If it is easy to save big on Microsoft cloud costs, then why don't we?
By Derk-Jan Boogerd | February 13th, 2023 | Optimize
We have embraced the Microsoft cloud in large numbers over the past 10 years, but in our hunger for new possibilities we have lost sight of the costs. The cloud was sold to us as “functionality-as-a-service” with unparalleled flexibility and scalability. Payment would also be based on actual usage basis, so customers assumed that the cloud would eventually be cheaper … In most cases the latter turned out to be an illusion – and most Microsoft customers have now caught on to this. The cloud almost always ends up being more expensive than expected, because the actual usage of services does not match up with what has been paid for.
If Microsoft pushes its clients to be increasingly flexible and scalable in terms of their technology, then why do they not apply this same logic to their management of our cloud costs?
To better understand this paradox, I will first outline the factors that play a role within organizations and then explain the relevance and urgency of properly managing cloud costs.
Reasons why not to pursue maximum cost savings
The request to save on or cleanup costs is usually issued top down within an organization, but the actual carrying out of any cost-saving analysis is delegated to IT Management and Procurement. This mismatch between different levels in an organization can cause clashes of conflicting interests, resulting in the cost savings never actually being actioned. We continue to be amazed how little initiative is taken within companies to start saving on their cloud costs.
We understand the tendency for people to prefer focusing on new “exciting innovations” rather than diving into and sorting through existing data to save on products and costs. Moreover, the pressure from Microsoft and its partners to ‘innovate’ contributes to keeping the focus on additional new applications.
It can thus be difficult to motivate IT Management and Procurement to allocate time and resources to figuring out cloud savings, but this cannot be the only reason for organizations to not make this move. What else is behind this and, more importantly, how can you motivate employees in your organization to make it happen?
Most heard objections to start managing cloud costs
The objection we hear most often to start optimizing is the complexity of cloud product licensing. This is an unattractive topic for many managers that requires a lot of specialist up-to-date knowledge and for which no budget and/or resources are available. Hiring consultants to help is generally expensive, of varying quality and they have little availability. Add to this the fact that optimization is not a one-time action, but something that you have to repeat continuously to keep your cloud costs under control.
Another objection we hear time and time again is that cutting back too much without insight or understanding of what is going on, can actually lead to higher costs (in the long run). The attitude is “we have to get this right“. If a company does not have the desire, time or space to carry out a thorough analysis to gain insight, they will not prioritize this.
This is also because following the uncovering of savings opportunities action needs to be taken to turn the advice into actual savings. Often organizations doubt whether they will be able to do this. Unfortunately, most organizations do not take the step to conduct a cost-benefit analysis to discover how easily they could be making savings.
Finally, we have noticed that there can also be a lot of opposition from managers as they want to protect their budgets and/or resources. Discovering savings could mean less money or manpower allocated in next year’s budget. But how can they justify holding onto higher budgets when the same results can be achieved with less?
Nog een titel te verzinnen...
Luckily there are also positive incentives, such as reducing operational costs. In the fight for efficiency, saving on operational costs (OPEX) can be an easy win. Seeing as Microsoft cloud costs are included in the balance sheet based on OPEX, this can be an important motivator for managers to start paying attention. Less cloud costs simply means fewer operational costs (although this must be weighed against any loss of productivity of course, which could lead to increased costs in the long term).
Additionally, managers benefit from more agility if they have control over the use and costs of the cloud. It becomes easier and faster for managers to align functionality with available means (IT management) and purchase power with the budget (IT procurement). Lack of agility is a common personal frustration for management, so this can be a key motivator.
Although we can conclude that there are interesting positive impulses, the negative objections may very well outweigh them. In any case, we currently don’t see motivation expressed in for example performance-related objectives to combat these counterproductive factors.
This raises the question; is controlling cloud costs interesting enough?
Optimize M365 & Azure
Start saving on your cloud running / operating costs today!
