Over the past few years, more organizations have gone all in with migrations to the public cloud. But for some \u201cwithout a concrete strategy, it has led to some obvious challenges with respect to measuring the real value from their cloud investments,\u201d says Ricky Sundrani, a partner in the pricing assurance practice at Everest Group.\n\nCut to one of the most significant concerns across enterprises today: rising cloud costs.\n\n\u201cMany enterprises are getting some unwelcome sticker shock surprises for their cloud services that are coming in much higher than estimated and blowing up the business cases they used to justify their program in the first place,\u201d says Andy Sealock, senior partner in the advisory and transformation practice at West Monroe.\n\nWhile inadequate planning at the start of the cloud journey is a major driver of this disconnect, there are plenty of others: limited visibility into cloud consumption and patterns, unchecked cost leakage, cloud sprawl, lack of workload optimization, and weak demand management policies, to name a few. More than two-thirds of organizations are not realizing the full value of their cloud investments, according to an Everest Group survey of CIOs.\n\nThe business case for cloud remains the same: greater scalability, increased efficiency, better data security, increased reliability and resilience \u2014 and, potentially, lower costs. But realizing those benefits requires deliberate and active management of cloud deals.\n\nThere are a number of actions IT leaders can take to maximize the value of their current and future cloud investments, from well before partners are narrowed down to long after the contracts have been signed. The following dozen tips are worth adopting.\n\nAssemble a cross-functional cloud team\n\nOne of the biggest missteps when pursuing cloud opportunities is failing to make these cross-functional efforts from the top down.\n\n\u201cWhen cloud transformation is driven by a CXO office without close involvement of business units and development teams, finer nuances are missed, leading to ineffective cloud adoption from a cost and efficiency perspective,\u201d says Mukesh Ranjan, vice president of IT services at Everest Group.\n\nIT leaders should assemble a team with representatives of all key stakeholder groups during the planning stages of the cloud transformation journey, Ranjan says. A 2022 PwC survey found that companies that were achieving transformational benefits from the cloud and reporting fewer barriers to value typically involved five or more functions at the start of their cloud projects. Doing so later on in migration, though less ideal, is still an option to ensure that 360 degree view of enterprise cloud requirements and usage.\n\nDefine baselines and (realistic) expectations\n\nToo many organizations lack a full understanding of the benefits they expect to gain from the cloud vis-\u00e0-vis their existing environment. That requires assessing the value of the current environment, the value they seek from cloud adoption, and timelines for achieving that value. Only then can they select the providers, solutions, and expertise that best align with their cloud goals, says Ranjan.\n\nIt\u2019s important to take off the rose-colored glasses during this process. \u201cIT leaders must be realistic in how much of their premise-based compute footprint can be migrated to the cloud and how quickly this can happen,\u201d says Sealock.\n\nBuild a full business case\n\nDuring the pandemic, many organizations rushed to the cloud \u2014 and for obvious reasons. But migrating to the cloud without a well-thought-out business case is not an optimal strategy. A hurried lift-and-shift approach typically results in increased costs over the long term. During a migration frenzy, companies can take shortcuts that result in technical debt that dilutes the impact cloud transformation can have.\n\n\u201cThink of cloud as a modernization journey and not just a migration,\u201d Ranjan advises. \u201cUndertake application modernization initiatives such as refactoring, rearchitecting, replatforming, and replacing as needed to optimize applications running on cloud.\u201d\n\nAnalyze (and negotiate) cloud contract terms upfront\n\nMany IT leaders lack the relevant market data required to conduct informed negotiations with cloud vendors.\n\n\u201cThis could be pertaining to expected discounts, more favorable terms and conditions offered to certain buyers, and better transformation timelines, among other things,\u201d says Sundrani.\n\nMarina Aronchik, a partner in the law firm Mayer Brown\u2019s technology and IP transactions practice, recommends accounting for the terms in cloud agreements as part of the broader evaluation of potential cloud solutions and providers. \n\n\u201cIn the current economic environment, customers may have a unique opportunity to secure more flexible and favorable contractual terms,\u201d Aronchik says. \u201cTo do so, IT organizations should build time into the process for reasonable engagement with several cloud providers on a competitive basis, or a single cloud provider with a reasonable opportunity to pivot to an alternative solution if needed.\u201d\n\nRead the fine print\n\nThe value of a cloud contract is not fully represented in the fee schedule. What the customer may assume to be \u201cpermitted use,\u201d the cloud provider may deem \u201cexcess use\u201d or an \u201coverage.