Develop a Cloud Consumption Strategy

1. Develop a Cloud Consumption Strategy Optimize your cloud deployment to stay ahead of the demand curve.

2. Introduction Without a proactive cloud consumption strategy, over-provisioning, and under-utilization will tend to consume any cost-related benefits of Cloud. CIOs and IT leaders trying to maximize efficiency and value to the business. COOs and CFOs looking for greater cost accountability and value in IT infrastructure. IT infrastructure managers trying to maximize efficiency and cost transparency to senior management. Adapt your capacity planning to a cloud environment. Manage complexity of planning across multiple solutions by applying service tiers. Leverage third party management and monitoring solutions for capacity planning and cost accounting. Manage increasingly empowered stakeholders and align IT with the business. Prepare for the future with people and processes equipped for continuous optimization. This Research Is Designed For: This Research Will Help You:

3. Executive Summary Situation • Organizations are moving to the Cloud to lower costs and increase scalability. • Cloud flexibility, scalability, and agility can lead some to believe that planning and managing deployments are not as necessary as with traditional deployments. Complication • Cloud infrastructure and platform deployments change the ease of usability in IT services and provision. • Incremental capacity increases are easy for large numbers of non-administrative IT users to deploy; organizations are experiencing ‘cloud sprawl’ (excessive provisioning and underutilization of resources) which leads to overspending. • Variability of capacity creates uncertainty in the operating budget as consumption patterns vary from month to month, which make budgeting for cloud spending difficult. • Without control, this creates the risk of low value services being deployed and a lack of visibility of cloud service costs. Resolution • Apply a governance layer using service tiers to simplify the planning process, maintain consistency, and ensure the right resources are being deployed for the appropriate use cases. • Use tools built on service providers’ APIs to identify areas for cost savings and optimization (e.g. underutilized resources), including predictive analyticsto forecast traffic fluctuations. • Take advantage of granular metering to provide cost accounting (billing, chargebacks, “showbacks”) and tie usage to value, business units, strategic objectives, etc. • Practice “just in time,” lean or agile provisioning, and approach cloud operations as continuous deployment, i.e. continuously improve configurations to take advantage of various costs and benefits of private and public clouds.

4. Understand the costs and benefits of Cloud Understand costs and benefits Forecast resource consumption Manage Cloud capacity Account for cloud consumption Look at IT from a cloud-oriented perspective Find opportunities for IT to create value and efficiency Beware of common risks and costs of cloud infrastructure Identify your organization’s needs Understand opportunities created by cloud ecosystems

5. Cloud infrastructure forces IT to adopt a new strategy Delivering IT “as-a-service” means IT leaders need to focus more on positive outcomes such as business satisfaction, user experience, and value. Impact of Cloud Adoption: • As expected: • IT leaders who responded to our survey were likely to perceive that cloud adoption correlates with: • Increased consumption or demand • Increased server sprawl, i.e. unnecessary or sub-optimal provisioning • However: • IT leaders were more likely to perceive an increase in “soft” indicators: • Response time expectations • Service level expectations • Info-Tech recommends developing a cloud consumption strategy grounded in people and processes before addressing technology. In a cloud environment – particularly a public cloud environment – there will be daily opportunities to continuously decrease costs. Develop roles and processes to continuously use these opportunities – not just for cost savings but to increasesatisfaction and value to the organization. Source: Info-Tech Research Group, n=26

6. Find opportunities for IT to create value and efficiency Cloud infrastructure creates new opportunities to align IT capacity planning, capacity management, and cost visibility. 1 Capacity Planning Opportunities Capacity Management Opportunities Cost Accountability Opportunities • Elastic resource capacity can be provisioned and de-provisioned in minutes, driving efficiency and quality of service by diminishing gaps between supply and demand. • Network-based management consoles enable self-provisioning on demand, decreasing project delays and administrative overhead. • Analytic tools to help forecast demand andidentify opportunities for efficiency are widely available, due to commoditization enabling third party monitoring and management tools to flourish. • Granular metering enables IT to track costs to specific projects, business units, and users for greater visibility into spend in relation to capabilities and benefits. 2 3 This solution set will help IT and finance managers optimize costs of current or future cloud infrastructures. See Info-Tech’s Embrace the Cloud researchto decide whether to adopt cloud infrastructure.

