For many companies, the shift to the public cloud was instigated to take advantage of cost, scale, and performance efficiencies, but those benefits haven’t always been realized. In fact, many have seen costs rise, and now some are moving capabilities back on premises. But not every company has the resources or appetite to manage a larger cloud footprint on premises. So how can they get the balance right and optimize costs and performance while satisfying growing demand across the business?
Cloud adoption accelerated dramatically during 2020 when customer and employ interactions became 100% remote, and it’s continued to grow. GlobalData predicts the enterprise cloud market will reach $1.4 trillion in 2027, and IDC found that public cloud spending by end user business outpaced private cloud in the first quarter 2023 and expects it will continue to do so through to 2027.
Despite this, some organizations are returning to on-premises and are building and maintaining their own private clouds. X (formerly Twitter) recently reported that among other tech consolidations and moves, it has ‘optimized usage of cloud service providers and began doing much more on prem’ and by doing so it has reduced monthly cloud costs by 60%. This included moving media/blob artifacts out of the cloud to reduce cloud storage size by 60% and, additionally reducing cloud data processing costs by 75%
1) Costs
It’s no secret that cloud costs are increasing. This year wages, energy prices, and consumption patterns have seen prices soar. But companies have long struggled to realize the cost savings they expected from the cloud, with service provider tool complexity and billing making it challenging to keep costs in check.
As more of the business relies on digital, more workloads are transitioning to the cloud, further increasing consumption. Adding to costs and complexity is the fact that many companies have adopted a multi-cloud approach. In a recent global study of 6,000 companies, 52% of respondents said they believed that those who don’t adopt a multi-cloud approach risk failure. The companies that have adopted a multi-cloud approach have increased from 38% two years ago to 64% now.
In such a dynamic environment, balancing costs with workload requirements can be tricky when working with just one cloud service provider (CSP) but working with multiple CSPs with different cost structures and tools, it’s becoming even more complex.
2) Digitalization plans
Many industries are connecting their physical assets and gaining access to operational data to optimize processes. They want to take advantage of greater automation and use technologies such as AI, VR, and machine learning – and with this will come a need to process data in real time. By moving cloud resources on-premises they can support these critical processing requirements while reserving use of the public cloud for processing of other workloads. Additionally, by adopting an on-premises edge cloud, they can also maintain data governance of operational data.
3) Security and Compliance risks
Entrusting company data to a third party is always a considered decision as cost of non-compliance can be high. Today companies are also grappling with changing regulatory requirements around data storage and reporting. For example, GDPR regulations govern the way data on EU citizens is stored, the Health Insurance Portability and Accountability Act (HIPPA) Act governs data in healthcare in the US, and Sarbanes Oxley is the US law which mandates practices around financial record keeping for corporations. Amazon received an eye-watering Euro 746 million fine in relation to data processing and compliance to data protection laws.
75% of respondents to the 2023 Thales Cloud Security Study said more than 40% of data stored in their organization’s cloud environment was sensitive. 39% had experienced a data breach during 2022, a rise of 4% over 2021, with the leading cause of breaches being human error. Another cloud security report found that 57% of organizations find it challenging to properly protect data in multi-cloud environments and 27% of companies had experienced a security incident in the public cloud.
Healthcare and finance are two organizations seeing a rising number of cyber-attack attempts – in fact the healthcare sector in the US suffered about 295 breaches in the first half of 2023, with 39 million individuals implicated. If companies are found to be non-compliant with regulations, data breach costs can spiral.
How to Get the Balance Right
While some companies may be moving away from public cloud, not everyone wants to shoulder the costs and effort of maintaining a larger cloud footprint on-premises. All companies, however, want to maximize performance and costs across all their resources. So before making the decision to move resources back on prem, companies must understand how to get the balance right across all their cloud resources.
With reports finding that 30% of cloud spend is wasted, some companies have implemented FinOps, creating cross-functional teams from engineering, product, and finance to maximize the value of the cloud. But FinOps face the same challenges that ITAM teams have over the years, and Rob Martin, Director of Learning at the FinOps Foundation advocates FinOps and ITAM work together to overcome them. He suggests they collaborate to share best practices, ensure consistency between asset naming and reporting, and create transparency in their operations.
Data visibility is vital
But one of the biggest challenges FinOps and ITAM teams face is how to access the data they need. They must be able to compare data such as workload usage in real-time to compare costs and make decisions, guided by regulatory requirements on whether to place them in the public cloud or on-prem to maximize performance at the greatest cost efficiency and with the least risk.
But this data is held within the many home-grown and vendor point solutions, cloud service provider tools, and systems of record that they’ve invested in over the years to manage and monitor resources in the cloud and on prem. These tools don’t interact, creating blind spots that can only be removed through time, resources, manual processes, and a mountain of spreadsheets.
Managed manually it’s always going to be challenging to dynamically manage cloud resources across multiple cloud provider and on-prem resources. However, by implementing a digital platform conductor (DPC), FinOps and ITAM teams can leverage the true value of their tool investments. A DPC connects to IT and business systems, allowing them share data and orchestrating workflows across them.
Using a DPC, blind spots are removed, enabling better-informed business decisions about where workloads should be placed in line with cost, performance, and regulatory requirements, thereby reducing risk and optimizing resources across the public and on-prem clouds.
ReadyWorks is a digital platform conductor. Book a demo with ReadyWorks to understand how to get the cloud balance right and optimize costs and performance to meet your organization’s needs.
