How Canadian Organizations Should Think About Cloud Optimization
Most organizations currently use some type of cloud service for IT, but many are now evaluating their operational expenses, seeking to optimize their cloud spend.
Cloud technology has steadily grown in adoption and is now used in one form or another by nearly all organizations in Canada. But the increase in spending on cloud applications and services is prompting many to think about how to get the most from the cloud investments they’ve made.
Cloud has been a key building block for digital transformation, helping to make businesses more resilient, efficient and in better position to achieve sustainable growth. According to CDW Canada’s 2023 Hybrid Cloud Report, based on research conducted by IDC Canada, Canadian businesses have applied digital first strategies to create value by transforming processes, products and services to deliver digital assets and experiences to customers.
Digital business ambitions see organizations utilizing cloud platforms extensively. The report also finds that moving to public cloud services enables organizations to innovate across their business processes, user and customer experiences, new products and services as well as improving their sustainability and operating model.
But while most organizations currently use some type of cloud service for IT, many are evaluating their operational expenses, seeking to optimize their cloud spend. On average, 18 percent of all public cloud services spending in Canada is being wasted.
The rise of FinOps
There’s a need for cloud spend optimization, and it has given rise to financial operations (FinOps), an evolving cloud financial management discipline helping organizations achieve maximum business value by working with engineering, finance, technology and business teams to collaborate on data-driven spending decisions, increasing visibility into cloud spending in real time. FinOps is a newer discipline, and in some cases, it may be the responsibility of one individual or a team within a large enterprise.
Our research shows that only 55 percent of Canadian organizations have an individual or team dedicated to FinOps. Those individuals and teams are challenged to understand how to optimize cloud spend for architectural and business benefits, allocate cloud costs to the correct team (charge backs), understand cloud pricing models and how to apply them, and establish governance to ensure that cost and optimization recommendations are implemented.
For medium-sized organizations, optimization challenges are mostly around allocating cloud costs to the correct teams and understanding cloud pricing models. For large organizations, the key challenge is optimizing cloud spend for architectural and business benefits given that large organizations typically run more complex environments.
Cloud investment considerations
Moving to cloud lets organizations shift capital expenses (CAPEX) for IT infrastructure investment to operational expenses (OPEX) through Software as a Service (SaaS), which moves on-premises software to the cloud, and Infrastructure as a Service (IaaS), which applies consumption-based subscriptions for dedicated digital infrastructure.
IDC research shows that the most important business spend-optimizing factors driving consideration and use of cloud by small, medium and large businesses are:
- Simplifying capacity planning and infrastructure scaling (46%)
- The ability to better match cost to business demands (40%)
- Satisfying data protection and privacy concerns (38%)
- Simplifying edge infrastructure deployment and support (34%)
- The availability of colocation/hosted options that can be managed the same as on-premises resources (29%)
- Reducing internal staff required for day-to-day digital infrastructure support and management (27%)
- Utilizing a vendor for ongoing tech refresh and remote management (27%)
- Guaranteeing a trusted digital infrastructure supply chain (26%)
Key cloud optimization considerations
The 2023 Hybrid Cloud Report highlights a number of considerations and recommendations regarding the use of cloud and how organizations might optimize their cloud investments for greater business agility, efficiency and to overcome some of the current challenges they face. These include:
- The main goal of cloud deployments should be to drive business value, and this requires proper alignment between IT and lines of business. Organizations should also invest in strong change management practices that allow for successful adoption and utilization of technologies.
- To successfully transform into a digital business, organizations need to leverage a variety of skills and technologies. And to achieve this, they need to build a robust partnership with their cloud services provider ecosystem to develop and enhance their cloud competencies and effectively deploy technologies such as digital workplace, Internet of Things (IoT) and generative artificial intelligence (GenAI).
- Organizations should evaluate their current workloads then decide on a cloud migration strategy. Based on the modularity of the solutions, the skills available and the impact the workload will have on business, organizations can either do a “lift and shift” (often the most costly option), leverage containers and microservices to refactor/rearchitect workloads or entirely replace the solution with a SaaS workload.
- Organizations should build out strong IT financial operations (FinOps) practices. Like security, it is a shared responsibility, and it is important to have a clear understanding on the role of the cloud services provider and the organization itself. If organizations are in the early stages of their IT FinOps journey, they can lean toward their partners to better understand how they can run optimized cloud environments.