Cloud cost overruns may be a business leadership failure
A couple of months back, some smart folks at VC firm Andreesen Horowitz wrote a blog post called “The Cost of Cloud, a Trillion Dollar Paradox“. Among other things, the blog made a big splash because it claimed, quote: “[W]hile cloud clearly delivers on its promise early on in a company’s journey, the pressure it puts on margins can start to outweigh the benefits, as a company scales and growth slows.” It claimed that cloud overspending was resulting in huge loss of market value, and that developers needed incentives to reduce spending.
The blog post is pretty sane, but plenty of people misinterpreted it, or took away only its most sensationalistic aspects. I think it’s critical to keep in mind the following:
Decisions about cloud expenditures are ultimately business decisions. Unnecessarily high cloud costs are the result of business decisions about priorities — specifically, about the time that developers and engineers devote to cost optimization versus other priorities.
For example, when developer time is at a premium, and pushing out features as fast as possible is the highest priority, business leadership can choose to allow the following things that are terrible for cloud cost:
- Developers can ignore all annoying administrative tasks, like rightsizing the infrastructure or turning off stuff that isn’t in active use.
- Architects can choose suboptimal designs that are easier and faster to implement, but which will cost more to run.
- Developers can implement crude algorithms and inefficient code in order to more rapidly deliver a feature, without thinking about performance optimizations that would result in less resource consumption.
- Developers can skip implementing support for more efficient consumption patterns, such as autoscaling.
- Developers can skip implementing deployment automation that would make it easier to automatically rightsize — potentially compounded by implementing the application in ways that are fragile and make it too risky and effortful to manually rightsize.
All of the above is effectively a form of technical debt. In the pursuit of speed, developers can consume infrastructure more aggressively themselves — not bothering to shut down unused infrastructure, running more CI jobs (or other QA tests), running multiple CI jobs in parallel, allocating bigger faster dev/test servers, etc. — but that’s short-term, not an ongoing cost burden the way that the technical debt is. (Note that the same prioritization issues also impact the extent to which developers cooperate in implementing security directives. That’s a tale for another day.)
The more those things are combined — bad designs, poorly implemented, that you can’t easily rightsize or scale — the more that you have a mess that you can’t untangle without significant expenditure of development time.
Now, some organizations will go put together a “FinOps” team to play whack-a-mole with infrastructure — killing/parking stuff that is idle and rightsizing the waste. And that might help short-term, but until you can automate that basic cost hygiene, this is non-value-added people-intensive work. And woe betide you if your implementations are fragile enough that rightsizing is operationally risky.
Once you’ve got your whack-a-mole down to a nice quick automated cadence, you’ve got to address the application design and implementation technical debt — and invest in the discipline of performance engineering — or you’ll continue paying unnecessarily high bills month after month. (You’d also be oversizing on-prem infrastructure, but people are used to that, and the capital expenditure is money spent, versus the grind of a monthly cloud bill.)
Business leaders have to step up to prioritize cloud cost optimization — or acknowledge that it isn’t a priority, and that it’s okay to waste money on resources as long as the top line is increasing faster. As long that’s a conscious, articulated decision, that’s fine. But we shouldn’t pretend that developers are inherently irresponsible. Developers, like other employees, respond to incentives, and if they’re evaluated on their velocity of feature delivery, they’re going to optimize their work efforts towards that end.
For more details, check out my new research note called “Is FinOps the Answer to Cloud Cost Governance?” which is paywalled and targeted at Gartner’s executive leader clients — a combination of CxOs and business leaders.
Posted on October 20, 2021, in Infrastructure and tagged cloud, FinOps, Gartner, IaaS, research. Bookmark the permalink. 3 Comments.
I like the comment about incentives. Charlie Munger, Warren Buffett’s right-hand-man at Berkshire Hathaway, says “Show me the incentives and I’ll show you the outcome.”
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