As companies move to IT Cloud-based computing infrastructure, many are finding that costs far exceed budgeted forecasts. Such was the case with an organization that recently moved to Cloud-based systems and needed to find ways to reduce and mitigate the unexpected costs.
A fast-growing Digital Advertising Firm, which had recently migrated to a cloud-centric compute environment was faced with costs that greatly exceeded forecast. The CIO, CPO and CFO were all under pressure to rein in the overages, enhance transparency and implement governance processes. They were also asked to allocate cloud costs to each business unit, to foster accountability.
The company engaged Jamie Martino, a member of the OnDemand Professional Network with Strategic Sourcing / IT Category Expertise and an extensive expense management background, to evaluate the cloud optimization market. Martino was charged to work with IT and Procurement to identify aligned vendor solutions, which could reduce costs by at least 30%.
DISCOVERY & EVALUATION
During the Discovery Phase, the team learned that there was a robust set of platforms and managed services available in the market, which claimed to far exceed the capabilities of generic tools offered by the cloud compute vendors themselves (AWS, Azure, GCP). Through conversations with reference clients of these firms, the team was able to validate that 30% savings was a realistic goal.
They learned that common drivers of overages stem from a lack of visibility and challenges related to aligning the purchase decision for each Instance with the best opportunity available.
Cost overages were often due to:
- Zero Usage Instances
- Over Engineered Instances
- Decentralized non-strategic ‘buying patterns’
- Unclear Ownership & Inability to allocate costs
- Lack of Internal Resources & Appropriate Tools/Reports
COLLABORATIVE LEAN SOURCING APPROACH
A Kaizen inspired “continuous improvement” approach was selected, as it fostered partnership between Procurement, IT, Finance, and the Suppliers. The tactical plan focused on:
- Taking advantage of a Free Spend Assessment negotiated into the supplier POC. Identifying the biggest overages by category, using the Assessment Results
- Running a PIC analysis to prioritize tactics
- Aligning a phased execution approach to the PIC analysis
- Enhancing Visibility & Reporting capabilities to remediate future waste
A two-stage Sourcing Strategy was agreed, which would first focus on selecting a cloud reporting and analytics product capable of driving savings thru visibility, analysis, and reporting. The second phase would focus on adopting AI driven purchasing/decision tools, which could take advantage of Secondary and Spot marketplaces, which had been identified by the OnDemand Advisor. Together the two phases were projected to deliver 30% savings.
In Stage 1, after evaluating multiple “cloud reporting platforms”, the OnDemand professional helped the firm select a vendor solution that combined a cloud analytics platform with the support of professional services. The team was able to negotiate a Free Vendor Assessment into the agreement, which expedited the process by identifying the leading causes of overages. After 4 months, the program had already achieved 25% savings. A Tagging Manager solution was also implemented, which simplified detailed cost allocation, fostering accountability.
Stage 2 addressed the challenges around a lack of resources and sub-optimal ordering methodologies of each compute instance. An AI driven-managed solution was selected to tap the “Spot Marketplace” for compute, where savings in excess of 80% were available. This advanced use of AI allowed the firm to obtain a Guaranteed SLA from the optimization vendor, while also enjoying deep discounts only available to users of Spot marketplaces, wherein compute vendors offer excess capacity for short periods at deep discounts.
With the success of Stage 1 creating a win together environment, the team was able to enhance the savings by an additional 18% in Stage 2, for a combined savings of 43%, versus the goal of 30%. With over $1M in monthly cloud expenses, the project yielded over $430k per month in savings and enhanced visibility and cost control for this expanding taxonomy center.
CRITICAL SUCCESS FACTORS
- Taking a Lean and Collaborative approach, which incorporated the views of all stakeholders
- Enlisting the help of dedicated subject matter experts with ample time and tools to execute
- Separating the work into Stages, using lean tools to harvest the largest savings first and then enhancing the savings thru more complex methodologies
- Combining visibility & reporting with managed services to minimize overages in the future
MEET JAMIE MARTINO – ONDEMAND NETWORK MEMBER SINCE 2021
Jamie has extensive experience as a senior strategic sourcing, IT & commercial leader. He is a dedicated mentor to Technology Sourcing Professionals, thru his role as the Technology Sourcing Chapter Leader for Procurement Foundry, wherein he moderates & mentors over 3500 IT Sourcing professionals. Martino has held senior global leadership roles at technology dependent firms; Salomon Brothers, TCG\AT&T, Last Mile, Ingersoll Rand, Trane and Aryaka. He is a frequent conference speaker on topics such as: Cloud Optimization, Digital Transformation, Expense Management and Telecom Networking. At OnDemand, Jamie specializes in Digital Transformation and Technology Expense Management. Always on the forefront, Jamie helped develop over 100 of the first fiber optic networks and launched the first competitive dial tone product in the US market. He holds an MBA in International Finance from St. John’s University and is an active leader in the Charlotte IT Professionals and Leadership on the Lake organizations.