SaaS cost management helps companies control spending

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The rise of the cloud has made businesses faster, faster and more agile. But this created a new problem: Billing models based on use with cloud providers like Amazon AWS, Microsoft Azure and Google Cloud Platform have made it easier than ever for businesses to lose control of operating costs. -compute.

There is an underlying assumption that moving from on -premises servers to the cloud will help companies save money, said ServiceNow IT asset manager German Bertot. But that is not always the case.

• “There is the promise, and it is wonderful. But companies are having a hard time realizing those savings, ”he said.
• “People are extremely surprised at how much cloud computing costs [them] in traditional computing, ”said David Linthicum, head of cloud strategy at Deloitte.
• While some of that is just the price of access to computing power, most of it is due to poor spending management, he said.

That’s why SaaS companies like Flexera, Apptio and ServiceNow help companies reduce their subscription costs in the cloud-as long as you subscribe to their services, which, of course, aren’t free.

The reason why cloud costs are rising so fast is because managing the costs associated with compute power is more complex in the cloud than when companies bought and managed their own servers.

• In data centers, it’s common for CIOs to only buy new technology every few years, says Flexera Senior Director Brian Adler. In response, IT employees will demand the most resources they can get, especially since most companies allocated more computing power than they needed at the time.
• Because it takes so long to buy and deploy infrastructure resources when operating on-premises data centers, this is fairly common behavior, says Forrester Senior Analyst Tracy Woo. The difference with the cloud is that provisioning “is something you can ask for and get online in minutes.”
• However, when many customers first moved from on -premises operations to the cloud, they often carried the old data center mentality with them.
• But with the cloud, “I don’t buy the peak, I can rent the peak. So that’s a new behavior that people need to learn, ”Adler said.

Another aspect that makes managing costs in the cloud difficult is that IT spending is not as centralized as before.

• For one, the ease of getting started in the cloud means it’s easier to subscribe, deploy and then accrue large charges.
• “You don’t have to take a purchase order with your hardware provider, take them, pay for it in advance, insert the hardware into your data center, install it and so on,” Bertot says.
• Even having the ability to see where spending is coming from can be a challenge, as a company can have hundreds of engineers using the resources but only getting one bill.
• And those bills are so complex that no one can look at all that data and determine if they’re being overcharged, says Adler, who has seen Flexera customers with 12 million rows of information in a monthly fee.

The best way to manage spending in the cloud can be to spend money on spending control tools, although it may seem counterintuitive, So the major cloud providers AWS, Azure and Google as well as SaaS companies like Flexera, Apptio and ServiceNow all offer services to help companies to reduce their costs in the cloud.

While many of these services require the purchase of another subscription, according to practitioners and industry analysts, the savings can be substantial.

• At the end of the SaaS application, understanding which users are consuming licenses, and how much they are using, will help determine which subscription level to purchase or to whom licenses will be issued.
• If a user uses a license but doesn’t use it, “are there ways for us to review usage patterns and suggest a lower subscription level … and in the process save?” said Bertot.
• Later, the savings may come from the reasoning of SaaS applications. “How many different communication platforms do I have? Do I have Zoom and GoToMeeting and Teams and Citrix? What if I combine those?” said Apptio Vice President Eugene Khvostov.
• At Deloitte, Linthicum has seen clients save up to 200% on their cloud bills after using a spend management tool. While that’s an outlier, “in many cases it will be 30% to 50% savings,” at least, he says. And “there’s always some kind of 100% time savings in my experience.”
• And because many of the cloud spend management tools are relatively affordable-on average, 1% to 3% of what customers spend on cloud services a month-the return on investment is greater than the cost of subscription. “Generally, you see ROI for them in two weeks to three months,” Woo said.

While customers who are new to the cloud will face many of these problems, over time they will become better at understanding how to manage their own spending.

• “At first, it’s usually a pretty big bang for the buck, and then it peters out over time,” Adler said.
• But as customers become more adept at managing their own spending, could the demand for these services weaken? For some, the answer is no, because cloud spend management requires constant monitoring.
• In the cloud, cost management is about the ability “to not only have observability so you can see where costs are going, but to have observability around interdependencies, observability on how things will be charged going forward, and do that on platforms., ”Linthicum said.

Without spending management tools, companies would need to develop their own internal processes and software to have a level of visibility into their cloud spend. While that is possible, it is much easier to purchase a subscription.

– Aisha counts (email | kaba)

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Join experts from Salesforce, Crowe, Banner Health, and Formstack as they discuss the 2022 State of Digital Maturity report: Advancing Workflow Automation, the move toward continuous automation, and the leading ways to accelerate digital maturity. your organization.

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Cloud revenue rotation

Microsoft enjoyed another quarter of strong cloud sales to begin 2022, as revenue from the company’s various cloud services rose 32.2% to $ 23.4 billion. Again, Microsoft declined to share a certain amount of revenue associated with Azure but he said Azure’s revenue rose 46% in the third quarter of its fiscal year, roughly the same percentage of growth as in previous quarters. .

Meanwhile, Google Cloud said its revenue increased 44% to $ 5.8 billion, compared to last year. The unit, which includes sales of both the Google Cloud Platform and Google Workspace, is still not profitable, but it minimized its operational loss to $ 930 million.

AWS reported earnings on Thursday.

– Tom Krazit (email | kaba)

A MESSAGE FROM FORMSTACK

Join experts from Salesforce, Crowe, Banner Health, and Formstack as they discuss the 2022 State of Digital Maturity report: Advancing Workflow Automation, the move toward continuous automation, and the leading ways to accelerate digital maturity. your organization.

Learn more