Public Sector Leaders: It Is Time to Focus on Cost Optimization

For many organizations eagerly pursuing their cloud journey, it is not unusual for the cloud’s value to blind them to its potential cost savings. As they seek to capture the flexibility and functionality of the cloud, they sometimes overlook opportunities to eliminate unnecessary costs and manage others.

Not surprisingly, public sector organizations are particularly susceptible to this challenge, as they are primarily charged to fulfil their mission. The prevalence and amounts are not negligible, according to KPMG: “A recent report by Gartner suggests not, commenting that many organizations are “ill-prepared for managing costs”. In a separate survey of 1000 technical professionals, “wasted” cloud spend is estimated to be as much as 45 percent.”

Now, three developments produce an imperative for the public sector to confront opportunities to optimize cloud costs:

1. The sheer size of the spend: The United Kingdom’s government spending on cloud computing services is well in excess of £1 billion,
2. The rapid shift in spend to cloud: UK organizations in general are allocating more of their IT spend to cloud infrastructure than to on-premise systems, and
3. The chance to correct for past oversights: The pandemic-driven rush to remote work and cloud services inevitably placed life-saving considerations above cost considerations.

Now, as they strive to create more realistic budgets and track their spending, they find themselves constrained by tools unsuited for the new digital environment, time-consuming and prone to errors, which defeats the purpose of the budget process. This is further complicated by the pressure to demonstrate that they are using taxpayer money wisely and by ongoing restrictions against shifting from Capex to Opex budgeting.

Nevertheless, public sector organizations can quickly take advantage of three significant opportunities to optimize the cost considerations of their cloud journey:

1. Simplify Budget Management:

Cost allocation issues tend to complicate budget management beyond the ability of software solutions to resolve them – especially for organizations operating in complex multi-cloud environments, where hyper-scalers provide cost breakdowns only for their own servers. It is difficult to get a consolidated view in one place.

Among the challenges are the need to support amortization, perform annual budget rollovers, and offer options to view budgets by data intervals and perspective groups. For example, many organizations seek support to view their Budget vs. Actual Report in one place – thus the need for tools that enable them to analyze critical time-based variances and then depict the accuracy of their budget and adjust forecasting.

What is vital is to set continuous improvement plans and establish governance policies. Once budgets are configured, then it is time to focus on creating policies to monitor costs and notifications when costs exceed, or are projected to exceed the expected budget allocation.

2. Enable Complete Visibility

Many government entities are beginning to appreciate that visibility is the foundation of cloud governance as they derive valuable insights from their cloud usage, compute cost and resource management. But the tools offered by their cloud service providers typically limit visibility to the data and assets hosted on their providers’ services, leaving other cloud consumption data difficult to access, especially in organizations with multi-cloud and hybrid-cloud environments.

The resulting “cloud sprawl” can be costly, with organizations running more instances than they need, which wastes money, hampers productivity, and poses security risks.

The key is to consolidate up-to-date data in one place that is easily accessible to all stakeholders.  A consolidated cost history report can highlight trends on specific infrastructure growth and encourage an ongoing assessment that displays a holistic view of cloud environment and immediate cost savings (e.g. purchasing Reserved Instances). Many stakeholders within an organization can use this increased visibility and greater access to data to partner effectively with the IT department to identify spending trends and make informed decisions.

3. Right-size Cloud Resources

Overspending generally occurs when cloud resources have been over-provisioned or underutilized. Rightsizing cloud resources frees up working capital for reinvestment elsewhere. However, the manual analytic tools that are often used for rightsizing efforts are difficult to manage in a growing cloud environment, and the risk of error is exacerbated when these tools are used in a multi-cloud environment.

As public sector agencies seek to automate and perform proactive optimization, it is important that they add a rightsizing functionality to highlight underused infrastructure and recommend downgrading certain assets. This is particularly valuable for integrating public and hybrid cloud where rightsizing reports can be provided on instances and volumes across public cloud providers and data center machines as well.

The result is greater visibility into cloud operations, including spend tracking, which in turn enables organizations to establish performance thresholds and also provides recommendations based on machine size, which is another component of the overall cost.

If you are a public sector organization interested in finding out more on how to optimize cloud operations and resolve unnecessary spending, please download our recent whitepaper here for new perspectives.