Most heard objections to start managing cloud costs
The objection we hear most often to start optimizing is the complexity of cloud product licensing. This is an unattractive topic for many managers that requires a lot of specialist up-to-date knowledge and for which no budget and/or resources are available. Hiring consultants to help is generally expensive, of varying quality and they have little availability. Add to this the fact that optimization is not a one-time action, but something that you have to repeat continuously to keep your cloud costs under control.
Another objection we hear time and time again is that cutting back too much without insight or understanding of what is going on, can actually lead to higher costs (in the long run). The attitude is “we have to get this right“. If a company does not have the desire, time or space to carry out a thorough analysis to gain insight, they will not prioritize this.
This is also because following the uncovering of savings opportunities action needs to be taken to turn the advice into actual savings. Often organizations doubt whether they will be able to do this. Unfortunately, most organizations do not take the step to conduct a cost-benefit analysis to discover how easily they could be making savings.
Finally, we have noticed that there can also be a lot of opposition from managers as they want to protect their budgets and/or resources. Discovering savings could mean less money or manpower allocated in next year’s budget. But how can they justify holding onto higher budgets when the same results can be achieved with less?
What is the true relevance of controlling cloud costs?
We see that organizations who have taken control of their cloud management save between 5% and 45% on their M365 cloud costs and between 10% and 70% on Azure. To be clear: we are not talking about all the possible savings here, just about the so-called “low hanging fruit”. Preventing new costs is at least as important.
The costs for the Microsoft cloud are continuously calculated per month, minute or even second. In other words, despite doing a major cleanup, costs will quickly rise again if they are not constantly monitored correctly. This is especially true for companies that continuously deliver new projects /applications /environments in the cloud. Even if an organization has signed a long-term commitment with Microsoft it can still pay to avoid high costs by means of rightsizing and reallocating subscriptions.
For medium-sized organizations, annual Microsoft cloud costs can quickly run into the tons and for larger organizations even millions. The potentials for savings we are talking about are substantial amounts that can be saved without too much hassle for the organization.
Our question is: if the financial impact for an organization can be so significant, why is this not prioritized in the budget? Our guess is that, if the savings potential is uncovered, people within the organization will have to start taking action.
What is the urgency?
The world is currently facing a global economic crisis and many organizations must start looking for ways to reduce their costs. If they did not feel the pressure to reduce and save before, this now seems to be rapidly changing.
We are already seeing that OPEX and IT budgets are under pressure and the requests for accurate insights into costs within organizations are being made more and more forcibly. IT has a decisive influence on both the productivity and efficiency in an organization and IT-departments will have to start acting sooner or later.
This creates opportunities to cut back on the growth of enthusiastically purchased cloud products and to begin keeping them under control effectively from now on. When the market picks up again innovation can be put back on the agenda and, if done well, can provide interesting opportunities for IT-management and procurement to increase agility.
What are the expectations?
Ultimately, organizations always have to account for costs incurred and, in times like these, costs are examined with a magnifying glass. As soon as the management of an organization understands that there is a quick way to save somewhere in their organization, their ask for cost optimization will trickle down through the company quickly enough.
Subsequently, an organization just needs the right insights and advice to easily leverage the flexibility and scalability of the cloud by implementing the right optimization at the right time. For this, an organization can use its own data which can be easily accessed. There are also various parties already on the market that can analyze the data for a company and make optimization recommendations based on this.
We expect that given the growth and urgency more organizations will make the move to better manage their cloud costs soon. As a company you need to make sure that you are prepared for this. That is, prepare managers for the optimization of cloud costs by talking about this with regards to budgeting, allocating resources and setting clear performance targets.
Also research solid and affordable solutions to control your Microsoft cloud costs easily and quickly. Preferably with clear, understandable insights and cost optimization recommendations and without getting lost in licensing complexity. Being open and transparent with employees will ensure good will and motivation from IT-management and procurement.
Start today, because why would you unnecessarily let your cloud costs increase? They have probably multiplied in the time it took you to read this blog! 🙂
Hello!
Click one of our contacts below to chat on WhatsApp