\u201d\n\n\u201cTo maximize total value of a cloud contract, IT leaders should look for contractual and technical clarity on the metrics that are used to calculate relevant fees, reliable tools for monitoring consumption, and the methodology for addressing actual or potential excess use,\u201d says Aronchik.\n\nBeware of minimum commitments\n\nIt can be tempting to agree to certain volume or spending levels to secure deeper discounts for ongoing cloud usage. But it\u2019s one of the leading causes of stranded value in cloud contracts.\n\n\u201cIt\u2019s important to not overcommit on the minimum commitments,\u201d Sealock warns. \u201cThis often depends on an enterprise being able to accurately predict how much of their premise-based footprint they can actually migrate to the cloud and at what rate.\u201d\n\nIf an IT organization runs into issues that delay or prevent moving on-premises systems to the cloud, and thus miss a minimum commitment, there will be costs involved. \u201cLonger term commitments, use of \u2018sticky\u2019 native services may drive larger contract discounts but also impact your technology plans,\u201d says Sealock.\n\nLeave no cloud stones unturned\n\nThere are a number of internal factors that can impact cloud value realization. \u201cChallenge your IT department to pull all levers for efficient cloud usage,\u201d advises Sealock. There may be an opportunity to refactor applications to make them more efficient users of cloud resources, adopt cloud native services instead of lifting and shifting existing system to IaaS, or move to SaaS options as part of ongoing application rationalization.\n\nIncreasing the focus on application modernization is crucial to extracting the full value of cloud, says Ranjan.\n\nInvest in a cloud management platform\n\nReal-time visibility across the cloud environment goes a long way in preventing unexpectedly huge bills from cloud providers. But \u201ccloud pricing and ordering options are at a sufficient level of complexity that it is beyond the capacity of a \u2018smart person with a spreadsheet\u2019 to manage effectively,\u201d says Sealock.\n\nThere are numerous cloud cost management tools on the market from established players and startups alike. These tools should have real-time interfaces to the cloud service providers\u2019 pricing engines and be able to automatically match the enterprise\u2019s cloud usage patterns with the right cloud services (e.g., IaaS, PaaS, native) and configurations (e.g., service instance type\/size, storage tier). Sealock advises evaluating multiple platforms, looking for the following attributes:\n\nSecure scarce cloud management talent\n\n\u201cCloud pricing can be very complex and dynamic and is highly dependent on usage,\u201d says Sealock. Without the proper governance, unnecessary costs can quickly accumulate. Adopting a cloud management platform is step one, but these tools are themselves complex. IT leaders must also recruit technology professionals who know how to use cloud management platforms to continually refine cloud service usage to meet enterprise SLAs at the lowest costs.\n\nEnterprises are seeing premiums for cloud skills outpacing those for standard IT infrastructure skills, according to research by Everest Group.\n\n\u201cCloud expertise is in short supply, but without in-house experience it is difficult to avoid the wasteful pitfalls,\u201d Sealock says. \u201cInvest in the people to use the cloud tools properly who can also design the policies, processes, and procedures of a cloud governance framework.\u201d\n\nIn some cases, IT leaders will create a cloud center of excellence that can be leveraged across multiple lines of business. \n\nGet serious about demand management\n\nEase of use and self-provisioning are two of the big benefits of using the cloud, but they also open the door to unmitigated (and sometimes invisible) cloud sprawl. IT organizations must create and communicate clear policies and processes for cloud demand management.\n\n\u201cTraining can be used to increase the socialization of the policies and processes to users, but good compliance also requires those policies to be enforced within the programmed workflow of the tools,\u201d says Sealock, who suggests putting some teeth into demand management. \u201cCommunicate top down that there will be smart constraints on cloud usage that will be reinforced via training but also codified in the workflow of their systems.\u201d\n\nAddress overruns right away\n\nSome IT organizations may view cost overruns as inevitable. But ignoring them is a mistake. \u201cThey do not get better on their own,\u201d says Sealock. \u201cIt takes action to change the dynamic.\u201d\n\nUnexpected \u2014 or worse, inexplicable \u2014 cloud costs are a red flag. Understanding the root cause of the usage and addressing it as soon as possible is important. \u201cYou do not want to discourage cloud usage, but you must insist that the usage be smart, deliberate, and cost-effective,\u201d Sealock says.\n\nContinuously monitor and measure cloud value\n\nHaving clearly defined SLAs to measure performance against expected value is crucial. \u201cUnless enterprises have a well-built process to continuously monitor and measure value against their stated goals, they will slip off in their transformation journey,\u201d says Ranjan.\n\nCloud vendors, consultants, and other partners are likely to keep pushing more cloud, but its critical for IT leaders to periodically re-evaluate the cloud march to ensure the organization can achieve the intended value.