Efficiency, always a top concern of IT leaders, is the subject of heightened focus in 2023, thanks to ongoing inflation and the threat of recession. Expenditures for cloud services in particular are coming under close scrutiny, at a time when cloud spending is nearly half of many IT budgets.\n\n\u201cAs more and more workloads migrate to the cloud, managing cloud expenses has become an important priority,\u201d says Dilip Venkatachari, senior executive vice president and global chief information and technology officer of U.S. Bank. The financial institution, headquartered in Minneapolis, is in the process of moving 70% of its workloads to cloud providers, principally Microsoft Azure, up from less than half that amount just a few years ago.\n\n\u201cWe need to track and attribute expenses to specific applications over time. Knowing where the greatest demands are is the first step to being able to manage costs,\u201d Venkatachari says. To do that, U.S. Bank has embraced FinOps, a business discipline and set of best practices for optimizing enterprise cloud spend. \u201cWe view it as an approach, a practice to be more strategic and tactical on critical expenses associated with infrastructure,\u201d he adds.\n\nRick Villars, group vice president for worldwide research at IDC, sees the cloud as a natural fit for targeting IT cost efficiencies, with the firm predicting that in 2024, 50% of IT spending will be on cloud services.\n\n\u201cWhen you tighten belts, you look at your biggest budget item,\u201d Villars says, noting that many companies made commitments to the cloud within the past three years, and as contracts have been renewed, customers have seen price increases between 10% and 20%.\n\n\u201cCompanies think they are overspending a lot on cloud,\u201d says Villars.\n\n\u201c2023 is all about the year of being efficient,\u201d offers Tracy Woo, senior analyst at Forrester Research. \u201cPeople realize the cloud isn\u2019t a proof of concept anymore and that they need to batten down for a possible recession. They realize they need to get the most out of what they\u2019re spending, and they have to be smart and strategic about what they\u2019re doing.\u201d\n\nA look at cloud bills might make it appear that cloud providers are taking advantage of their customers, but that\u2019s not the case, according to Woo. \u201cThere is not any price gouging. The market is too competitive for that,\u201d she says.\n\nInstead, customers often walk into cloud agreements assuming they will save money, but because they don\u2019t watch costs closely enough, they are unpleasantly surprised. Customers need to track billing per hour, per minute, and even per second. \u201cThe way you have to keep track of it is very different from on-premises IT,\u201d says Woo.\n\nCloud costs in the crosshairs\n\nLike U.S. Bank, electronic components provider Avnet is in the midst of a multi-year cloud migration that will eventually move all IT resources to the cloud. \u201cFour or five years ago, when we first thought about moving to the cloud, we thought the cloud was going to be less expensive. We learned early on that was really not the case,\u201d says Max Chan, CIO of Avnet. \u201cLift and shift will never be economical unless you change the way you work.\u201d\n\nAnd that is something Chan and Avnet have had to learn on the fly.\n\n\u201cThere is a different operating model, a completely new way of doing things in the cloud,\u201d Chan says. \u201cIf you just think compute, storage, and capacity, you are in for an unpleasant surprise. We have been learning from our past mistakes.\u201d\n\nAvnet has created a FinOps team that uses ServiceNow Cloud Insights to track cloud usage as it increases from year to year, and on-premises capabilities as they decrease. \u201cIt\u2019s a multi-year journey. As you are migrating, there is no way you can shut down your data center,\u201d says Chan.\n\nUsing mainly Azure, Chan is beginning to use the Azure AIOps tool while relying on Azure Advisor, Azure Cost Management, and Azure Monitor with inputs from Azure DevOps and GitHub. \u201cThey are more than happy to help you optimize your usage of Azure. It sounds counterintuitive, but they want you to be efficient and use new capabilities,\u201d says Chan.\n\nNovanta, a maker of photonics equipment and a technology partner to medical and industrial OEMs, launched its cloud strategy three years ago. Up from 2% cloud utilization to 55% currently, the company, which is using mainly Microsoft Azure, now is looking at cost efficiencies and alternate cloud platforms.