The term “cloud expense management” has been co-opted by many parties, from those selling employee expense management software hosted in the cloud, to telecom expense management software (TEM), to IT expense management software, to cloud cost management software which focuses on SaaS, IaaS, and/or PaaS services. For the purpose of today’s blog we will slant towards cloud management software and specifically key in on infrastructure, IaaS and PaaS offered as public cloud services.
One of the greatest benefits of cloud computing is supposed to be cost efficiency, but there is a flip side to the agility gained by using public cloud computing. Costs can easily get out of control if your cloud services are not effectively provisioned or properly governed and managed. Most organizations have not yet fully migrated all their applications to the cloud. Because of this hybrid cloud structure, public cloud services can become an added cost to their overall budget, making understanding, planning and managing these cloud services extremely important. That is where cloud expense management software comes into play, it really needs to be part of your overall cloud management strategy from day one.
Cloud Computing Services
Before we discuss further how to manage cloud expenses, let’s take a look at the different cloud service types in more detail to get a picture of the expenses there are to manage. Remember there are literally hundreds of IaaS and PaaS services offered in the public cloud — as of this blog writing AWS alone has 190+ cloud services.
Infrastructure-as-a-service (IaaS) is a category that offers traditional IT services like compute, database, storage, network, load balancers, firewalls, etc. on demand and off premise – vendors like AWS, Azure and Google dominate this market.
Platform-as-a-service (PaaS) is a category of cloud computing services that provides a platform allowing customers to develop, run, and manage applications without the complexity of building and maintaining the infrastructure typically associated with developing and launching an app – AWS, Azure and Google offer PaaS along with IBM, Oracle, and RedHat to name a few.
Software-as-a-service (SaaS) is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. It is sometimes referred to as “on-demand software” – vendors who dominate this space include Salesforce, ServiceNow, Microsoft and SAP (and ParkMyCloud) to name a few.
Enterprise expenses in these categories are skyrocketing as outlined in our cloud waste blog, along with the difficulties of administering an effective cloud expense management for a single cloud, let alone a multi-cloud or hybrid cloud environment in order to protect a company’s bottom line. Companies now require visibility and insights into their cloud-based services, and automated controls and actions to remediate and manage those cloud service expenses.
Where does Cloud Expense Management fit?
As mentioned, cloud expense management should be a key element in your overall cloud management strategy. Enterprises need a clear strategy here and generally tools fit into the following categories — please note functionality can be both natively provided by the cloud service provider or via a third-party:
- Provisioning and orchestration: create, modify, and delete resources as well as orchestrate workflows and management of workloads
- Automation: Enable cloud consumption and deployment of app services via infrastructure-as-code and other DevOps concepts
- Security and compliance: manage role-based access of cloud services and enforce security configurations
- Service request: collect and fulfill requests from users to access and deploy cloud resources
- Monitoring and logging: collect performance and availability metrics as well as automate incident management and log aggregation
- Inventory and classification: discover and maintain pre-existing brownfield cloud resources plus monitor and manage changes
- Cost management and optimization: track and rightsize cloud spend and align capacity and performance to actual demand
- Migration, backup, and DR: enable data protection, disaster recovery, and data mobility via snapshots and/or data replication
We believe cloud expense management is a subcategory of Cloud Cost Management and Optimization. Tools in this category generally help enterprises with:
- Cost visibility, reporting, budgeting and chargeback
- Buy and manage Reserved Instances (RI’s) and Savings Plans
- Leverage usage data in real-time to make recommendations and take actions on idle, under or overprovisioned, or orphaned cloud resources
- Create an action plan to optimize future cloud costs and avoid budget surprises
Why is Cloud Expense Management Important?
Simply put, the cloud is a utility and it needs to be managed as such – cloud costs need to be reported and allocated, cloud services need to be optimized, and in order to reap the benefits of cloud these cost control actions needed to be automated. Whether cloud expense management is your full-time, or “when-you-have-time” responsibility, it is important to build it into your cloud management strategy from day one. It will take time but what you get in return is increased optimization and validation of your cloud services and costs, ensuring you maximize your ROI.
