Cloud Cost Management (CCM) refers to the process of monitoring, controlling, and optimizing a business’ overall cloud spend. The cloud’s unmatched flexibility, scalability, and efficiency are crucial for innovation and growth, but these benefits can turn into pitfalls without a firm grip on costs. On average, organizations waste 30% of their annual cloud budget. This inefficiency can quickly add up to a substantial financial burden, draining IT resources and inflating budgets.
Companies move to the cloud for many reasons: flexibility, scalability, security and, of course, cost cutting. Potential cost savings is a powerful motivator for making the leap, but business leaders often find themselves unprepared for the actual costs and rising expenses related to their cloud technologies and cloud computing resources. Companies are now using dozens – even hundreds — of different cloud services. How do you govern cloud costs at all levels of your organization? How do you curb waste, properly allocate costs, and prevent overspending?
That’s where Cloud Cost Management comes in.
Cloud Cost Management makes it easy for companies to optimize their cloud usage, avoid overspending, and make data-driven decisions about their cloud infrastructure. There are many Cloud Cost Management Tools available, but a Cloud Cost Management solution like Tangoe One Cloud is top-rated for its ability to centralize cost management for both cloud software and cloud infrastructure services across a vast list of cloud service providers and application services. CEM solutions are touted as the machine behind the FinOps strategy for cloud cost optimization and can reduce costs by as much as 40% when implemented effectively.
Cloud computing has become an essential part of modern business operations, providing organizations with unparalleled scalability, flexibility and cost savings. However, without effective cost management in place, cloud expenses can quickly spiral out of control, leading to unnecessary spending and a lower ROI. Cloud cost management provides a solution for monitoring, optimizing, and controlling cloud expenses.
Here are a few reasons why companies need cloud governance.
The increased accessibility of cloud services through mobile devices and app stores has made it easier for employees to adopt and interact with more applications without the approval or involvement of the corporate IT department. While users appreciate the convenience, that means your IT team isn’t aware of what your team is using. This is called shadow IT.
Shadow IT often crops up when companies fail to establish clear policies for accessing cloud services and requesting new services. Shadow IT is also more common when IT lacks control over device-level permissions, especially in workplaces where employees bring their own devices.
Uncontrolled applications can lead to higher security risks and increased spending when multiple tools are used for the same purpose.
The pandemic accelerated digital transformation, causing many companies to rapidly adopt cloud services and applications. Without proper SaaS governance and clear ownership, companies are challenged to understand what devices, apps and services are being used and how much they cost the organization.
Organizations need to navigate an increasingly distributed cloud environment that makes it difficult to track and optimize cloud costs.
Variable Pricing & Billing Challenges
Cloud service providers often use complex pricing models that can be difficult to understand. IaaS providers often charge for services in a granular way, such as by usage, data transfer or storage. These pricing models complicate efforts to accurately estimate the costs of using specific cloud resources.
Forecasting your costs can be challenging, especially if you’re paying by usage levels. Some providers change prices frequently or offer dynamic pricing, which further complicates budgeting. Billing complexities can also press resources to their limit. A single invoice, for example, may contain hundreds of pages of extensive data and billing information. Analyzing and managing these invoices can be time-consuming and resource-intensive.
Many businesses lack the resources or expertise to effectively manage their cloud expenses, which is another contributor to cloud expense management challenges. Sometimes this lack of resources is an oversight, but other times the cause is rapid innovation that outpaces organizational capabilities.
Sometimes, the total cloud spend, or the total usage of cloud resources, isn’t the problem. Instead, some cloud services are over-provisioned and others are unused or under-used, leading to wasted spending and reduced performance.
Without visibility into the complete resource catalog and service usage data, organizations struggle to estimate near- and long-term costs, much less identify possible cost reductions. Over time, cloud services remain in place without anyone really knowing whether they’re still useful or whether the company is getting the best return on investment.
The cloud comes with many advantages, as well as a unique set of challenges for IT and financial teams trying to track investments and usage, compare prices, and allocate cloud expenditures across multiple departments within the business. Sprawling cloud technologies blur visibility and transparency into invoices and service usage data making it hard to stay on top of spending and consumption trends.
All of this creates problems with:
Runaway Costs: You need protective parameters in place to avoid overprovisioning (deploying and paying for cloud resources that go unused) and thus overspending. Today, it’s not uncommon for companies to overspend in the cloud by as much as 70%, according to Gartner. Learn more about how Tangoe One Cloud helps Finance teams.
Trouble Seeing and Finding Cloud Waste: 30% of cloud resources go to waste, and you need deep clarity into your entire cloud estate to identify unused or misused resources including:
Acting on Cost Savings Opportunities: To cut costs and maximize value, you need access to – and the ability to quickly act on – cost savings intelligence. For example, knowing where needs and services are mismatched so you can start scaling or rightsizing across IaaS, SaaS, and UCaaS. This should include the right team to reallocate wasted resources, handle invoice corrections, manage vendor disputes, and modify services as needed.