\n\n\u201cWe\u2019re looking at other cloud service providers for diversification, resilience and operational efficiencies,\u201d says Sarah Betadam, CIO and CISO of Novanta.\n\nNovanta plans to retain 25% of its IT operations in a scaled-down data center, for which Betadam is experimenting with raising temperatures above 64 degrees to cut air conditioning costs.\n\n\u201cSaving power and improving sustainability is an important goal for us,\u201d she says, noting that Google Research has shown that IT infrastructure can operate safely at 80 degrees. Betadam adds that the push to bring down cloud costs is not an unusual drive to economize, unique to 2023, but part of the company\u2019s ongoing adherence to efficiency.\n\n\u2018Shift left\u2019 and an appeal to automation\n\nKevin Gray, CIO of Burbank, Calif., faces different forces. As nearby employer Disney announced layoffs of 4,000 workers, Gray took note.\n\n\u201cWe haven\u2019t been hit by a recession, but enterprises are reducing their workforces. If tax revenues decrease, we may lose steady funding,\u201d says Gray. \u201cWe\u2019ve had the discussion with the city manager. We\u2019re trying to get ahead of that storm by driving more efficiency and automation, not just in IT but the entire city.\u201d\n\nTo that end, the municipality of 108,000 is implementing a number of \u201csmart city\u201d initiatives built on the internet of things (IoT) and AI, including intelligent traffic management and an intelligent transportation system.\n\nAlthough not implementing a formal FinOps initiative, the CIO is leading the implementation of Scaled Agile Framework (SAFe) for Government, a blueprint for deploying Lean, Agile, and other principles for public entities.\n\n\u201cWe\u2019re big on shift left \u2014 shifting work to the least expensive resources you can,\u201d says Gray. \u201cThat includes shifting work to the least-cost human resources and implementing automation,\u201d he adds. As for the cloud, Gray says he is \u201cvery wary\u201d of cloud costs and seeks to trim expenses for AWS and Microsoft Office 365 services using tools that come with the services. For a city the size of Burbank, third-party tools would not offer sufficient return on investment, he says.\n\nManaging the workforce for efficiency\n\nWorkforce flexibility plays an important role in cost control for the city of Burbank. With 33 full-time employees, Gray relies on contract workers, systems integrators, and managed service providers to fill gaps, rather than over-hire and be confronted with layoff choices down the road. Burbank uses a managed service to help support Oracle ERP applications and a systems integrator to build its Mobile 311 application, an easy-to remember number that connects\n\ncitizens with municipal services.\n\nThe surge in remote work prompted by the COVID-19 pandemic presents opportunities for savings, according to Greg Smith, professor at Georgetown University and CTO of a firm in the Washington, D.C., area. \u201cOrganizations are starting to implement economical operational and technological changes as a result of the hybrid work environment that organizations have adopted,\u201d says Smith.\n\nGeolocation-based pay can allow organizations to reduce salary to match wages in the regions where remote employees might choose work, according to Smith. Remote work also allows organizations to trim costly office space and sell off unneeded real estate holdings. \u201cA mix of fully remote, hybrid, and office-based staff will achieve payroll savings that are significant,\u201d says Smith.\n\nDynamic sourcing models, including team-staffing platforms and skills marketplaces, are also stepping in to help fill talent voids without committing to full-time resources.\n\nLessons and advice\n\nWhether macro-economic forces are expanding or contracting, IT budgeting requires deft management.\n\n\u201cEvery year is a year of economy. We always want to be good stewards of our budget dollars,\u201d says Venkatachari of U.S. Bank.\n\nAs for Chan, having learned firsthand the cloud is not a panacea, he advises his peers to proceed with caution. \u201cDon\u2019t jump into the cloud and rack up expenses without knowing how to take the costs out, otherwise you will be stuck with high costs for a long time.\u201d\n\nBetadam says no matter whether the economy is turbulent or not, focusing on ROI for all IT programs by tracking savings and accomplishments year over year can pay dividends later on, especially during budget requests.\n\n\u201cIT leaders\u2019 focus on ROI and operational efficiencies should become part of our DNA and brand,\u201d she says.