Hybrid cloud cost management: optimising expenses

“91% of organisations are wasting money in the cloud.”

Yep, you read that right.

This eye-opening statistic from the HashiCorp 2024 State of Cloud Strategy Survey underscores a critical challenge for businesses leveraging hybrid cloud environments. As organisations scale their cloud usage, the complexity of managing resources across public and private clouds often leads to inefficiencies and spiralling costs.

With Flexera’s 2024 State of the Cloud Report revealing that 59% of organisations rank cost optimisation as their top cloud initiative, it’s clear that companies are feeling the financial strain. But how can organisations manage these expenses effectively while ensuring they meet business goals?

Below are some actionable strategies informed by these reports and broader industry insights.

The scope of cloud cost waste

Cloud waste, or avoidable cloud spending, is a pervasive issue. According to the HashiCorp State of the Cloud report, 91% of organisations acknowledge waste in their cloud spending, with the leading contributors being a lack of needed skills (41%) and overprovisioning of resources (40%). Other significant factors include idle or underused resources (35%), inability to automate enforcement of policies (35%) and manual operations (32%). These issues highlight a systemic challenge in managing hybrid cloud environments effectively.

Breaking down the causes of cloud waste

Here’s a detailed breakdown of the primary factors driving cloud waste:

Source: HashiCorp 2024 State of Cloud Strategy Survey

Interestingly, only 6% of organisations reported no avoidable cloud spend, while 3% admitted to not knowing whether their spending was avoidable – emphasising the need for greater visibility.

Low-maturity vs high-maturity organisations

The problem is exacerbated in low-maturity organisations, which are defined in the report as businesses with fewer automated processes, limited visibility into cloud environments and less established governance practices. These organisations often lack structured approaches to resource optimisation and rely heavily on manual operations, making them more susceptible to waste.

On the other hand, high-maturity organisations tend to have advanced cloud governance, robust FinOps practices and a workforce trained in hybrid cloud management. These businesses are better equipped to leverage automation, monitor usage and enforce policies, leading to significantly lower levels of cloud waste.

The stark contrast between low- and high-maturity organizations highlights the critical importance of investing in employee training, cloud governance and automation to reduce waste and optimise spending. As hybrid cloud adoption accelerates, bridging this maturity gap will be essential for sustainable and efficient operations.

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Strategies for effective hybrid cloud cost management

Given the diverse causes of cloud waste, organisations need a multi-pronged approach to optimise hybrid cloud expenses. While FinOps practices are a critical foundation, addressing the underlying issues of cloud waste requires additional strategies tailored to the challenges of low-maturity environments. Below are effective strategies to consider:

1. Build cloud skills and invest in training

The lack of necessary skills is the top contributor to cloud waste (41%). Organisations must prioritise upskilling employees through:

Training programs: Invest in certifications like AWS Certified Solutions Architect or Azure Administrator Associate.
Cross-functional knowledge sharing: Enable IT, finance and operations teams to collaborate on cloud management.
Internal Cloud Centers of Excellence (CCoEs): Establish dedicated teams to enforce best practices and mentor others in cloud operations.

2. Address overprovisioning with right-sizing tools

With 40% of cloud waste attributed to overprovisioning, right-sizing is critical. Organisations can:

Use tools like AWS Compute Optimizer or Azure Advisor to identify underutilised resources.
Regularly audit resource allocations to ensure they match workload needs.
Implement granular monitoring to detect and reduce over-allocated instances in real time.

3. Automate policy enforcement

Manual enforcement of policies leads to inefficiencies and wasted resources. Address this by:

Automating governance: Use tools such as HashiCorp Sentinel or AWS Config to enforce policies like tagging, cost allocation and compliance.
Lifecycle management: Automate expiration dates for temporary environments, such as testing or development resources, to avoid unnecessary costs.

4. Maximise the use of idle resources

Idle or underused resources account for 35% of avoidable cloud spend. Mitigation strategies include:

Automating the shutdown of non-critical resources during off-peak hours.
Consolidating workloads onto fewer instances during periods of low activity.
Leveraging serverless options, such as AWS Lambda, to avoid paying for idle infrastructure.

5. Implement regional optimisation

Cost premiums in certain geographical regions account for 29% of avoidable spend. Organizations can optimize these expenses by:

Hosting latency-tolerant workloads in lower-cost regions.
Using Content Delivery Networks (CDNs) to minimise data transfer expenses between regions.
Negotiating custom pricing with cloud providers for multi-region operations.

6. Adopt FinOps practices

As highlighted earlier, FinOps remains a cornerstone of cost management. By aligning spending with business objectives, FinOps helps:

Optimise predictable workloads through reserved capacity discounts.
Reduce unnecessary expenses via automated policies.
Manage software licences effectively to avoid overspending on underused applications.

7. Collaborate with Managed Service Providers (MSPs)

Organisations struggling with low maturity can benefit from partnering with MSPs. These providers bring specialised expertise to:

Monitor and optimise hybrid cloud environments.
Identify inefficiencies and propose tailored solutions.
Implement advanced tools and processes for cost control.

8. Increase automation across operations

Manual operations contribute to 32% of avoidable cloud spend. To counteract this:

Automate resource provisioning, scaling and de-provisioning.
Use Infrastructure as Code (IaC) tools like Terraform to streamline deployments and reduce human error.
Implement monitoring solutions to trigger automated actions when inefficiencies are detected.

Key takeaways

Cost optimisation in hybrid cloud environments demands a multifaceted approach. Beyond adopting FinOps practices, organisations should focus on understanding workload requirements, partnering with MSPs and leveraging technologies like autoscaling and spot instances. Regular audits and proactive monitoring are equally important to identify and eliminate waste.