{"id":21845,"date":"2022-10-29T23:21:12","date_gmt":"2022-10-29T16:21:12","guid":{"rendered":"https:\/\/renovacloud.com\/?p=21845"},"modified":"2022-12-14T10:22:29","modified_gmt":"2022-12-14T03:22:29","slug":"the-cloud-cost-dilemma-scale-vs-return-on-investment","status":"publish","type":"post","link":"https:\/\/renovacloud.com\/en\/the-cloud-cost-dilemma-scale-vs-return-on-investment\/","title":{"rendered":"The Cloud Cost Dilemma: Scale vs. Return on Investment"},"content":{"rendered":"
If you enjoy a monthly pat on the back while looking over your cloud invoice, believing that on-premises costs would be a great deal higher, then this recent report<\/a> by VC firm Andresson Horowitz (a16z) was probably a real buzz-kill.<\/strong><\/em><\/h5>\n

a16z dove deep into the numbers of cloud vs on-premises Total Cost of Ownership (TCO) and presented a sobering conclusion: \u201cIf you\u2019re operating at scale, the cost of cloud can at least double your infrastructure bill.\u201d<\/span><\/p>\n

Getting a Handle on the Cloud Paradox<\/strong><\/h5>\n

Let\u2019s get some perspective on what the report was trying to tell us, as the authors were clear that they weren\u2019t advocating for repatriation. Indeed, they recognize the \u201cincredible value proposition\u201d of immediately available infrastructure at scale.<\/span><\/p>\n

The paradox is, at its core, about the maturity of your business. As a start-up, the cloud is the perfect soft landing. First, zero CapEx and all OpEx means you don\u2019t need anywhere near as large an initial investment, as you\u2019re focusing on operational expenditure with an \u201cas-a-service\u201d subscription model rather than capital expenditure by building your own infrastructure. Next, an experienced cloud provider handling infrastructure on your behalf limits your need to onboard in-house developers and engineers, and you get access to a cornucopia of cloud-based applications \u2014 just a hop, skip and an API away \u2014 to build out your core product or service.<\/span><\/p>\n

As your rapidly growing start-up morphs into something larger and more stable, and your initial investment needs to be transitioned to ongoing profits, things get a little more complicated.<\/span><\/p>\n

The more you scale your cloud, the more engineers you need to onboard to manage it. These engineers are highly prized in an increasingly cloud-focused market with a serious skills-gap, and come with niche skills that demand a large paycheck. As cloud use expands across the company \u2014 from storage and compute, to back-up, SaaS products or security \u2014 many companies feel they are signing over a \u2018blank check\u2019 to their cloud provider.<\/span><\/p>\n

This is because as your business scales and you onboard new customers and build new features, you need a growing amount of compute resources to manage the scale. At the same time, the speed of growth means it\u2019s tough to look for an alternative path to the one you\u2019ve started down, without impacting business continuity. Plus, ultimately your vendor is focused on their own profit and growth; AWS for example has<\/span> comfortable cloud margins of around 30% <\/span><\/a>each year.<\/span><\/p>\n

Looking at the Bigger Picture<\/strong><\/h5>\n

So, is the cloud always the most cost effective option? While cloud is definitely likely to save you on initial start-up costs, as your business scales you might find that your costs start rising as well.<\/span><\/p>\n

However, ask yourself another question. Regardless of whether it\u2019s the most inexpensive option, is cloud the right option for your business?<\/span><\/p>\n

If you moved to the cloud, or started your journey there in the first place, reducing costs was probably one of just many items on your checklist. Turns out, you may not be able to have it all. Ask yourself, what other benefits are you gleaning from your cloud environment?<\/span><\/p>\n

For some, it will be quick delivery of new features and updates using a DevOps pipeline that\u2019s ten times as fast as you could achieve on-premises. For others, it might be the peace of mind that comes with scale-on-demand to meet peak traffic, seasonal demand, or a sudden viral marketing campaign (*Refreshes Google analytics hopefully*). Perhaps it\u2019s flexibility, ease of integration, confidence over the Shared Responsibility Model for security, or any number of other reasons why the cloud is the only pandemic-free zone, <\/span>forecasted to grow 23% this year.<\/span><\/a><\/p>\n

