By Herb Hogue, CTO, Myriad360
Your cloud bill keeps climbing, and you’re not alone. It’s a frustration shared by organizations across industries. The promises of hyperscalers like AWS, Google Cloud, and Azure—convenience, flexibility, and rapid scalability—have transformed IT operations, but they often come with an unwelcome surprise: runaway costs. The key question is, why? And what can you do about it?
The answer lies in a paradox. The cloud’s greatest strength is also its costliest weakness. Its ease of use encourages rapid adoption and along with it, unchecked consumption.
The Convenience Trap
Hyperscalers have made it easier than ever to adopt cloud services. From intuitive dashboards to seamless integration, their platforms are designed to be user-friendly and powerful. This drives business value but also drives consumption.
Take the example of Coinbase, which inadvertently paid $65 million to Datadog due to unmonitored expenses. This is the essence of the convenience trap. Just as apps on your phone make it easy to subscribe and forget, cloud services encourage consumption without constant oversight. Add to that the constant expansion of services offered by hyperscalers, and it becomes increasingly difficult for organizations to track usage.
Convenience is powerful, but without strong governance, it leads to unnecessary spending.
The Hidden Costs of Consumption Models
Cloud services often come with hidden costs that catch organizations off guard. Monitoring tools like Splunk and Sentinel provide critical insights, but their low upfront costs can mask significant ingestion and storage fees. Tools with zero initial costs often generate significant expenses based on data ingestion, storage, or other variables.
The variability of workloads amplifies the challenge of managing cloud expenses. AI processing, for instance, can rapidly consume $1 million in a single month due to its volatile and resource-intensive nature, driven by massive computational and data demands. In contrast, $10 million allocated to VDI (Virtual Desktop Infrastructure) environments provides predictable scaling, as costs are tied to a specific number of users or devices accessing virtual desktops. These contrasting models highlight how cloud services align differently with organizational needs, yet their inherent variability makes forecasting and managing expenses a persistent challenge.
Understanding the total cost of ownership for each service is essential to avoid these costly surprises.
Discount Structures and Commitment Dynamics
Hyperscalers entice organizations with discount structures tied to consumption commitments. The idea is simple: the more you commit, the bigger your discount. But there’s a catch. These discounts often lead to escalating commitments and lock-ins. Worse, not all dollars spent are equal across platforms. For instance, $10 million spent on Google Cloud might yield different results than $10 million spent on AWS, depending on the service types and workloads.
The key takeaway? Scrutinize discount agreements carefully and evaluate how they align with your organization’s growth strategy.
Visibility: The Key to Controlling Costs
The solution to managing cloud costs starts with visibility. While hyperscalers have improved their cost visibility tools, these tools often lack the granularity organizations need. For example, the introduction of the FOCUS specification by the FinOps Foundation is helping organizations streamline multi-cloud financial management, offering a way forward for businesses wrestling with cost complexity.
Building internal processes is equally critical. Tagging expenses by business unit, tracking costs internally, and pairing these efforts with external tools can bring much-needed clarity. Additionally, adopting a dual-cloud strategy can improve transparency, mitigate lock-in risks, and offer flexibility to optimize workloads.