Five strategies to manage cloud costs

After the boom in tech investment during the pandemic, many companies have great new technology in their infrastructure. Today, however, we are in an ‘age of sophistication’: organizations want to keep their infrastructure up to date while cutting costs so that they can survive in this stormy economy.

Cost management is a top priority and fundamental to a company’s digital transformation. Today, people are increasingly aware of the long-term impact of cloud costs, as usage can negatively impact budgets and revenues. Gartner predicts in fact, that 60% of leaders experience cost overruns in the public cloud.

As organizations prepare for a potential new economic downturn, it’s important to have a cloud cost management strategy in place. This allows organizations to optimize overall spend and use of services and increase profit margins.

Here are some ways to make sure there are no hidden surprises in your cloud account:

Understand your environment

Companies often try to quickly move to the cloud. Without visibility into how different teams are using available resources, they risk being surprised when the cloud bill comes in at the end of the month. It is crucial to have a good understanding of your entire cloud environment. With Software-as-a-Service, developer needs, infrastructure and services such as email and virtual desktops, “cloud” is likely to be everywhere in your IT environment. Getting to grips with what you’re paying for and determining if it’s worth paying for has always been difficult in IT. The public cloud business model (where someone else does the management for you) requires different ways of financial management. The first step is to gain visibility into all cloud resources across the organization, because you can’t manage what you can’t see.

Create the right management framework

Once you know what you have, the next step in managing cloud spend is to create an appropriate governance framework that establishes rules and boundaries for effective cloud use. A management structure provides notifications of approval or denial to users for the correct deployment of resources. It essentially provides people with guidelines on how to spend money efficiently.

Know and link your cloud value

Establishing guidelines for identifying and linking cloud assets to specific teams, business units or “value streams” is also essential. This is often referred to as “tagging” an asset, similar to adding hashtags to social media posts to make the post recognizable to others. Without adequate tagging, it is virtually impossible to see which assets belong to which teams and apps or what is causing cost changes. This way you can understand what you have in-house and who in your organization owns and uses the assets. Also, if you figure out how to manage your costs, you can get a better picture of what exactly is happening.

Understanding the value of cloud costs

Reducing waste in your cloud spend is valuable, but it’s more valuable and strategic to show why you’re spending that money in the first place. Demonstrating the value of IT to the organization as a whole has always been difficult, sometimes impossible. And if you don’t know the value of something, it’s easy to ‘manage’ those costs by simply asking for the lowest price. But quantifying the value of even the most basic IT services can be difficult.

Unless you want your cost management to be just an annual repeat exercise in doing more with less, you need to demonstrate the value of each cloud asset. There’s certainly an art to doing this, but at a basic level you need to be able to connect cloud assets to customer-facing parts of the business and internal apps and services used to run the business. When building your cloud cost analysis, make sure you demonstrate the connection between a particular cloud feature and the actual (business) function it provides.


Let’s take a look at software development, the apps that an organization builds and uses for day-to-day operations. Developers are notorious for their ignorance of costs. One of the recent insights from the FinOps community is that many cost overruns in the cloud are due not so much to unused or wasted resources, but to application architectures that are expensive to run. When it comes to the cloud, developers need to think about how much it costs to run their apps from the start. There are tools that help platform and application teams understand the cost of their decisions. This allows those teams to minimize cloud spend and streamline operations, while also helping developers understand the financial and operational impact.

Shift left

Cost management can certainly benefit from a shift left, especially when it comes to the way your developers design their application. As we enter 2023, with everything going on, CIOs will be asked to cut costs. Keeping cloud costs under control will be particularly important in the near future. To be less powerless, it is always valuable to put in place the right management and controls that allow you to link IT to the business. If the business becomes convinced that proper cost control has been put in place, the tendency is to ask the CIO how IT can be used to innovate the business, rather than demanding cutbacks.

This is a submission from Michael Cote, Senior Member of Technical Staff at VMware.

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