7. Cloud is providing avenues to align actual usage with capacity that traditional deployments can not The traditional “step-jump” capacity planning model leaves room for sub-optimal consumption of IT. Traditional Model Public Cloud Model • More hardware has to be purchased as needed or planned – this takes time • Very difficult to match current and planned capacity to actual usage • Capacity is allocated on demand in a matter minutes, aligning capacity with usage • Flexibility must be managed to attain the most value and reduce any over/under use

8. Prepare for the risks that come with new opportunities Planning, managing, and accounting for cloud infrastructure requires IT to develop new processes and skills as service providers. Info-Tech Insight 1 Self-service has both favorable and unfavorable consequences. Cloud infrastructure empowers developers, project managers, and other IT staff to provision resources when needed, which also relieves the administrative burden on IT operations staff. But self-service creates a governance responsibility to ensure the right level of service is provisioned and that resources are de-provisioned after use. Capacity Planning Risks Capacity Management Risks Cost Accountability Risks • Giving more people the ability to self-provision resources gives more people the ability to over-provision excess capacity at excess cost and potentially fail to de-provision after it’s needed. • Cloud makes it easy to manage infrastructure, reactively making it too easy to overlook critical capacity planningand miss opportunities to decrease medium- and long-term costs. • Holding users and business units accountable for costs requires time, effort, accountability processes, and soft skills to follow up and deal with disagreements and push-back. 2 3

9. Envision your consumption strategy next to an ideal scenario In an Ideal Enterprise Cloud scenario: (Set aside performance, security, compliance, and other concerns for now, for the purpose of focusing on cost and consumption strategy.) • Capacity scales fluidly up and down according to demand, without inefficiency caused by pre-provisioning or over-provisioning, or downtime caused by under-provisioning. • New capacity is provisioned automatically or by the people who need it, without taking IT managers’ time or creating project delays. • Metering and cost allocation hold users accountable for consumption to ensure costs align with benefits (i.e. if the organization benefits, the organization will pay; if a business unit benefits, the business unit will pay). Ideal Enterprise Cloud The Ideal Enterprise Cloud state is not yet within reach for most organizations. But clarity around target or ideal state is a prerequisite for strategic planning – positioning your current state in relation to the target, in order to deciding which steps you need to take toward it. Once [the team] has gotten there, the world is wonderful for us. The server guys are saying ‘this is great stuff!’ because they’re able to very quickly meet demand – increasing size, upgrading an app – whatever it is, they can meet those demands a lot more efficiently. Assistant Director of MIS

10. Position your current state in relation to the ideal state Organizations fall into three different categories as they approach enterprise cloud infrastructure: • Traditionalapproach: • Mid- to large-sized established enterprises with substantial investments and dependencies in legacy technology, and processes. • Key challenge: clearly delineate between cloud resources and traditional resources to keep flexible cloud practices from undermining rigid traditional practices, and vice versa. Ideal Enterprise Cloud Traditional Lean • Ad hoc approach: • Small to mid-sized organizations with some investments and dependencies in legacy technology and processes. • Key challenge: develop skills and experience for planning, governance, and process management. Infrastructure Complexity Ad hoc Cloud Focus • Leanapproach: • Small to mid-sized organizations with no legacy assets or dependencies – a “green field” to adopt the Cloud by default, to stay flexible and minimize capital expenditures. • Key challenge: develop skills and experience for planning, governance, and process management. Use Info-Tech’s Consumption Strategy Appropriateness Assessmenttool to assess where your organization is in this landscape.

