provides the background and context to influence future decisions your team makes.
Until CloudZero started helping companies gain “cost intelligence,” cost management and optimization were the phrases searched by companies trying to wrangle their massive budgets back under control. These days, most companies understand the importance of cost intelligence over mere management. Even Amazon has adopted the term to differentiate it from the more surface-level strategies.
2. Where do I start with cloud cost intelligence?
The first priority is to understand, through cost allocation, what you’re spending your money on. How much does it cost you to provide certain features? How much does it cost to serve different levels of customers (for example, enterprise customers versus small businesses)? How much do you spend on advertising for each product or service?
The problem you may encounter is that cost allocation is becoming increasingly complicated, especially with newer cloud-native technologies, such as Kubernetes and multi-tenant infrastructure. These technologies add a layer on top of your infrastructure that essentially misaligns your billing data with what services are actually running.
Whenever possible, implement a consistent tagging strategy within your system. We say “whenever possible” because tagging comes with its own set of challenges on top of the ones mentioned above, like untaggable resources in AWS.
If you aren’t sure where to start allocating costs or you have disorganized, inconsistent tags that would be a nightmare to untangle, don’t panic.
CloudZero organizes your cloud spend whether you have a uniform tagging strategy or not, helping you account for shared resources and other common challenges that make tagging and other forms of cost allocation difficult.
3. Once I have visibility into where my business is spending money, what’s next?
Once you understand where your money is going, you can begin to put that information into context. This context will help you understand whether the big number on your bill is actually too big, or whether you’re efficiently growing your cloud spend along with your business.
To start, pick one or two metrics to track that are meaningful to you and that align directly with the success of your business.
For instance, a music streaming service generates revenue through advertising for the time listeners spend on their platform — so they may want to track cost per each individual song stream or each hour of streaming. This will help them understand whether they’re operating efficiently.
A software development company may choose to track the costs of delivering new features to existing programs, which helps them understand if their R&D is efficient. Then, they can track the cost to support each of those features per customer to understand their operating efficiency and margins per customer.
Whatever metric you pick for your business, start to align costs to that metric and paint a picture of what it costs for you to run different aspects of your business.
From there, you can proactively think about these aspects when it comes time to make future decisions. If you know the costs associated with different actions your business takes, it’s much easier to ensure every decision you make will be financially viable. To read about these metrics in more detail, see this blog post.
Need Help Advancing Your Company’s Cloud Cost Strategy?
At CloudZero, we deliver cloud cost intelligence to help your business gain better insights from your cloud spend.
Our cost intelligence platform allows your whole business to see the cost impact of major decisions so each department stays aligned on your end goals.
to see how you can achieve better visibility into your cloud spend.
The Cloud Cost Playbook
The step-by-step guide to cost maturity