A few years ago, AWS announced the release of their Scheduled Reserved Instances. These reserved instances are designed for workloads that recur on a daily, weekly, or monthly schedule, and are purchased for a one-year term. AWS says that Scheduled Reserved Instances provide a 5-10% savings over On-Demand instances used for this same purpose.
While we always appreciate ways to save on AWS, there are a few reasons that Scheduled Reserved Instances are unlikely to make a useful addition to your toolbox when compared to other cost-savings options available.
First of all, they have a decidedly limited use case, only for predictably scheduled operations that will go on for at least one year. Many companies would need to see a much higher savings rate than 10% with this year-long commitment when looking at AWS on demand vs reserved.
Secondly, they are inflexible. Once you set a schedule, you cannot change or override it, and the options to set schedules are limited to daily, weekly, or monthly recurrence on a set duration. Since one of the main benefits of cloud is the ultra-flexibility you get on short notice, this might be a deal-breaker by itself.
Additionally, as Beth Pariseau pointed in a TechTarget article, additional management overhead is required to manage every additional type of instance that a company leverages.
Note that Scheduled Reserved Instances are also limited by region – only available in US East (Northern Virginia), US West (Oregon), and Europe (Ireland) regions – and by instance type, currently supporting C3, C4, M4, and R3 instance types. This means that modern versions of those EC2 instance families, like M5, M5a, M5n, M6g, C5, or C5n, are not available for scheduling, so you’re using an older version of those EC2 instance types. While this might not matter much now, the list of usable instance types has not been updating along with the on-demand instance types, which means this problem will only get worse with time.
When compared to standard AWS reserved instance pricing, you’re not really getting the savings you’d expect from this kind of commitment. Reserved Instances typically save 30% for a convertible 1-year purchase, and can be about 60% for a standard 3-year purchase. This means that if you have an EC2 instance you need that would match the scheduled reserved instance but are using that same EC2 size for other workloads throughout the month, then the non-scheduled EC2 reserved instance pricing works much better with more savings.
For your recurring workloads, you can run instances only when you need them but maintain flexibility by using ParkMyCloud to schedule on/off times for On-Demand instances. By keeping workloads on just during business hours, you’ll save 65% using ParkMyCloud, with even more savings achievable if you need that instance even less throughout the month (and doesn’t even account for savings achieved through RightSizing). This beats any AWS RI pricing while maintaining flexibility for your organization. Keep this in mind while you are evaluating your reserved instance vs on demand decisions.
See the chart below for a full comparison of using Scheduled Reserved Instances vs. using ParkMyCloud.
This comparison shows that AWS Scheduled Reserved Instances are unlikely to be worth any effort or investigation by your cloud operations team. ParkMyCloud provides more benefits and much higher savings with more flexibility and less commitment. Even standard AWS EC2 Reserved Instance pricing and savings can give you more bang for your buck.
If you’ve got workloads and servers that don’t need to run very frequently throughout the month, but you need to ensure they can be spun up at a moment’s notice, then ParkMyCloud can help you save money and enable your users for maximum cloud efficiency. Give ParkMyCloud a try for yourself – start seeing savings today.
Google Cloud Platform vs AWS: what’s the deal? A while back, we also asked the same question about Azure vs AWS. After the release of the latest earnings reports a few weeks ago from AWS, Azure, and GCP, it’s clear that Microsoft is continuing to see growth, Amazon is maintaining a steady lead, and Google is stepping in. Now that Google Cloud Platform has solidly secured a spot among the “big three” cloud providers, we think it’s time to take a closer look and see how the underdog matches up to the rest of the competition.
Is Google Cloud catching up to AWS?
As they’ve been known to do, Amazon, Google, and Microsoft all released their recent quarterly earnings around the same time the same day. At first glance, the headlines tell it all:
The obvious conclusion is that AWS continues to dominate in the cloud war. With all major cloud providers reporting earnings around the same time, we have an ideal opportunity to examine the numbers and determine if there’s more to the story. Here’s what the quarterly earning reports tell us:
- AWS had the slowest growth they have ever since they began separating their cloud reportings – up just 37% from last year.