11. Manage and plan for different resources appropriately Different types of infrastructure resources in any organization require different planning, management, and accountability practices. Traditional Model Private Cloud Public Cloud Traditional Private Cloud Public Cloud • Planning: Organizational capacity planning happens far in advance of expected need and requires a complicated procurement process. • Management: Capacity must be maintained by IT staff and provisioned to internal customers by dedicated IT staff. • Accountability: Cost allocation mainly occurs prior to capital expenditures, which means connections to actual benefits and capabilities is largely obscure. • Planning: As with traditional infrastructure, organizational capacity planning happens far in advance of potential need. • Management: Underlying physical capacity is maintained by IT staff but internal customers provision virtual machines through self-service interfaces. • Accountability: As with public cloud infrastructure, metering of virtual resource usage enables greater visibility of consumption relative to benefits. • Planning: Organizational capacity planning can be ad hoc, but there are benefits to proactive planning. • Management: IT staff doesn’t maintain or control the underlying infrastructure; both IT and internal customers provision and manage capacity through self-service interfaces. • Accountability: Metering of virtual resource usage enables greater visibility of consumption relative to benefits.

12. Match strategic resolutions with the problems your organization is facing Different use cases have unique challenges that you need to be aware of. Match problems with resolutions Identify the challenges Understand the problems Match problems with resolutions 1 2 3

13. Use a mix of capacity planning, capacity management, and cost accounting for the most effective consumption strategy These will help maximize the value received from cloud services, however, practices must be matched with an enterprise level of appropriateness. Cloud Consumption Strategy Cycle Use all information to re-assess and plan for changes as needed for continuous cloud optimization Plan Capacity Manage Capacity Account for Costs • Use proactive measures to align planned capacity with business needs • Establish budgets for ongoing operations • Adopt services as required • Ensure proper architecture and integration • Allocate and monitor capacity and response times • Control and monitor volume, volatility, and criticality of usage • Use reactive measures • Track and align costs with IT capabilities, business needs, and business value • Align across IT and business stakeholders • Ensure the business is being properly enabled by IT services For more information on matching practices with your enterprise’s level of appropriateness use Info-Tech’sconsumption strategy appropriateness tool.

14. Plan for resource consumption Start with a solid planning foundation Define service tiers Update your capacity planning process Leverage predictive forecasting Consider third party management solutions Understand costs and benefits Plan for resource consumption Manage cloud capacity Account for cloud consumption

15. Build a cloud consumption strategy on a planning foundation The obvious benefit of cloud scaling is that you only pay for the resources you use… The downside of cloud scaling, however, is that it can become a crutch that lazy system architects use to avoid capacity planning. George Reese. CTO, enStratus Cloud Application Architecture. O’Reilly, 2009. Risks and opportunities: • Making it easy to manage infrastructure reactively makes it too easy to overlook critical capacity planningand miss opportunities to decrease medium- and long-term costs. • Analytic tools to help forecast demand andidentify opportunities for efficiency are widely available, due to commoditization enabling third party monitoring and management tools to flourish. Info-Tech recommends: Define Service Tiers Classify users, applications, and data according to criticality and value to ensure sufficient capacity is available to meet critical demand. Reserve Capacity Look at options available from vendors for medium and long-term savings. Use Cloud Cost Analytics Leverage tools available to help monitor and forecast demand, and identify opportunities for efficiency.

16. Define service tiers to increase efficiency and productivity Benefits of service tiers: Service tiers positively correlate with cost savings and reliability in infrastructure… • Maintaining consistency in planning and management by establishing a shared orientation and vocabulary. • Consistent definitions ensure that truly critical services are prioritized over less critical ones. • Creating partitions in processes to contain creeping costs. • Without these barriers, users will gradually provision higher-cost resources than were originally considered in cost-benefit analysis. … and yet fewer than half of IT departments use them. (Source: Info-Tech Research Group, n=76)

