A mix of rapid migrations to the cloud and complexity over usage and costs has companies desperately trying to reduce waste and gain control over their spending. Making matters worse is a volatile economy that has decision-makers on edge, considering cost-cutting measures and placing a priority on locking down revenue.
Without a formal FinOps or cost optimization strategy in place, it’s easy for companies to see cloud expenses snowball out of control. In fact, analysts from Gartner report that organizations that do not employ cloud cost optimization can overspend by up to 70%. That said, ramp plans are becoming a vital tool for containing cloud resources.
Still, while this strategy can show how to effectively grow your environment and increase workloads, the way a ramp plan is carried out is key to its success. The following looks at what companies should do to succeed with ramp planning accompanied by some strategic advice for handling unique needs that may arise.
Ramping Up
A ramp plan, at its most rudimentary level, is data tracking toward how your organization consumes cloud resources versus what it commits to with a cloud service provider (CSP) or reseller. By committing to spend a set dollar amount, you can get healthy discounts or other incentives. As an example, a 50% increase in consumption by the end of the year might earn a 10% discount from a CSP on compute workloads. But there is risk: A company is still obligated to pay that figure, even if it uses far fewer resources than it committed to.
Still, just as you don’t want to spend money needlessly, CSPs—even high-volume hyperscalers like Amazon AWS and Google GCP—would rather see customers get what they need and grow their footprint. For some organizations, the answer is bringing in a partner to help forecast spend. Questions regarding what is needed, past usage, anticipated growth, potential for acquisitions and more need to be answered. You also have to examine such things as product and service offerings. For instance, a subscription app you offer could catch fire and bring in customers—but you’ll need to plan accordingly so the resources will be in place to meet this demand.
Compiling and projecting this all isn’t easy, but this type of data is needed so you can develop a ramp plan and budget effectively. In the past, this process required time-consuming manual research, a host of spreadsheets and sophisticated algorithms. However, technology has been developed to automate, drive and scale this process. For some businesses, the ideal is to find a partner with this capability in-house and a depth of expertise to use it correctly.
Processes and Partners
Ideally, a ramp plan should be developed before a commitment is made. It should be reviewed on at least a quarterly basis with the C-suite and appropriate technical executives and then revised as necessary. On the whole, CSPs like to sign customers to contracts extending more than a year, with three-year terms being typical.
Working with a third-party partner, reseller or directly with a hyperscaler comes down to personal preference. Big companies, much like hyperscalers, tend to have a lot of bureaucratic processes and requirements. So, if you want a tactical agreement with AWS, you may have to buy tactical support. You may get a good financial incentive in exchange, but the cost of enterprise-level support could offset that.
Partners and resellers of cloud services, on the other hand, help hyperscalers scale their businesses, so they often have special arrangements that lower support costs. The development of ramp plans is usually less when going through a third party versus registering with a CSP. These services are often designed for smaller companies that larger CSPs don’t have time to handle. Third parties tend to provide tailored services more in tune with customer needs, including more flexible usage, optimization and security. These partners tend to negotiate more effectively than customers themselves because they better understand the ecosystem and which levers to pull.
Measuring Success
It’s not easy to measure and track the success of a ramp plan. Beyond understanding and meeting your commitment—and getting the most from cloud spend—the best measure is profitability. Are you just eating costs or acquiring new customers? Is your efficiency boosting or lowering your margins? It’s even possible to apply unit economics to assess if you’re making money on the resources being used.
Making a commitment and ramp planning should involve more than financial incentives. Maybe there’s some other strategic aspect you want to achieve? From service-level agreements to support, a lot of things can be woven into a commercial contract. Benefits can come in various forms, but when they’re added together, you can take success in the cloud to a whole new level.