Holding Departments Responsible for Cloud Costs: With the cloud consuming such a huge part of IT spending, companies need to carefully account for applications and infrastructure to protect their bottom line. It can be extremely difficult to know where resources are being used across the organization, plus keep teams accountable for their usage in the form of issuing chargebacks.
Aligning Cross-Functional Teams to Prioritize Cost Optimization: A crucial yet oft overlooked part of Cloud Cost Management involves the overlapping needs and dependencies among IT, finance, and other stakeholder teams. Cloud cost governance is an organization-wide initiative and needs to pull everyone across the entire cost management ecosystem together for comprehensive cost optimization success.
Cloud Cost Management provides IT and financial teams with a definitive understanding of their organization’s entire cloud estate to make better decisions around cost allocation, unnecessary spending, budgeting and forecasting, and much more.
Obstructed view of usage and costs: 70% of IT and financial decision-makers say it’s hard to account for cloud usage and spend. If you don’t know who’s using what or how much you’re spending, it’s time to tighten the reins with Cloud Cost Management.
Stakeholders lack the insight they need to drive impact: It’s not just about knowing your current state of usage and spend. You need to continually optimize your cloud usage and rates to achieve better price performance and higher cloud ROI.
Cloud investments aren’t meeting expectations: Less than half of UCaaS and IaaS investments have fully delivered anticipated benefits. Can you relate?
You lack the organizational alignment needed to make FinOps a sustainable practice: Overshadowed by siloes? Empower your IT team and financial team to manage cloud utilization and cloud finances together using a central control center.
There are many benefits of using cloud cost management software and services. Cloud platforms, such as Tangoe One Cloud, improve visibility and lead to higher productivity, better resource allocation and numerous other gains.
Here are some of the common benefits of using cloud expense management software.
Cloud cost management software can help your business comply with industry and security regulations by identifying and responding to shadow IT applications and cloud services. When employees sign up for cloud applications and services without going through the proper channels or getting approval from IT departments, expense management software steps in to shed light into both known and unknown applications, helping companies recognize the applications posing the highest security risk as well as the steps needed to mitigate risk with unified security approaches for every endpoint.
Shadow IT is a security threat, but it also contributes to overspending in the form of redundant cloud tools and expenses. This is where cost optimization recommendations come in handy, as SaaS expense management solutions can evaluate both security and financial risks.
Cloud cost management solutions enable a comprehensive approach for governance across the IT environment, including IaaS, SaaS, and UCaaS. Because you have one source of truth for understanding your ROI on technology investments, you can quickly identify areas where costs can be reduced and value can be increased.
For example, cloud expense management software can reveal spending across applications, infrastructure instances, users, departments, or business units, helping you pinpoint the root cause of high costs and take corrective action.
For many companies, the first step in controlling cloud costs is getting an accurate picture of their total cloud services, especially when departments and business units use different vendors.
Many organizations struggle with silos when it comes to critical information in the cloud. Cloud cost management makes usage, expenses, and spending patterns visible so everyone can see and evaluate them for cost optimization purposes. Cloud expense management creates greater visibility into your organization’s cloud services, so there’s less mystery about where costs come from or what services are utilized. This also means Shadow IT can be monitored and managed appropriately.
Using cloud cost management software allows you to easily share information with financial, security, and compliance teams or even outside strategic IT advisors. By combatting uncertainty with cloud observability, organizations increase accountability among all parties. For example, your finance team can share spending information with project managers and IT department heads, allowing them to make more informed decisions about resource allocation.
Effective cloud cost management tools deliver essential features that empower companies to optimize usage, eliminate waste, and gain full control of their entire cloud estate (IaaS, SaaS, UCaaS, and private cloud), maximizing both efficiency and savings.
FinOps is a recognized process and framework for cloud cost management. The framework is built around six key principles, three phases, and six domains – all specially designed to enhance collaboration, accountability, and transparency among cloud cost management stakeholders. The structure puts strategic best practices into place for visibility and cost governance that empower businesses to gain better financial control and predictability over their cloud estate.
To make informed decisions about cloud expenses, stakeholders require data about how much they’re spending, on what, and why. AI does what no human can in this regard, boiling down an endless sea of data into exactly the information leaders need. But not all Cloud Cost Management tools are the same. Effective cloud cost management tools are purpose-built, leveraging AI at the core to streamline and accelerate cost management end-to-end. This includes continuous optimization powered by newer advancements like Generative AI (GenAI) and large language models – driving smarter, more efficient cloud spending strategies.