17. Define service tiers to increase efficiency and productivity Tailor service tiers to your organization’s needs. Example service tier descriptions: Where to find service tiers: • Most organizations have some sort of tiers already. • For example, storage is typically tiered according to different availability and durability requirements. • Information or data governance policies. • If your organization has any information or data governance policies, there are likely some form of tiers based on required retention periods, recovery time and point objectives, data sensitivity, value, etc. • Mission -critical, broad value • Low tolerance for downtime or latency • Minimal provisioning rights • Formal provisioning process Gold / Tier I • Less-critical (higher tolerance for downtime and latency) • Value more at the unit/team level • Distributed provisioning rights Silver / Tier II Use Info-Tech’s Capacity Planning Data Collection & Tiering Workbookto begin planning. • Necessary but not frequently accessed • Largely automated provisioning (e.g. archives, backup, disaster recovery) Bronze / Tier III

18. Classify users in order to prioritize needs Quantifying the criticality and value of specific users’ needs is essential for building IT’s capabilities as a service provider. Including a user classification in your cloud capacity planning process is essential. Because the Cloud gives end users greater ability to circumvent IT to provision what they want, IT needs to: Attend quickly to the needs of critical users, or users handling critical data, before they expose critical data to potential security or compliance breaches. Give users of non-critical data more autonomy, which alleviates some of IT’s administrative burden. What to do: Administer the Info-Tech User Classification Survey. Input the results into the User Classification Tool to assess the criticality, value, and response time objectives of various user groups. The tool will provide appropriate service tiers for your user classes.

19. Reserve longer term capacity to reduce costs Despite the appeal of capacity on demand, in many cases both IaaS vendors and customers are better served by longer term contracts at lower prices. Examples of reserved capacity offered by IaaS vendors: • Amazon Web Services • Amazon offers Reserved Instances to customers able to commit to one or three year terms. • Reserved Instances represent 30-40% savings for 1-year or up to 70% savings for three-year reserved instances. • Amazon also offers a Reserved Instance Marketplace, where AWS customers can sell sub-optimal Reserved Instances to other AWS customers (minus a percentage fee to Amazon). • Other Vendors • Public cloud vendors that are evolving from managed hosting businesses continue to offer set-term contracts for dedicated resources. • Contracts can be negotiated to procure relatively stable capacity at lower costs, while continuing to take advantage of scalability, and self-service provisioning for less stable capacity. • See Info-Tech’s Vendor Landscape: Cloud Infrastructure as a Serviceto compare vendors that offer a breadth of hybrid options. Because of the complexity of options available, a niche market of third party tools is emerging to help customers identify stable capacity that can be moved to lower cost options, based on projected consumption and cost. Some of these tools are covered later in this section.

20. Evaluate longer-term costs of contracting stable capacity Use Info-Tech’s Cloud Service TCO Comparison Toolto compare long-term costs of different options. • Use a total cost of ownership (TCO) calculator to evaluate potential cost savings from contracting reserved capacity. • You can also use this tool to calculate consolidated costs of operations, including: • Integration & configuration costs • Related costs • Cost per user

21. Use technology to forecast demand and find savings Cloud infrastructure creates an ecosystem of tools IT and Finance managers can use to manage cloud costs. Excel • Advantages: • You’re already using it. • Limitations: • Breaks easily and requires manual input and adjustment. • Difficult to maintain a single updated version of truth. • 2. Cloud Cost Management tools: • Extend pricing, usage monitoring, and cost allocation functions of cloud IaaS providers to help cloud customers manage costs. • Connect to your IaaS account (usually through cloud vendor APIs) to generate reports, alerts, forecasts, and recommendations based on your capacity, usage, and pricing. • Offer free usage tiers with much greater usability, efficiency, and value for this purpose than you get with Excel (but with less flexibility, e.g. you can’t arbitrarily add a column of internal costs, though some Cloud Cost Management tools allow data to be exported to Excel and other tools). • Examples: Cloudyn, Cloudability, CloudVertical, Newvem, uptimeCloud • Advantages: • Very usable, aimed at executives and other potentially non-technical users • Clear, actionable recommendations, such as when to purchase reserved capacity. • Limitations: • Integration is limited to a small number of vendors (typically focused on AWS) • Read-only (can’t configure or provision from the dashboard – though from a risk perspective this is an advantage).

