Four strategies for cloud and data centre cost optimisation

Cloud and data centre infrastructure are essential for organisations seeking scalable, flexible, and efficient solutions for their growing technology and data demands. 

While migrating to cloud solutions offers clear benefits, enabling organisations to avoid upfront capital investments, managing costs in these dynamic environments can be complex. At the same time, owning and maintaining a data centre requires a significant investment in keeping infrastructure compatible with emerging technologies.

We recommend four strategies for achieving cost efficiency in cloud and data centre operations, to ensure organisations gain maximum value from their investments.

1. Rightsize cloud and data centre infrastructure

Rightsizing of IT infrastructure refers to the process of optimising an organisation’s IT resources and capacity to meet its current and future needs, to enable efficient, sustainable, and secure operations. Companies typically combine cloud and data centre infrastructure to achieve a balance between cost and performance, but many report poor visibility of cloud spend, overprovisioning of resources and a lack of consistent enterprise architecture. 

Rightsizing cloud and data centre infrastructure addresses these issues and delivers several benefits, including:

• Efficient spending, ensuring that resources are neither underutilised nor overprovisioned;
• Performance improvement, aligning resources with actual workloads to reduce bottlenecks and improve overall system responsiveness; and
• Better scalability, allowing organisations to adapt their infrastructure to changing needs.

The challenge with on-premises rightsizing lies in predicting future demand accurately. This requires complex capacity planning, relying on historical data and projections, and any deviation from predicted usage can lead to operational inefficiencies and sunk costs. 

Cloud environments provide a more flexible model for rightsizing, with the pay-as-you-go pricing structure enabling organisations to adapt quickly to changes in demand. Cloud environments also offer advanced tools, that leverage AI and machine learning, to analyse real-time usage patterns. Tools such as AWS Trusted Advisor, Azure Advisor and CloudHealth can automatically identify underutilised resources and make proactive recommendations. 

We recommend conducting a Total Cost of Ownership (TCO) analysis for comparing cloud rightsizing with on-premises. While the cloud offers greater flexibility, organisations must consider factors such as data transfer costs, storage costs, and the potential for egress fees. On-premises TCO encompasses hardware and maintenance costs, as well as the opportunity cost of tying up capital in physical infrastructure. Balancing these considerations will ensure a nuanced approach to cost optimisation.

2. Optimise data management

A significant proportion of cloud and data centre cost is associated with data storage, transfer, and processing. As organisations look to optimise overall IT infrastructure spend, we recommend five steps to optimising data management:

• Understand your data storage needs. Conduct a thorough assessment of data needs to inform your data strategy, considering factors like data type, frequency of access, and regulatory requirements.  
• Utilise storage tiers based on data access patterns and importance. Cloud providers offer multiple storage tiers with varying performance characteristics and costs. Frequently accessed data might be stored in a high-performance tier, while infrequently accessed or archival data can be moved to lower-cost storage tiers.
• Implement data compression and deduplication techniques. These methods reduce the amount of physical storage required, leading to cost savings. Take care to choose compression algorithms and deduplication mechanisms that balance performance impact with space savings.
• Minimise data transfer costs. The cost of transferring data between different components, services, or locations within the hybrid or multi-cloud infrastructure is often overlooked. Costs vary depending on factors like the volume of data transferred, the distance between data centres or cloud regions, and the specific pricing models of the cloud service providers involved. Organisations can minimise data transfer costs by strategically placing resources in the same region or utilising content delivery networks (CDNs) to cache and serve frequently accessed data closer to end users.
• Establish robust monitoring and reporting mechanisms to track data-related costs. Leverage cloud provider cost management tools and third-party solutions to gain insights into data storage, processing, and transfer costs. Review cost reports routinely to identify opportunities for further optimisation.

3. Build flexibility into cloud and data centre contracts 

Building flexible terms and provisions into cloud contracts and data centre agreements allows organisations to adapt to changing business needs. Rigid contracts result in operational inefficiencies and can have significant financial repercussions. The key lies in cultivating a contract management strategy as dynamic and responsive as the technologies it governs. 

Proactive renegotiation plays a crucial role here. By negotiating contracts that allow for flexible resource scaling, companies can seamlessly adjust their commitments and costs based on demand. Picture a tech startup that initially commits to a fixed data storage plan but experiences rapid growth in its user base. Through proactive renegotiation with the service provider, the startup can modify its contract to accommodate increased storage needs, avoiding unnecessary costs and ensuring a scalable infrastructure.

Businesses that embrace continuous adaptation, leverage real-time data insights and engage in proactive renegotiation can navigate the dynamic technological landscape with agility, ensuring optimal cost management without compromising operational efficacy.

4. Improve IT cost control through agile financial management

Effective financial management in cloud and data centre infrastructure involves strategically monitoring IT costs to optimise budgeting, cost analysis and forecasting over time. The true objective of cloud and data centre cost optimisation should be to achieve long-term financial sustainability. 

To achieve this, traditional IT financial models are gradually yielding to more dynamic approaches such as IT Financial Management (ITFM) and Financial Operations (FinOps). Embracing ITFM and FinOps introduces a paradigm shift where ongoing financial assessments become the norm, enabling organisations to proactively track and adapt their costs to an ever-changing technological landscape and the fluctuating price structures of cloud providers.

Incorporating cost methodologies into sprint cycles will ensure that cost review and optimisation become core components of product development. This proactive integration diminishes the financial lag that typically accompanies the introduction of new features, ensuring that cost implications are an ongoing, real-time consideration, and not an afterthought.

Summary

Cost optimisation in cloud and data centres is an ongoing, multifaceted process that includes rightsizing resources, optimising data management, negotiating contract flexibility and ensuring agile financial governance. Taking a strategic, comprehensive view of cost optimisation will enable organisations to drive operational excellence and financial sustainability.

Where next?

The next article in our technology cost optimisation series will focus on strategies for optimising your software cost and maximising ROI through app rationalisation. 

For more information on optimising cloud spend, read our cloud strategy article series.

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