From epic number crunching and dynamic price tracking to automated recommendations and implementation, learn more about Tangoe’s AI capabilities for cloud cost management here.
To effectively manage your cloud investments, organizations need to understand the cloud environment. This means looking at historical reporting, including service usage, expenses and invoices, to identify where money is going and which services cost the most. You can apply artificial intelligence to analyze usage reports from cloud providers to gain insights into your spending patterns and underutilized or unused instances.
Software makes this process easy, providing a comprehensive view of the cloud environment, enabling a full inventory and analysis of the current usage and helps you know where to make necessary adjustments that can boost ROI.
After getting a handle on cloud services and their associated expenses, it’s time to optimize spending. There are several ways to do this, such as negotiating with providers for lower rates, identifying and eliminating wasted resources and services, and optimizing cloud spend.
For example, look at your user base. Does everyone who has access to individual cloud applications and services need that access? This is especially important for services that involve any sort of per-user licenses or pricing. If your cloud service costs are based on usage, look at how efficiently you are using the resources you pay for. Target unused and underutilized resources that can be discontinued or renegotiated at a lower price ceiling.
Cloud cost management solutions are good at answering questions like:
Managing cloud technologies and computing resources is not cheap because it’s not easy. Every enterprise has different needs spanning different areas with associated (and complicated) costs. Ignoring these costs isn’t an option, especially if you need to save money. You’ll waste money – likely more money – if you don’t mange cloud costs closely.
Pricing matters, but cutting costs in the wrong areas can cost more in the long run. You must invest wisely in Cloud Cost Management to keep cloud costs as low as possible.
Wide Cloud Visibility
Tangoe One Cloud clears the haze of even the most complex multi-cloud environments and delivers actionable insight into all IaaS, SaaS, and UCaaS expenses. Know where your money is going, which resources drive costs, and which teams or users spend what. Our solution leaves no stone unturned.
AI Automation for Smarter FinOps Programs
Artificial Intelligence is what makes Tangoe One Cloud a cloud cost management juggernaut. Our AI-infused platform drives more savings and process efficiencies compared to competing solutions and doubles cost savings compared to a Do-it-Yourself (DIY) FinOps approach. Using the power of AI, companies can:
Flexible Analytics and Reporting for IT and Finance Teams
Adapting your digital strategy to ever-changing landscapes requires regular analysis and right-time, right-information decisions. With automatic data analysis and a unified view of cloud expenses and inventory, Tangoe One empowers companies to proactively problem solve, mitigate risk, track savings, and right-size spend.
Learn more about how we help IT teams and how we help Finance teams.
Cloud Expense Management (CEM) is the process of effectively controlling any costs and resource usage related to cloud computing environments. CEM solutions offer one centralized technology platform to help companies achieve this for both their cloud software services and their cloud infrastructure services. Read the full guide.
FinOps is a strategic framework helping companies control their cloud costs and make efficient use of their cloud services. This cloud financial management discipline brings together IT operations, finance, and other stakeholders and was created by the FinOps Foundation. Read the full guide.
Cloud Optimization is the practice of evaluating your cloud architecture, whether public, private, or hybrid by monitoring spending, allocating costs, and governing utilization consistently. Powerful cloud optimization should provide multi-cloud visibility with AI tools to control spending across multiple cloud service providers. Learn more about Cloud Optimization with Tangoe.
Cloud Services Management (CSM) is the process of effectively managing cloud services, products, and resources. CSM commonly uses a variety of tools and processes with the aim of optimizing costs and reducing waste by ensuring all cloud services are used to their full potential. Read the full guide.
Cloud data management is the process of managing all enterprise data stored across cloud services & platforms or in a combination of public/private/hybrid cloud environments and cloud applications. Read the full guide.
SaaS Management provides visibility, cost governance, and security insights into an organizations’ SaaS tools. SaaS Management platforms are cloud-based solutions that enable organizations to understand their SaaS spend and usage, carefully managing all the essential functions associated with their tech stack. Read the full guide.
SaaS Optimization is the practice of evaluating your SaaS ecosystem through a comprehensive view of all your SaaS applications, licenses, users, and expenses so you can get the most use out of the tools you already own, and make smarter choices about which apps to purchase moving forward. Learn more about SaaS Optimization with Tangoe.
Infrastructure-as-a-Service (IaaS) is a fully outsourced cloud computing service model with managed, owned/leased hosting and development environments. Resources (such as compute, network infrastructure, and storage hardware) that may have been previously hosted on premises or in data centers are now being hosted in public, private or hybrid-cloud environments on a “pay-as-you-go” basis. Read the full guide.
Unified Communications as a Service (UCaaS) refers to cloud-based communications solutions that deliver multiple types of digital communications services in one unified system. Read the full guide.
Meet with an expense management expert today.
Request a demo.