22. (cont’d) more Cloud management tools • Advantages: • Can provision and configure capacity • Wider compatibility (for managing both public and private Clouds) • Limitations: • More costly than Cloud Cost Management tools • 3. Cloud Management tools • Robust solutions for monitoring, managing, and automating multiple cloud services from a single dashboard. • Integrate with point solutions such as application performance monitoring, security monitoring, and cost monitoring. • Examples: RightScale, enStratus • Advantages: • Monitor more than cost-related factors (Info-Tech recommends performance monitoring anyway) • Limitations: • Require technical staff time to implement and manage • Require additional Excel or Cost Management tools to generate cost recommendations • 4. Performance Monitoring and Systems Management tools • Help identify opportunities to improve performance, which improves efficiency and can decrease costs and increase adoption. • Legacy: Integrated Systems Management Examples: MS System Center, IBM Tivoli, Compuware, BMC, VMware vFabric Hyperic, Zenoss • Lean: Application Performance Monitoring Examples: New Relic, Boundary, CloudEgg • Advantages: • Customized to your needs • Limitations: • Take time to develop • Create unknown risks and related costs to maintain and update internally • 5. Proprietary tools • Can be developed internally if your organization has the skills and time to do so, and new or unique needs. • For example, many of the leading third party tools (both commercial and open-source) started as proprietary tools developed by people or organizations with new or unique needs.

23. Speak to an analyst about cloud cost management tools This Info-TechAssisted Implementation will help you: Review your requirements. Evaluate the costs and benefits of cloud cost analytics tools. Understand the limitations and implications of these tools. Determine the appropriateness of cloud cost analytics tools. Identify the relative merits of various tools. Select tools to shortlist and start testing. Test a tool in your Cloud deployment. • This Info-Tech Assisted Implementation involves two one-hour phone calls with an Info-Tech analyst: • First call: review, evaluate, understand, determine, identify, and select. • Second call: follow-up on testing, addressing any issues, concerns, questions, and opportunities. Book a call now by contacting your Info-Tech account representative.

24. Manage Cloud capacity to optimize costs Capacity management follows capacity planning Empower administrators with autonomy and information to make the best decisions Automate recurrent and concurrent processes Leverage cloud management tools React without under- and over-reacting Define roles, policies, and controls for provisioning Understand costs and benefits Forecast resource consumption Manage cloud capacity Account for cloud consumption

25. Cloud management needs to be as responsive as the cloud technology employed When you can provision cloud resources in seconds, your bottleneck shifts from the technology itself to the speed with which your people and processes can manage it. Risks and opportunities: • Elastic resource capacity can be provisioned and de-provisioned in minutes, driving efficiency, and quality of service by diminishing gaps between supply and demand. • Network-based management consoles enable self-provisioning on demand, decreasing project delays, and administrative overhead. • Giving more people the ability to self-provision resources allows more people the ability to over-provision excess capacity at excess cost, and potentially fail to de-provision after it’s needed. Info-Tech recommends: Empower people Speed up processes and relieve high-level managers from dealing with non-critical requests by giving users self-service provisioning rights. Define decision models Prepare for unexpected changes in demand by documenting and refining decision-making models based on proactive cost-benefit assessments. Leverage automation Use proprietary or third party tools to automate recurrent and concurrent processes.

26. Empower administrators with autonomy and information they need for making the best provisioning decisions Info-Tech recommends taking these steps to be responsive to cloud demand: • Administratorsin positions to deploy new resources on-demand should have a decision-making responsibility to do so without a time-consuming internal procurement process. • Use oversight processes to ensure they’re accountable (see the next section on accountability). • Information about performance and cost must be readily available, accurate, and proactive. • Available: dashboard with actionable information must be accessible enough that someone can always act on unexpected events within minutes with the right process and checks built in. • Accurate: information must be timely and have integrity (if you deploy 5 new servers, monitoring should dynamically reflect that change). • Proactive: set alerts at performance and cost thresholds that require attention; don’t rely exclusively on dashboards for monitoring critical indicators. • Monitoring and Management Tools • Examples: Nagios, New Relic, Zenoss, Hyperic. • Benefits: provide robust, deep monitoring and reporting on not just consumption but also performance to help troubleshoot and optimize your technical architecture and configurations. • Cons: more expensive if cost is your main concern, depth of technical reporting might exceed some organizations’ means to act on it.