- Microsoft Azure reported a revenue growth rate of 59%.
- Microsoft doesn’t break out specific revenue amounts for Azure, but Microsoft did report that its “Intelligent Cloud” business revenue increased 27% to $10.8 billion, with revenue from server products and cloud services increasing 30%
- Google’s revenue has cloud sales lumped together with hardware and revenue from the Google Play app store, summing up to a total of $6.43 billion for the last quarter.
- To compare, last year during Q3 their revenue was at $4.64 billion.
- During their second-quarter conference call in July, Google said their cloud is on an $8 billion revenue run rate – meaning cloud sales have doubled in less than 18 months.
You can see here that while Google is the smallest out of the “big three” providers, they have shown the most growth – from Q1 2018 to Q1 2019, Google Cloud has seen growth of 83%. While they still have a ways to go before surpassing AWS and Microsoft, they are moving quickly in the right direction as Canalys reported they were the fasted growing cloud-infrastructure vendor in the last year.
It’s also important to note that Google is just getting started. Also making headlines was an increase in new hires, adding 6,450 in the last quarter, and most of them going to positions in their cloud sector. Google’s headcount now stands at over 114,000 employees in total.
The Obvious: Google is not surpassing AWS
When it comes to Google Cloud Platform vs AWS, we have a clear winner. Amazon continues to have the advantage as the biggest and most successful cloud provider in the market. While AWS is growing at a smaller rate now than both Google Cloud and Azure, Amazon still holds the largest market share of all three. AWS is the clear competitor to beat as they are the first and most successful cloud provider to date, with the widest range of services, and a strong familiarity among developers.
The Less Obvious: Google is actually gaining more ground
While it’s easy to write off Google Cloud Platform, AWS is not untouchable. AWS has already solidified itself in the cloud market, but with the new features and partnerships, Google Cloud is proving to be a force to be reckoned with.
Where is Google actually gaining ground?
We know that AWS is at the forefront of cloud providers today, but that doesn’t mean Google Cloud is very far behind. AWS is now just one of the three major cloud providers – with two more (IBM and Alibaba) gaining more popularity as well. Google Cloud Platform has more in store for its cloud business in 2020.
A big step for google was announced earlier this year at Google Cloud’s conference – Google Cloud Next – the CEO of Google Cloud announced that they would be coming out with a retail platform to directly compete with Amazon, called Google Cloud for Retail. What ‘s different about their product? For starters, they are partnering with companies such as Kohl’s, Target, Bed Bath & Beyond, Shopify, etc. – these retailers are known for being direct competition with Amazon. In addition to that, this will be the first time that Google Cloud has had an AI product that is designed to address a business process for a specific vertical. Google doesn’t appear to be stopping at just retail – Thomas Kurian said they are planning to build capabilities to assist companies in specialized industries, ex: healthcare, manufacturing, media, and more.
Google’s stock continues to rise. With nearly 6,450 new hires added to the headcount, a vast majority of them being cloud-related jobs, it’s clear that Google is serious about expanding its role in the cloud market. In April of this year, Google reported that 103,459 now work there. Google CFO Ruth Porat said, “Cloud has continued to be the primary driver of headcount.”
Google Cloud’s new CEO, Thomas Kurian, understands that Google is lagging behind the other two cloud giants, and plans to close that gap in the next two years by growing sales headcount.
Deals have been made with major retailer Kohl’s department store, and payments processor giant, PayPal. Google CEO Sundar Pichai lists the cloud platform as one of the top three priorities for the company, confirming that they will continue expanding their cloud sales headcount.
In the past few months, Pichai added his thoughts on why he believes the Google Cloud Platform is on a set path for strong growth. He credits their success to customer confidence in Google’s impressive technology and a leader in machine learning, naming the company’s open-source software TensorFlow as a prime example. Another key component to growth is strategic partnerships, such as the deal with Cisco that is driving co-innovation in the cloud with both products benefiting from each other’s features, as well as teaming up with VMware and Pivotal.