But\u2026 Money Matters! Is There a Way to Have it All?<\/strong><\/h5>\n

When you\u2019re building out your organizational goals and your initial charter for your Cloud Center of Excellence, here are some best-practices that can help to guide your vision.<\/span><\/p>\n

If these benefits are important to you, then occasionally you might find that cost-optimization needs to relinquish that driver\u2019s seat to make way for all these passengers. If that\u2019s the case for you and if other factors are just that important, then that\u2019s a sound and reasonable strategy. However, it doesn\u2019t give you a free pass on reducing cloud spend. Your ROI is important, and you can\u2019t be seen to be haphazardly throwing money at your cloud environment without the data to back it up.<\/span><\/p>\n

If repatriation isn\u2019t something you\u2019re considering, but you want to stay on top of the costs of an ongoing cloud strategy, here\u2019s three tips to get you started.<\/span><\/p>\n

Move engineers away from repetitive and mundane tasks:<\/b> Are you spending too much time recruiting and hiring engineers, only to waste their skills on mundane cloud management tasks? Free them up to help where humans thrive (hint: it\u2019s strategy, decision-making and customer support) and look for ways to add AI and automation to the tasks best suited to robots. (C3PO, it\u2019s time for you to shine.)<\/span><\/p>\n

Put together a FinOps governance strategy:<\/b> Here\u2019s where you map your existing usage and cloud spend and use business intelligence (BI) tools to find the hidden trends and patterns underneath the numbers. You can then create a data-driven budget for cloud optimization \u2014 including system design changes, re-architecture, third-party efficiency solutions, and even repatriation where it makes sense to do so.<\/span><\/p>\n

Use the cost-optimization tools available to you:<\/b> a16z wasn\u2019t all doom and gloom. They did comment that smart allocation of committed-use discounts, such as Reserved Instances, could bring your cloud spend down considerably \u2014 as could leaning on third-party optimization tools, which according to a16z have been shown to reduce cloud spend by anywhere from 10%-40%.<\/span><\/p>\n

Make cloud spend a measurable KPI:<\/b> Most importantly, don\u2019t consider \u201cwhatever the cost of cloud is\u201d to be a necessary expenditure. Instead, highlight cloud costs as a metric that the whole organization has responsibility for. Set up incentives for smart thinking that reduces expenditure, creates goals and milestones to keep you focused, and demands attention from all departments on tracking and managing cloud costs.<\/span><\/p>\n

You don\u2019t have to choose between scale and cloud ROI. Renovisor\u2019s intelligent cloud automation platform keeps costs, performance, and efficiency in check with zero effort on your end.<\/span><\/p>\n

Chat <\/span><\/a>with one of our cloud experts to learn how.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

If you enjoy a monthly pat on the back while looking over your cloud invoice, believing that on-premises costs would be a great deal higher, then this recent report by VC firm Andresson Horowitz (a16z) was probably a real buzz-kill. a16z dove deep into the numbers of cloud vs on-premises Total Cost of Ownership (TCO) […]\n","protected":false},"author":2,"featured_media":22059,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-21845","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/renovacloud.com\/en\/wp-json\/wp\/v2\/posts\/21845","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/renovacloud.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/renovacloud.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/renovacloud.com\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/renovacloud.com\/en\/wp-json\/wp\/v2\/comments?post=21845"}],"version-history":[{"count":2,"href":"https:\/\/renovacloud.com\/en\/wp-json\/wp\/v2\/posts\/21845\/revisions"}],"predecessor-version":[{"id":21901,"href":"https:\/\/renovacloud.com\/en\/wp-json\/wp\/v2\/posts\/21845\/revisions\/21901"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/renovacloud.com\/en\/wp-json\/wp\/v2\/media\/22059"}],"wp:attachment":[{"href":"https:\/\/renovacloud.com\/en\/wp-json\/wp\/v2\/media?parent=21845"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/renovacloud.com\/en\/wp-json\/wp\/v2\/categories?post=21845"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/renovacloud.com\/en\/wp-json\/wp\/v2\/tags?post=21845"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}