27. Define roles, policies, and controls around account access and provisioning Take advantage of identity and access management to distribute provisioning rights to different groups. Custom access rights enable you to administrator more procurement responsibility while maintaining oversight and accountability. Further, you can give developers and project managers rights to provision their own development and testing resources on demand, without using administrators’ time or creating project delays. Advanced access controls can be set so certain groups can only provision limited resources. For example, some organizations might want to limit developers to Tier II authorization to avoid accidental provisioning of expensive Tier I resources. Case Study: Netflix Who holds the keys? Netflix developed their proprietary cloud management tool (called Asgard) largely to give them a greater degree of access control and accountability than Amazon’s Identity and Access Management (IAM) provided. Source: http://techblog.netflix.com/2012/06/asgard-web-based-cloud-management-and.html Info-Tech has not seen wide adoption of IaaS vendor-specific access controls such as Amazon’s Identity and Access Management (IAM). Customers we see implementing advanced access controls do so with either a proprietary layer of abstraction (like Netflix), or a cloud management solution such as RightScale to maximize flexibility and minimize dependence. Providing an internal console allows us to grant Asgard users access to our Amazon accounts without telling too many employees the shared cloud passwords. Joe Sondow. Netflix

28. React to changes on demand without under- or over-reacting Public cloud infrastructure makes it easy to simply provision resources to meet demand, but reactive management requires planning and discipline.

29. Define decision models to respond to increased demand Here’s a sample process diagram, with key factors to consider when dealing with increased demand: What caused the increase? How critical is the capacity? How valuable is the capacity? High Cost, High Risk • Assess capacity cost vs. downtime cost + downtime risk + uptime benefits • Update Capacity Planning volatility estimates • Evaluate longer-term capacity, monitoring, and automation requirements • Assess duration & criticality of current volatility Temporary Cause Avg Cost, Avg Risk Low Cost, Low Risk High Cost, High Value • Assess capacity costs vs. capacity benefits • Refer to Capacity Planning growth estimates • Find ways to mitigate cost increases by evaluating longer-term capacity options • Assess rate & value of current growth Trend-Related Cause Avg Cost, Avg Value Low Cost, Low Value

30. Define decision models to respond to decreased demand Here’s a sample process diagram, with key factors to consider when dealing with decreased demand: What caused the decrease? How critical is the capacity? How valuable is the capacity? • Update Capacity Planning volatility estimates • Evaluate longer-term capacity, monitoring, and automation options High Cost, High Risk • Assess efficiency benefits vs. downtime risk • Assess ability to meet demand when it returns to normal • Assess duration & criticality of current volatility Temporary Cause Avg Cost, Avg Risk Low Cost, Low Risk • Refer to Capacity Planning growth estimates • Find ways to decrease costs by evaluating longer-term capacity options High Cost, High Value • Assess capacity costs vs. capacity benefits • Assess rate & value of negative growth Trend-Related Cause Avg Cost, Avg Value Low Cost, Low Value

31. Automate recurrent or concurrent processes to streamline cloud capacity management A mix of traditional and cloud-focused tools are available to help automate cloud management and configuration. Here are the main categories: • Cloud Management • Examples: RightScale, enStratus • Advantages: very robust solutions for not only monitoring consumption and performance, but also managing reconfigurations, and auto scaling. • Limitations: expensive, best suited for more complex deployments; will require substantial integration, and additional tools to manage private Cloud deployments. • Traditional Systems Management • Examples: MS System Center, IBM Tivoli, BMC • Advantages: large enterprises may already have system management tools deployed; designed for operations dominated by traditional deployments. • Limitations: not designed for the degree of flexibility that may be involved in managing cloud infrastructure. • Configuration Management • Examples: Chef, Puppet, CFEngine • Advantages: designed for very lean, agile IT or web engineering operations to enable concurrent launch, configuration, and continuous reconfiguration of multiple instances. • Limitations: require a relatively focused and innovative culture, with a shift in skills and mindset combining operations with development.

