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Sourcing IaaS and PaaS: Looking Beyond Discounts

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The marketplace for public cloud services including infrastructure-as-a-service (IaaS) or platform-as-a-service (PaaS) has changed how enterprises must negotiate value. Traditional discounting for sourcing a finished good does not work the same way when sourcing cloud services. Instead, you must think about maximizing your public cloud spend. This requires a more rigorous approach to planning the magnitude and velocity of your consumption of these services.

Understanding Cloud Consumption

Most organizations struggle to match consumption to spending commitment, which can lead to overspending and a loss of savings. First, you must get a clear understanding of your cloud consumption, but to do so, you need the right tools and resources to optimize, monitor and forecast it. Both cloud provider native and third-party tools are available to help determine your cloud usage. This gives you the clarity you need when negotiating with the cloud giants.

Azure, AWS and Google clouds use complex pricing structures and billing models that can confuse customers. Until you gain transparency, you will continue to struggle with overspending. In essence, controlling spending is a matter of managing your point-and-click access. Cloud providers make it easy to access their services by simply clicking the mouse. Without capacity constraints in place, customers will continue to experience excessive and unexpected charges.

The Benefits of a Cloud Consumption Financial Management Process

Developing a financial management process around cloud consumption is key to controlling costs. Simply turning off cloud instances is a stopgap measure that is likely to frustrate users. Be sure to involve the business stakeholders who use cloud services to better understand true demand and to develop a plan to structure and control any increase in demand. Failing to involve these critical resources can result in even more unexpected charges that could lead eventually to shadow IT spend.

Be sure to build a cloud consumption financial management process that includes:

  • Accurate forecasting
  • Organizational planning
  • Increasing organizational visibility
  • Understanding costs
  • Matching demand to actual purchase
  • Tying cloud cost to business value

Having a financial management process that is clearly defined and communicated puts you in a position to drive an optimal outcome in negotiations with your cloud services provider. ISG helps companies negotiate large and small cloud services contracts. Contact us to find out how we can help you.

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