1、More for less:Five ways to lower cloud costs without destroying valueCompanies can often find significant savings in their cloud programsif they know where to look.November 2022 Getty ImagesThis article is a collaborative effort by Abhi Bhatnagar,Bailey Caldwell,Dany El Khoury,Wasim Lala,Deepa Mahaj

2、an,Abdallah Saleme,Mike Stefanelli,and Konstantin Tyrman,representing views from McKinsey Technology.Cost pressures are coming,and its not clear whether most companies cloud programs are ready.With the macroeconomic environment becoming increasingly challenging and company leaders looking for ways t

3、o achieve higher business resiliency,CIOs and CTOs can expect uncomfortable questions about the costs of their cloud programs.While cloud is able to generate substantial value when done right,many companies weve observed have seen their cloud spend grow as much as 20 to 30 percent each year.Without

4、being more sensitive to costs and responsive to the economic pressures that companies are feeling,CIOs may soon find their cloud programs on the chopping block.That would be an enormous pity and a huge setback for most companies competitive aspirations.Through a targeted set of practices,however,tec

5、hnology leaders can quickly cut as much as 15 to 25 percent of the costs of their cloud programs while preserving their value-generating capabilities.Following are five things to help tech leaders get on that path.1.Stop unhealthy growthCloud cost increases can reflect healthy growth,such as growth

6、in the user base,increased digital adoption,and the development of new digital capabilities.In many cases,however,those same cost increases also hide“unhealthy”growth due to poor stewardship,such as provisioning more resources than required,or immature consumption practices,such as forgetting to shu

7、t down instances that are no longer used.Companies often dont have a clear perspective on these healthy versus unhealthy costs.This can be particularly detrimental if customers spending habits shift,as they do during recessions,leaving companies uncertain about how to adjust their own cloud spend.To

8、 ensure the transparency of cloud spend,companies should set up a consistent,high-quality,and comprehensive tagging and reporting capability(often automated)and put in place an allocation model that promotes accountability,such as charging business leaders,or at least making them aware of,the costs

9、of their products or services that use the cloud.Companies should also introduce financial controls,such as actively tracked and managed budgets for the individual product teams that allow for healthy growth while ensuring that cloud spend is going toward business priorities and critical use cases.2

10、.Focus on simple fixes(theres often a lot of value there)When helping organizations manage their cloud programs,we have consistently uncovered a broad range of cost-and performance-optimization opportunities.The good news is that,in many cases,companies can capture these productivity improvements by

11、 taking relatively simple steps.The most common no-regret actions include releasing unused capacity,introducing scheduling and auto-scaling features,and aligning service levels to specific application requirements(for example,switching from memory-optimized to standard instances or using a serverles

12、s compute engine for containers instead of managing their own cluster).Companies should prioritize the ones that offer maximum benefit and deploy them rapidly across teams and cloud users while doing quick feedback loopsif the lever is successful for one app or team,it can then be scaled to the othe

13、rs.One major public-sector agency,for example,was able to achieve around 20 percent savings by adjusting cloud services to better fit application needs,getting rid of assets it was paying for but no longer using,implementing some basic guidelines for tiering storage,and updating the instances to the

14、 latest version.Once a baseline level of optimization is achieved,companies can sustain the results by training technologists on cloud best practices so they understand which actions they need to take to lower costsand then empower them to do so,mandate that the FinOps team continuously scan for new

15、 cost-reduction opportunities,and track the results of optimization efforts.2More for less:Five ways to lower cloud costs without destroying value3.Unlock cloud elasticity to stop paying for unused cloud capacityIn theory,cloud elasticitythe ability of cloud to scale up and down to meet a companys i

16、n-the-moment needs,should lower costs because it enables companies to pay only for what they actually use.But many companies have multiple practices in place that keep them from using clouds elasticity effectively,such as rigid and often manual provisioning practices,technical debt that makes it imp

17、ossible to build in elasticity features,and excessive use of reserved instances.As a result,companies are paying for cloud capacity that theyre not using.A global telecom operator faced this issue due to the predominantly manual way the cloud infrastructure was scaled.While teams adjusted capacity u

18、p to respond to increases in traffic,they rarely readjusted down when demand was waning.This issue can have significant consequences during a recession,when customer demand weakens and businesses cut back on promotions or institute discounts,all of which can have a large impact on traffic and cloud

19、usage.Companies should work with their engineering team to identify inelastic applications and workloadsthe usual suspects are those that were simply“lifted and shifted”to the cloudand refactor them,starting with the ones with the largest footprint.In many cases,its relatively simple to set up stand

20、ard autoscaling features.Investment in more advanced capabilities,such as containerizing workloads,can lead to even more efficient elasticity,but these must be carefully considered,as they often require more time and effort.In general,companies should avoid“lift and shift”in future migrations,unless

21、 there are strategic reasons for it,such as an exit from a data center.4.Take another look at vendor agreementsIts often the case that an organization was too optimistic about the expected pace of its cloud migration and is now stuck with spending commitments that can be hard to meet in an economic

22、downturn.Many organizations fail to initiate renegotiation until 12 to 18 months before their contract expires,by which point its often too late to negotiate effectively.In reviewing vendor contracts,companies should ask if they would sign the same contract today.If the answer is no,they should try

23、to renegotiate.Companies are sometimes able to negotiate trade-offsfor example,deeper discounts for reduced flexibility or pushing back timetables on meeting set targets.Companies that are approaching or in the process of contract renewals should consider incorporating provisions that would enhance

24、flexibility,such as being able to step commitment levels up or down based on agreed trigger events,or revising the parameters of the services credit to be able to use it all in a single year or to spread it out over multiple years.5.Dont stop cloud migrations;just be smarter about themA common misco

25、nception is that organizations can reduce costs by slowing down cloud migrations and working within their on-premises environments,which theyve already paid for.However,compared to cloud environments,on-premises data centers require continuous operating support in the form of labor,utilities,leases,

26、and licenses to maintain systems,manage refresh cycles,and combat outages.Cutting costs in any of these areas can also lead to expensive issues.Furthermore,thoughtful and targeted cloud migrations not only help lower costs but also position the business to grow more quickly once the downturn has pas

27、sed.Organizations should prioritize migrating workloads to the cloud that generate value,such as those that enable critical business initiatives(for example,customer-support automation),use hardware that will shortly need to be replaced or upgraded,or have sizable operations overhead.3More for less:

28、Five ways to lower cloud costs without destroying valueOrganizations have adopted cloud thanks to its promise of increased flexibility and performance at a fraction of traditional IT costs.The current challenging economic environment puts this promise to the test.To weather it successfully,companies

29、 can make clear and simple moves to cut costs,build value,and improve productivity.Copyright 2022 McKinsey&Company.All rights reserved.Abhi Bhatnagar is a partner in McKinseys Atlanta office;Bailey Caldwell is an associate partner in the Southern California office;Dany El Khoury is an associate part

30、ner in the New York office;Wasim Lala is a partner in the Washington,DC,office;Deepa Mahajan is a partner in the San Francisco office;and Abdallah Saleme is a partner in the New Jersey office,where Mike Stefanelli and Konstantin Tyrman are associate partners.4More for less:Five ways to lower cloud costs without destroying value