32. Establish cloud management processes IT processes and people need to become more responsive to keep up with cloud infrastructure. Example: Situation Mistake Results • Organization’s IT infrastructure team took these steps: • Empowered administrators with more autonomy to deploy resources with fewer sign-offs. • Developed oversight processes. • Adopted configuration management tools to automate much of the configuration and cloud deployment process. • Because the IaaS vendor enables servers to be provisioned within minutes, the biggest constraints on response time are now: • Time for an administrator to become aware of increased demand, and act on it. • Time to configure the new servers (e.g. deploying monitoring and security agents). Organization adopts cloud infrastructure in order to rapidly provision web application servers to accommodate temporary usage spikes.

33. Account for cloud consumption Incorporate cloud cost allocation practices Identify IT responsibility-holders and business stakeholders Integrate cloud accounting into reporting and billing processes Use cloud cost analytics to increase visibility into consumption Understand costs and benefits Forecast resource consumption Manage cloud capacity Account for cloud consumption

34. Incorporate cloud cost allocation practices to align costs with capabilities and benefits My fear is that as people start moving into the Cloud, they will build separate silos that exist in the Cloud, and there will be no holistic way to bring it (these silos) into a common architecture or common set of services - which are the things that are going to provide the benefits. David Linthicum, CTO and founder of Blue Mountain Labs Risks and opportunities: • Granular metering enables IT to track costs to specific projects, business units, and users for greater visibility into spend in relation to capabilities and benefits. • Holding users and business units accountable for costs requires time, effort, accountability processes, and soft skills to follow up and deal with disagreements and push-back. Info-Tech recommends: Define IT service roles Clearly designate IT managers responsible for managing customer and stakeholder relationships. Establish accountability processes Continue to improve service tiers, capacity reservation, and decision models to improve cost visibility and alignment with benefits. Use cloud cost management technology Use third-party or proprietary tools to create dashboards, alerts, reports, and possibly chargebacks or bills.

35. Take advantage of cloud metering to drive visibility, allocation, and forecasting 1. Increased cost visibility “Most successful users of the Cloud focus on a couple of key metrics. People like Netflix are focused on how much it costs per stream, and are doing everything they can to study their data to bring that cost down. They can try different theories because they are measuring the right things.” • Costs of individual projects of business units to be viewed and related back to processes for ongoing cost/benefit analysis. • Track and align costs across multiple deployments with IT capabilities and business value. Info-Tech Insight With traditional deployments, the upfront costs are known before purchase. However, due to uncertainty of customer usage, the benefits are unknown. This is reversed with the Cloud: the benefits are understood, however spend is difficult to estimate without the proper cost management processes. 2. Effective cost allocation • This allows for costs to be billed to the appropriate budgets or accounts. • Increases accountability of services between various stakeholders to minimize overconsumption of IT services. Mat Ellis, CEO and founder of Cloudability 3. Accurate forecasting and budgeting • Allows for future costs to be estimated and to stop spending overages before they happen. The more accurate the forecasts are, the more responsive the company can be. • Using this in conjunction with planning and management will yield less variability in costs and more accurate budgeting.

36. The CIO, IT Managers, and Business Unit Leads all have a role to play in consumption optimization. Define IT service roles to enable alignment and accountability Many organizations are adopting specialized roles for cloud planning and accountability. For example, a “Cloud Architect” who leads capacity planning. In some cases there may be a role (or responsibilities added to a role) under the CFO or COO dedicated to managing cloud costs alongside utility costs.

