Your migration to cloud computing was a great decision. You’ve all-but-eliminated any capital investments on equipment. You’ve removed many operating expenses, too, including rent, electrical power, HVAC space cooling, equipment maintenance, on-staff administrators and managers, and more. You’ve replaced all of that with a single monthly expense that is consistent, predictable, and budgetable.
Or is it?
One of the Essential Characteristics of Cloud Computing
In 2011, the National Institute for Standards and Technology (NIST) published "The NIST Definition of Cloud Computing.” One of the “Essential Characteristics” listed in this brief document is:
Rapid elasticity. Capabilities can be elastically provisioned and released, in some cases automatically, to scale rapidly outward and inward commensurate with demand. To the consumer, the capabilities available for provisioning often appear to be unlimited and can be appropriated in any quantity at any time.
This coordinates elegantly with another essential cloud characteristic, “resource pooling.” Economies are achieved by having all users share from one pool of resources, requesting them and releasing them as needed. Finally, another essential service, “measured service” enables cloud service providers to measure all utilization and bill each user only for the services and resources they’ve actually used.
This has translated into one of the most attractive customer benefits of cloud computing, the fact that you only pay for the resources you’ve used. This is commonly referred to as “consumption-based billing” and it would seem like a wonderful advantage, which it is… as long as it is managed properly.
Managing Cloud Expenses
American author Thomas Charlton first wrote in 1809 that “the price of liberty is eternal vigilance.”
Applied here, cloud has dramatically reduced not only capital and operating costs, it has also minimized customer involvement in operating their own IT environment. While that is indeed “liberating” in that it frees personnel to accomplish far more important and valuable activities, cloud spending requires constant vigilance. Failure to exert such vigilance may often result in very unpleasant surprises. Some of these may even be career-threatening.
After a few months, invoices arrived. But some of these invoices didn’t resemble the subscription’s indicated maximum because some of these new cloud arrivals had overrun their intended limits. They consumed too much cloud. In some cases, way too much cloud. These unfortunates found themselves holding unanticipated invoices for tens or even hundreds of thousands of dollars.
Even today, those who are just now adopting cloud computing are struggling to improve their governance to prevent a proliferation of uncontrolled cloud projects.
Cloud and Your Offboarding Process
When new personnel join your cloud-computing-based-company, you routinely purchase them subscriptions for the services they will use.
Or do you first check to see if you already have “seats” that were formerly used by someone who has left your company? Many companies neglect to include cloud subscriptions in their offboarding checklist, and don’t have an accounting procedure in place to tick and tie the number of users to the number of “seats” currently under subscription.
The result is the purchase of new subscriptions when there is still time left on idle ones. Then, that usable time simply runs out unused.
The New Cloud Expense Accounting
The migration from on-premise to cloud computing brings with it a need to migrate from on-premise-style accounting to new processes designed specifically for cloud-computing environments. In turn, these new processes require the support of systems designed specifically for Cloud Service Expense Management (CSEM). This includes visibility and management of cloud service consumption well before you exceed thresholds, and that you use existing resources before you buy new. More fundamentally, CSEM enables you to track and reconcile all of your cloud services to approve payment of invoices with confidence.
An efficient, effective CSEM solution also interfaces directly with SAP, Oracle, or whatever enterprise resource management (ERP) solution your company depends upon to run the business.
With acceptance and adoption of cloud computing fast becoming the standard, the need for CSEM has increased dramatically. MDSL has enhanced our popular Technology Expense Management (TEM) to create a new, powerful CSEM solution that allows you to manage your cloud spend as closely as you manage every other cloud performance factor. To learn more, click here.