Energy prices were expected to rise by more than 50% this year, and that was even before the current situation in Ukraine sent them soaring and kicked off the current global energy crisis, which is predicted to see oil averaging $135 per barrel this year.
And of course, what comes for consumers will also come for businesses. Hyperscale cloud providers, co-location and on-premises data centres will all be hit by huge increases to their energy bills, impacting on budgets for innovation when the cost of recruiting and retaining skilled staff is also on the rise.
As the biggest consumer of energy in businesses, IT leaders play a pivotal role in mitigating the impact of energy costs whilst protecting their budgets. They need to:
- Eliminate toxic cloud consumption;
- Accelerate cloud migration plans;
- Protect IT spend by demonstrating value.
Eliminate toxic cloud consumption
Whilst cloud does offer access to the bulk purchasing power of a giant like Amazon Web Services, it cannot be assumed that AWS will not review their pricing in light of what is evidently going to be a protracted energy crisis. The answer to this is proactive cloud cost optimisation.
For businesses already in the cloud, now is the time to ensure that your workloads are well architected to be as cost efficient as possible – overconsumption of cloud is a toxic drain on your finances.
However, many organisations in the cloud are not mature in their cost optimisation practices – in fact, Gartner cite cost optimisation and control as one the most powerful ways to manage IT spend, yet these skills are in the top three most critical cloud skills gaps within organisations:
“Increasing consumption of on-demand services, combined with lack of visibility, assigned responsibility and control, leads to toxic consumption… Seek out resources that can apply the principles and discipline of FinOps to eliminate waste by orchestrating and managing consumption, rightsizing, optimising and eliminating idle instances. If you lack skills internally, examine whether outsourced providers will do this…”
Accelerate cloud migration plans
Reap the benefits of economies of hyperscale. Cloud providers buy energy in bulk on annual or multi-year deals, at a scale which means rates are likely lower than the average business can hope for. This means cloud migration could become a financial imperative for businesses looking to protect their margins whilst accelerating their digital transformation.
However, what hinders these transformation initiatives is skills. Gartner research published yesterday indicates that cloud skills are a critical gap in many organisations, yet can you afford to stay on-prem or co-locating when the costs of doing so are more unpredictable?
You need skilled cloud engineers to get it right first time, make sure your workloads are migrated in the most cost-efficient and sustainable manner and to ensure that no nasty surprises lurk within your architecture.
Protect IT spend by demonstrating its value
Cost optimisation isn’t just about turning on billing alerts and right-sizing instances – it’s about how your business perceives its cloud costs. The ‘pay-as-you-grow’ model of cloud is antithetical to traditional procurement processes, and this can be a difficult hurdle to overcome. You know your cloud spend is delivering the services and solutions your customers need, but if bills start to increase it can be difficult to persuade finance teams that this spend is justified.
A proactive approach to cost optimisation in line with FinOps principles, with a partner who is well versed in these FinOps practices, can ensure that your cloud spend is valuable and protect or even grow your organisations’ investment in cloud.
Long-term energy cost resilience
Longer term, enterprise IT leaders will need solutions which can help them to take advantage of the growing public cloud market. As Google Cloud Platform and Azure continue to take market share from AWS, it is reasonable to expect that this increased competition will have cost benefits for cloud consumers. In a situation where energy costs are rising, providers may take a competitive decision on their pricing, but a ‘USwitch for Cloud’ is an unlikely outcome.
What is more likely is a renewed focus on the risks energy costs pose to organisational resilience, which could result in the growth of cloud-agnostic development at large enterprises and investment in portability between clouds (something which Digital Platform Conductors can assist with).
IT leaders at large enterprises with cloud spend in the tens of millions are most likely to see the benefits of switching workloads between providers, and are most likely to have the skills and budget for the tools required for this level of portability.
That’s also not to mention the fact that increased energy costs will impact across several resilience dimensions, including ESG, Innovation and Continuity. Ultimately, whether a business is spending hundreds or even millions of pounds each month on the cloud; now is the time to act to help limit the impact of the worst energy crisis in decades.