37. Consider the opportunities and challenges of chargebacks An Ideal Chargeback/Showback Cycle: The “Showback” Model – A Pragmatic Approach The “Chargeback” Model – The Ideal 1. Increase transparency of costs and usage Info-Tech recommends a showback system where individual business units or projects are shown how much is being spent on cloud services. A chargeback system holds business units or projects accountable for cloud costs. Costs are “charged back” to units or projects responsible for consumption. • 6. Associatecosts with actual benefits • 2. Increase accountability within business units The above benefits will be more pronounced with a chargeback system. Chargebacks are an ideal state as implementation in only straightforward with specific public Clouds. They get more complex with shared public resources and more so with internal IT. Use showbacks when chargebacks are not feasible, and put the appropriate measures in place to increase accountability within your cloud environment. 3. Promote cost-conscious consumption • 5. Improvebusiness/IT alignment • 6. Reduce IT services costs Because there is an external cashflow going out, there needs to be a chargeback. When doing a cloud project, Finance need to be involved because the payment models are not the same as internal projects. Martin Hargreaves, Technical Architecture Manager, Vocalink

38. Establish accountability processes Here are some ways to overcome the challenges of instituting and managing chargeback and showback processes: Opportunities to successfully implement chargebacks: • Organization-wide initiatives to reduce costs. • For example, due to unusual economic or competitive pressure, especially when downsizing is involved and IT efficiency is a welcome alternative to workforce reductions. • Leverage top-down executive pressure to lend authority, and urgency to IT chargebacks, and showbacks. • Healthy inter-departmental competition. • Managers can further their individual careers by showing how effectively they find efficiency within their units. • Show business unit and project leaders where they have opportunities for efficiency, but give them room to take credit for the decision. • Support managers’ success by providing reports they can use to demonstrate their personal and team effectiveness. • Key considerations: • Who should be accountable for cloud expenses? • Enterprise wide IT services should be funded from a pooled resource from IT or other accounts (e.g. internal/private clouds, and widely used external deployments such as AWS, Azure). • How is this being governed? • Regardless of how advanced your cloud deployments are, business and IT must work together to ensure that accounting policies being pursued reflect the needs of all stakeholders. • Governance processes need to be defined and followed to maintain integrity and security of the services. It is amazing what you can accomplish if you do not care who gets the credit. Harry Truman

39. Leverage technology for cloud cost allocation Tagging tools allow for content to be organized by department, line of business, or application. • Tagging costs to the required business case is a great technique to deal with this. It will: • Increase granularity of costing reports and enables cost allocation to be treated like a phone bill. • Summary reports generate high level cost trends over time, and cost spikes can be pinpointed to the appropriate context. • Generate predictive costing based on usage to identify if you will be going over budget. • Enable the appropriate planning and management responses to further optimize consumption. Tagging tools are a recent innovation in the market. They can be very effective at allocation costs for showbacks or chargebacks, but can be difficult to use in practice, especially without ways to ensure accuracy and consistency (e.g. access controls differentiate between users, and users apply the appropriate tags). Use third party or proprietary solutions to improve usability, consistency, and integration. • Options: Some IaaS vendors such as Amazon offer cost allocation functions directly, but Info-Tech recommends using third-party cloud management, and cost management tools to improve usability, consistency, and cross-vendor consolidation. Source: uptimeCloud website

40. Summary 1 Plan for Capacity Define Service Tiers Classify users, applications, and data according to criticality and value to ensure sufficient capacity is available to meet critical demand. Reserve Capacity Look at options available from vendors for medium and long-term savings. Use Cloud Cost Analytics Leverage tools available to help monitor and forecast demand, and identify opportunities for efficiency. 2 Manage Capacity Empower people Speed up processes and relieve high-level managers from dealing with non-critical requests by giving users self-service provisioning rights. Define decision models Prepare for unexpected changes in demand by documenting and refining decision-making models based on proactive cost-benefit assessments. Leverage automation Use proprietary or third party tools to automate recurrent and concurrent processes. 3 Account for Costs Define IT service roles Clearly designate IT managers responsible for managing customer and stakeholder relationships. Establish accountability processes Continue to improve service tiers, capacity reservation, and decision models to improve cost visibility and alignment with benefits. Use cloud cost management technology Use third-party or proprietary tools to create dashboards, alerts, reports, and possibly chargebacks or bills.