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Do You Really Know Where Your Cloud Spend Is Going?

Follow these recommendations to start or continue your cloud cost visibility journey.

ITPro Today

May 14, 2024

5 Min Read
3 roads made out of dollars going into the clouds

The cloud paradox persists for many organizations, as the cloud is failing to deliver on the promise of being cheaper and better. A survey by CloudZero found 58% of organizations say their costs are too high, but that doesn't tell the full story. The real problem isn't that costs are too high; it's that organizations lack visibility into what's driving those costs.

Organizations need better visibility to regain control of cloud costs. This makes engineering engagement possible, which leads to better business outcomes. But daily visibility isn't enough; modern SaaS companies need hourly granularity.

Examining Cloud Costs and Perceptions

The bottom line is that most companies aren't happy with their cloud costs, and they "lack control over them. The survey revealed that fewer than half of companies reported healthy cloud costs, and the number of respondents who said their costs are "way too high" rose from 11% in 2022 to 14% this year. While not a huge spike, it shows an upward trajectory of lack of control over cloud costs.

Organizations largely don't understand where the costs are coming from or what is driving the significant increases. When asked about their ability to ascribe cloud spend to various aspects of their business (products, features, customers), 42% of respondents indicated they could only give an estimate. What's worse, more than 20% said they have little to no idea how much different parts of their business cost. Unit costs are especially hard to measure, with two-thirds of companies unable to calculate them accurately.

Related:Cloud Cost Calculators: Benefits and Limitations

The inability to transform cost data into manageable unit economics underscores a massive failure in cloud software engineering.

Digging Into the Visibility Issues

Poor cloud cost visibility doesn't discriminate — both small and large businesses struggle with it. That said, there's also been a change in how a company's stage affects their cost visibility. In 2022, venture-backed or private equity-owned companies did better than public companies in terms of cost attribution, but this year, we found the opposite; when attributing cloud spend, venture-backed companies report having the least confidence (32%).

Lack of visibility also impacts productivity and job performance. Over half (66%) of participants said rising cloud costs interfere with finance and engineering workflows. The same percentage of engineers said this lack of visibility caused some level of disruption to their work. The percentage reporting a high level of disruption doubled between 2022 and 2024, from 11% to 22%.

Related:How FinOps Can Help Optimize Cloud Spending

Moreover, a massive 89% of participants reported that lack of cloud cost visibility impacts their ability to carry out their role; just under half noted a major impact.

Investigating Cost Discrepancies

Efforts to boost visibility are improving but still take time. The good news is that businesses are getting faster at investigating discrepancies. While in 2022, 8% of respondents said it took more than a week to solve discrepancies, no one said the same this year.

The picture isn't completely rosy, though. The number of participants who said it takes them hours to investigate cost discrepancies has increased, while the number who said it takes only minutes has decreased. Overall, most people said it takes between one and three hours.

The Role of Engineers in Cloud Cost Control

Many organizations assume that getting engineers to care about cloud costs will be a fruitless uphill battle, but the survey reveals that the opposite is true. When engineers take cloud costs into their own hands, better business outcomes result.

Engineering ownership equates to a better understanding of cloud cost. There's a correlation between engineering ownership and better outcomes, such as increased confidence in reporting accuracy. When engineering has some level of ownership, 81% of respondents said their cloud costs are "about where they should be."

How Organizations Can Start to Gain Greater Visibility

In all other realms of business, leaders are required to know what they're spending money on and how much it costs to deliver their core value offering. This core business precept has not been required of the cloud for years — but that's changing.

Unit economic visibility leads to observable business results. With this concept, companies can track their cost per feature, product, customer, and more to ensure that every cloud dollar is allocated optimally. This enables financial predictability and control in the cloud — helping companies increase profitability, eliminate surprise bills, and lower pressure to cut costs.

Third-party platforms have the power to automate and streamline this process, which would otherwise be unsustainably labor-intensive. Once businesses correlate cloud usage with business value, they determine which views most closely represent this relationship. This further reduces the manual workload for each engineer.

All cloud stakeholders must remain committed to cloud financial operations (FinOps) goals, which requires a single source of FinOps truth. This depends on a single destination for 100% of your cloud spend data, alerts, views, and reports that engage engineers in managing that spend and empower teams with data specific to their missions.

Maximizing Cloud Efficiency

Ultimately, cloud cost visibility isn't necessarily about decreasing your costs. They may increase, but are they rising for the right reasons, such as attracting new customers or increasing top-line revenue? Understanding how cloud costs affect business performance is key to understanding whether you are building efficiently in the cloud. You need to understand what drives 100% of your cloud operational spend and take an engineering-led approach to optimizing that spend. Use the above recommendations to start or continue your cloud cost visibility journey.

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