Driving Google’s growth is also the fact that the cloud market itself is growing so rapidly. The move to the cloud has prompted large enterprises to use multiple cloud providers in building their applications. Companies such as Home Depot Inc. and Target Corp. rely on different cloud vendors to manage their multi-cloud environments.
Home Depot, in particular, uses both Azure and Google Cloud Platform, and a spokesman for the home improvement retailer explains why that was intentional: “Our philosophy here is to be cloud-agnostic, as much as we can.” this philosophy goes to show that as long as there is more than one major cloud provider in the mix, enterprises will continue trying, comparing, and adopting more than one cloud at a time – making way for Google Cloud to gain more ground.
Multi-cloud environments have become increasingly popular because companies enjoy the advantage of the cloud’s global reach, scalability, and flexibility. Google Cloud has been the most avid supporter of multi-cloud out of the three major providers. Earlier this year at Google Cloud Next, they announced the launch of Anthos, a new managed service offering for hybrid and multi-cloud environments to give enterprises operational consistency. They do this by running quickly on any existing hardware, leverage open APIs and give developers the freedom to modernize. There’s also Google Cloud Composer, which is a fully managed workflow orchestration service built on Apache Airflow that allows users to monitor, schedule and manage workflows across hybrid and multi-cloud environments.
Google Cloud Platform vs. AWS – Why Does It Matter?
Google Cloud Platform vs AWS is only one of the battles to consider in the ongoing cloud war. The truth is, market performance is only one factor in choosing the best cloud provider. As we always say, the specific needs of your business are what will ultimately drive your decision.
What we do know: the public cloud market is not just growing – it’s booming. Referring back to our Azure vs AWS comparison – the basic questions still remain the same when it comes to choosing the best cloud provider:
- Are the public cloud offerings to new customers easily comprehensible?
- What is the pricing structure and how much do the products cost?
- Are there adequate customer support and growth options?
- Are there useful management tools?
- Will our DevOps processes translate to these offerings?
- Can the PaaS offerings speed time-to-value and simplify things sufficiently, to drive stickiness?
Right now AWS is certainly in the lead among major cloud providers, but for how long? We will continue to track and compare cloud providers as earnings are reported, offers are increased, and price options grow and change. To be continued in 2020…
Every week, we find ourselves having a conversation about cost optimization with a wide variety of enterprises. In larger companies, we often talk to folks in the business unit that most people traditionally refer to as Information Technology (IT). These meetings usually include discussions about the centralization vs decentralization of IT and oftentimes they don’t realize it, as we are discussing cloud and how it’s built, run and managed in the organization.
Enterprises traditionally organized their IT team as a single department under the leadership of the CIO. The IT team works across organizational departments and supports the enterprise to meet various tooling and project needs requested by other business units or the executive team. Although there are significant efficiencies from this type of approach, there are some risks that can affect the entire organization, in particular, one that seems to stem from the ‘need for speed’ (agility). The LOB depends on IT to deliver services, hardware, software, and other ‘tools’, but this is not always done quickly and efficiently, mostly due to internal processes.
Benefits of Centralized IT Structures
The benefits of this type of organizational structure were often associated with increased purchasing power, improved information flow between IT team members, skilled hiring efficiencies, and a watchful view of the enterprise’s technical infrastructure from both an operational network and security perspective. Let’s dig into these in a bit more detail.
- Lowered expenses and increased purchasing power – the centralized environment will always provide a business with more buying power at a lower cost by combining all of the needs of the business into a centralized buying pool.
- Improved productivity for IT staff – IT teams are like any other team, they thrive with collaboration and mutual understanding and respect for each other’s skillsets. It also makes installations and technical resolution(s) easier as you’re addressing a centralized resource.
- Enterprise-wide information dissemination – the centralized organization will build its network from the center out – LOBs will typically share the same networked resources – such as an ERP or CRM. This avoids the dangers of siloed information that could be critical to another LOB, but without access, there’s no visibility into the information that is available.
Despite the benefits stated above, a centralized team has several limitations and challenges – one of those challenges with the greatest enterprise-wide exposure is how best to prioritize project requests from each of the LOBs – enter decentralization and cloud — IaaS, PaaS and SaaS.
