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Enterprises have embraced the cloud's flexibility and scalability, but that doesn't mean the developers and employees who take advantage of cloud-based services are using them wisely.
Indeed, at many companies, the cost of cloud-based services undermines the business case made to justify their use, explains Andy Sealock, managing director at sourcing advisory Pace Harmon. CIOs need to implement a cloud governance framework that will optimize spending and mitigate cloud security and compliance risks.
In part one of this expert tip, Sealock explains the ways in which companies often misspend in the cloud and builds a case for applying ITSM in the cloud.
Editor's note: The following has been edited for clarity and brevity.
Why do companies need to apply IT service management (ITSM) in the cloud?
Andy Sealock: A cloud governance framework is what is going to make cloud business cases work over the long term. And we think ITSM is essential to implementing that cloud governance framework for metered cloud services -- in particular, infrastructure as a service and platform as a service.
What's attractive about those cloud services -- and is probably the leading cause for adoption -- is their scalability, their flexibility and the ability for users to quickly and easily provision a complete development environment. It's hugely enabling, especially as more enterprises adopt DevOps.
But unfortunately, we are starting to see some unhappy surprises in terms of [companies'] business cases blowing up over time. The spending ends up much higher than they anticipated -- higher than the business case justification that they used to say, 'Let's get out of this traditional data center and into the cloud.'
The main reason for that is the lack of a governance framework, which is largely a way to purchase intelligently and exercise demand management -- to do spend optimization in the cloud. Implementing ITSM in the cloud can help.
How are companies failing to optimize their spending on cloud-based services?
Sealock: There are a lot of ways that you can spend inefficiently in the cloud -- things like not matching your purchase options with the way that you actually use the cloud.
One of the main things we see is not having the right mix of three-year reserved instances versus one-year reserved instances versus on-demand instances.
The unit cost for an on-demand instance is the highest one you can get. If I do a reserved instance and commit to use it for a year, I get a lower unit price; if I commit to using it for three years, I get an even lower unit price.
The way you get the deepest discounts, generally, on your cloud-based services usage is to figure out whether you can commit to a reserved instance, or not, and if you can commit to a reserved instance, then can you commit to one year or three years?
Andy Sealockmanaging director, Pace Harmon
The way companies tend to waste money is they buy on-demand instances at the highest price possible and then use it constantly for the next year or the next three years. Had they bought a one-year or three-year reserved instance, they would have gotten much lower price.
But it can also go the other way. If you buy an instance at the lower cost for three years, but after a year the application goes away, you're stuck -- you pay for the three years. So, it is a balancing act.
It's hard, but there are some pretty sophisticated automation tools out there that help you do this. Not everybody uses them and not everybody uses them properly, but a market has emerged.
A second lever you can pull to optimize cloud-based services concerns the type of computers you reserve. Another is storage tiering -- do you need really fast, high-performance storage that costs $200 per gigabyte, or do you need archive storage that costs $4 a gigabyte?
There is also a risk component. When employees can set up all these cloud instances, they might not comply with all the company's security standards, its privacy standards, redundancy standards. There's a lot that goes into setting up your cloud environment, so that the spend is optimized and also so that you're doing the right thing in terms of security and privacy. This is where ITSM comes in.
In part two of this tip, "Benefits of ITSM: Use an ITSM portal as gateway to cloud services," Sealock talks about how to use ITSM in the cloud as an interface between users and cloud portals.