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Runaway cloud computing cost may be causing an information technology industry crisis

Runaway cloud computing cost may be causing an information technology industry crisis. Expanding requirements, extended transition schedules and misleading marketplace hype have made "Transformation" a dirty word.  Questions about how to manage cost variances and deviations with assets and cost across different suppliers abound. A  recent Cloud Tech article explained that while public cloud offers considerable cost savings in comparison to private or on-premises based alternatives, there may also be significant hidden costs. Operational features like auto-scaling can cause costs to soar in line with demand for resources, making predicting costs difficult and budgeting even harder. There is also an acute need for a holistic and heterogeneous system that can track the costs of cloud services from the point of consumption (e.g., an application or business unit) down to the resources involved (e.g., storage or compute service).

Sitting at the apex of all of these issues is the CFO or corporate Vice President of Finance. As the key budget manager for most organizations, it is where many of the key financial decisions are made. This is also where the spectrum of IT cost responsibility extends from the pure financial analytics tasks of:

  • Optimization
  • Forecasting and projection
  • Financial reporting

To the pedestrian but crucial accounting tasks like:

  • Show-backs and charge-backs
  • Charge reconciliation; and
  • Budgeting policy management

The most prevalent cause of these financial problems is a failure to keep track of virtual assets in the cloud.  Many companies have lost complete visibility and control of cloud computing cost simply because they failed to tag and track these assets.  Unfortunately, this error is typically realized after hundreds or even thousands of cloud based assets have been instantiated.Experts have also outlined a five-step process that help enterprises bring control and governance to hybrid cloud IT cost.

Step 1: Establish governance thresholds and policies for services

Step 2: Access your cloud service provisioning accounts

Step 3: Track the costs of the services, including recurring and usage-based costs

Step 4: Enforce compliance on the costs and asset usage using the purpose built cost analytics engines; initiate and track changes

Step 5: Simulate and optimize the control and compliance actions and better control your costs

Managing spend and assets across hybrid clouds also requires the availability of actionable data. This will help the CFO focus on which assets are performing as expected and which are not. Predictive analytics and insight-based recommendations can also help to drive the prioritization of changes that can have the most effective impact.

These sort of challenges can certainly be acute but the solution for helping organizations gain control of these issues will typically include holistic hybrid cloud management. In fact, financial organizations are just now realizing their critical role in managing the operational expenditure model embraced by cloud computing. Services specifically designed to address the financial management aspects of cloud metering, billing, workload management and service provisioning policies are just now hitting the marketplace.

One of these leading financial management services is provided by IBM. Their newly launched Cost and Asset Management application helps companies address escalating cloud costs and complexity while offering guidance into the next steps of hybrid cloud transformation. Through the use of predictive analytics to monitor and provide recommendations on a single dashboard, this service can provide finance and IT on one system of reference for hybrid cloud governance. This particular service can establish and enforce governance control points using financial and technical policies. Its ability to easily combine asset tags with policies can help the CFO identify and respond to financial variances before they become problems. Through the innovative use of Watson Cognitive services, this particular application can tap into a years of IBM experience to offer recommendations using built-in advanced analytics and cognitive capabilities. Acting on these suggestions can streamline cloud usage, predict future trends and identify waste.

If your company is currently experiencing these digital transformation challenges, learn more about managing hybrid IT finances at ibm.biz/ExploreCloudBrokerage. Establishing a focus on cloud governance, cost and asset management is a truly essential step towards expanding the operational benefits of hybrid cloud.


This post was brought to you by IBM Global Technology Services. For more content like this, visit IT Biz Advisor.

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Kevin Jackson, founder of the GovCloud Network, is an independent technology and business consultant specializing in mission critical solutions. He has served in various senior management positions including VP & GM Cloud Services NJVC, Worldwide Sales Executive for IBM and VP Program Management Office at JP Morgan Chase. His formal education includes MSEE (Computer Engineering), MA National Security & Strategic Studies and a BS Aerospace Engineering. Jackson graduated from the United States Naval Academy in 1979 and retired from the US Navy earning specialties in Space Systems Engineering, Airborne Logistics and Airborne Command and Control. He also served with the National Reconnaissance Office, Operational Support Office, providing tactical support to Navy and Marine Corps forces worldwide. Kevin is the founder and author of “Cloud Musings”, a widely followed blog that focuses on the use of cloud computing by the Federal government. He is also the editor and founder of “Government Cloud Computing” electronic magazine, published at Ulitzer.com. To set up an appointment CLICK HERE

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