Decentralization is a type of organizational structure in which daily operations and decision-making responsibilities are delegated by top management to middle and lower-level managers and their respective business units. This frees up top management to focus more on major decisions. For a small business, growth may create the need to decentralize to continue efficient operations. Decentralization offers several advantages and is a practical approach when different departments or business units in a company have different IT needs and strategies.
Benefits of Decentralized IT Structures
- The ability to tailor IT selection and configuration. When individual departments have IT decision-making power, they can choose and configure IT resources based on their own specific needs. For example, each department has its own servers optimized to run its required applications.
- More fail-safes and organizational redundancy. Decentralizing makes servers and applications more resilient—and it can do the same for IT networks, too. If each department maintains its own server, one can function as a backup server in case another server fails. (Of course, this type of redundancy would need to be properly configured in advance.)
- Respond faster to new IT trends. Since departments in decentralized organizations can make independent decisions, it’s easier for them to take advantage of new technology in the cloud.
One drawback of decentralized IT structures is that this model often leads to information silos – collections of data and information that cannot be easily shared across departments. Centralized IT structures help prevent these silos, leading to better knowledge-sharing and cooperation between departments. For example, using one centrally managed CRM system makes it possible for any employee in a company to access customer information from anywhere — think SalesForce.
The Reality is Hybrid IT
As we see above and in real life, there are many reasons an organization might be tempted to move toward or away from a centralized IT organizational structure but in practice many companies practice a hybrid model – some IT systems like your CRM and ChatOps are centralized, while others like your Cloud Provider and Orchestration tool may be decentralized (buy business unit). The top reasons for this hybrid model that come to mind are technical agility and the availability of tools through SaaS, IaaS and PaaS providers – IT no longer needs to build every solution and tool for you. And decentralized IT organizational structures are typically best for companies that rely on technical agility to remain competitive. These include newer, smaller companies (e.g., startups), and organizations that need to respond quickly to new IT developments (e.g., software and hardware companies or app developers). And, for larger companies that want to bring that mentality and model to their business, here is a great example, Capital One, a bank wanting to be a technology company.
What are your thoughts on the centralization vs decentralization of IT?
“How do I stop wasting money on Reserved Instances?”
It’s a question we’ve heard before from despairing AWS users. They were told Reserved Instances (RIs) would save them money, so they purchased them. Now, halfway into a three-year contract, they realize they’re not utilizing the RIs they’re paying for. Or worse… they may not even know what RIs they have.
Amazon offers Reserved Instances to ostensibly help get your cloud costs in control. The message is that RIs help you save money on your EC2 instances by offering discounted hourly rates in exchange for a 1- or 3-year commitment. Before we get into how you can cut your cloud spending with an AWS RI, here’s a bit of background and what you need to know about AWS EC2 Reserved Instance pricing.
How do EC2 Reserved Instance Purchasing Options Work?
When it comes to Reserved Instances purchasing options, you can either choose a 1- or 3-year contract. The longer the commitment, the greater the cost savings compared to On-Demand. By choosing one of these contracts, customers are promised savings of up to 75%.
There are a few risks that come with the longer commitment times. For starters, if AWS drops pricing, then the promised savings are reduced or may disappear. And when AWS introduces a new generation of an instance type family it may attract your users away from your contracts – these are based on the older generation. If you don’t know your future needs, it may be appealing to use the 1-year instead of a 3-year contract, which has savings vs. On Demand at about 31-40%.
There are three different types of EC2 Reserved Instances that customers can purchase – Standard Reserved Instances, Convertible Reserved Instances, or Scheduled Reserved Instances. With Standard Reserved Instances, customers would see the most significant savings. However, Convertible Reserved Instances are attractive to customers because it gives them added flexibility like the ability to use different instance families, operating systems, or tenancies over the term. Scheduled RIs allow you buy an RI that is only used at certain times each day in a recurring schedule.
When an RI expires, you are charged again at the normal rate. See the recently released option to queue RI purchases in advance. This may help provide the greatest savings by eliminating gaps in your coverage from reservations.
Additional Ways To Save
AWS also offers additional discounts if you have more than $500,000 worth of Reserved Instances in a region – the more Reserved Instances you have, the larger your discount.
You may also buy RIs on the Reserved Instance Marketplace from third-party sellers. The great thing about this is that these third parties tend to list their RIs at lower prices for a shorter period of time. And if you find you have too many RIs, you can sell them on the Marketplace as well.
There are three different payment plans offered with Reserved Instances. Payments can be made either All Upfront, Partial Upfront, or No Upfront. It is important to note that if you pay all up front, you will have greater savings because there are no other costs or additional charges during the term regardless of the usage hours.
Some may think that the need to pay upfront and be locked in undermines both “pay as you go” and the notion of being “elastic”- almost like a step backward to the old economic model.
An example of the savings offered by each EC2 RI option, along with the percent of savings each has over the On-Demand price is shown below. From these graphs, you can see that with a 3-year contract, your savings would be much greater. Other things to note is that you will have greater savings with Standard Instances, as well as if you choose the “All Upfront” payment plan. While you would receive discounted hourly rates for choosing Partial Upfront or No Upfront as a payment plan, if you can, All Upfront would be your best option with the most savings.
How should I use my Reserved Instances?
In non-production environments such as dev, test, QA, and training, Reserved Instances are not your best bet. Why is this the case? These environments are less predictable; you may not know how many instances you need and when you will need them, so it’s better to not waste spend on these usage charges. Instead, schedule such instances (preferably using ParkMyCloud). Scheduling instances to be only up 12 hours per day on weekdays will save you 65% – better than all but the most restrictive 3-year RIs!
Reserved Instances are very much a “use it or lose it” proposition. In other words, there are no rollover minutes – if you don’t use your reserved instances one month you don’t get extra time the next month. Here’s why they are like this:
- The EC2 options available are specific to Region, Availability Zone, Instance Type (e.g. m5.large) with some exceptions, Platform Type (e.g. Linux or Windows), and Tenancy. AWS, behind the scenes, attempts to randomly match instances you launch to the Reserved Instance contracts you have in place, based on the specific criteria. When there is a match, the cost benefit is applied. It is not uncommon for people to believe they are launching instances that match all the criteria, when in fact they are not, so the contracts are under-utilized. And you won’t know what matches were made until you get your bill at the end of the month.
- AWS decrements the contract amount for every hour when not used, meaning your return on investment diminishes.
- For every hour in your RI term, you pay the fee for hourly usage regardless of whether there has been any usage during that hour.
Given all of the tradeoffs mentioned above, Reserved Instances make the most sense in a production environment, where instances need to always be “on.”
How ParkMyCloud Can Help Manage Your Reserved Instances
ParkMyCloud is an easy to use platform that allows users to automatically identify and eliminate wasted cloud spend. You can use the ParkMyCloud platform to fully optimize your non-production instances without committing to an AWS EC2 RI term that will go underutilized. The platform does this by scheduling, rightsizing, and identifying idle instances. Recently, we added the ability to view all your existing Reserved Instances in the platform so you can better track what commitments you have already made, with more optimization functionality coming soon.
With ParkMyCloud, you can create parking schedules that automatically turn EC2 instances on and off according to your specifications. ParkMyCloud provides customized parking recommendations based on criteria provided by the user, which makes identifying “parkable” instances easier – and you can automatically accept these recommendations if you like. Turning this into an automated process cuts down on time and costs, thus further optimizing your cloud environments. Another perk of ParkMyCloud is that the platform tracks costs, projected 30-day savings, and actual savings for the current month – giving you better visibility.
ParkMyCloud easily achieves EC2 savings of 50-73% with no annual commitment, upfront payment, or risk of instance termination or price cuts. In fact, we had a customer cancel a $10,000 order for AWS Reserved Instances in favor of EC2 instances that they could turn on and off after they found out just how easy and powerful this cost savings tool can be. Here are some of the advantages that come with using ParkMyCloud:
- Better savings
- No commitment or upfront payment
- Price cut protection
Try out ParkMyCloud for yourself and get started parking your non-production systems and RightSizing your resources to ensure that your environments are running in the most efficient way possible.