Cloud is a savior ... to the technology world.

Its arrival brought about a new era, where companies can go digital and compete against digital upstarts. "Cloud first, cloud always" is en vogue and companies are eager to move from on-premise reliance.

With the cloud comes flexibility, but flexibility has a downside: cost overruns. 

Freed from physical technology limitations companies migrating to the cloud face new costs, and those companies without a plan in place will find people across departments pulling on resources. 

The cloud shifted the financial treatment of assets, said Barry Libenson, Global CIO at Experian, in an interview with CIO Dive.

Enterprises investing in data center technology would build in the cost of hardware on a refresh cycle, anywhere from three to five years, distributing costs over time.

When a company runs technology on premise, it can capitalize or operationalize cost structure and calculate depreciation, Libenson said. Businesses can't do that in public cloud, where a bill arrives once per month as an operating expense. 

In 2019, the No. 1 priority for businesses was cloud cost optimization, according to RightScale's State of the Cloud Report from Flexera. Companies want to move more workloads to the cloud, but continue to face challenges managing cloud spend. 

Respondents estimate more than one-quarter of cloud spend is wasted, though Flexera estimates that number is closer to 35%. 

A lack of visibility

Part of the the overruns or wasted resources is lack of visibility. While cloud investments start small, bills can grow over time and spin out of control.  

The cloud is "unlike when you bought that server, paid a big check, and forgot about it," said Julia White, corporate vice president of Microsoft Azure, in an interview with CIO Dive. Early on in the cloud days, horror stories circulated in industry of $2 million bills. 

Part of the problem is a cloud governance. Companies can easily spool up additional resources, which can lead to cost overrun if controls are not put in place. 

Another concern is who is drawing on cloud resources. For example, developers use the cloud to build and test new applications and operations teams run workloads. Each will tax cloud resources and contribute to the monthly bill, but with siloed departments, neither are worried about cost overruns. 

Putting workloads in the cloud without cost management is like giving your kids a credit card, said Sonia Cuff, cloud advocate, Azure at Microsoft, speaking last month at the Interop IT conference in Las Vegas. 

Cloud is "about paying for what you forgot to turn off," and people across the organization need to realize how they contribute, said Cuff. In a business, the CFO, CIO, CTO, IT manager, operations engineer and developers are all responsible for cloud cost management. 

Changing habits in the cloud

Managing the cloud properly requires visibility. If companies wait until the end of the month to address usage, cost overruns remain likely. 

At Experian, they see every invoice related to Amazon Web Services or Microsoft Azure, showing details on new environment and overall spend, Libenson said. It's possible to have net new spend in the public cloud without offset, which ends up as net growth. 

Successful cost management requires coordination with finance to understand where costs are coming and how the business will deliver value, according to a Deloitte report. Cost reduction is seen a cloud value proposition, but benefits don't just materialize. 

Libenson is not aware of any CIOs who say they have cloud costs down to a science.

Cloud costs are broken down by compute, storage and bandwidth. And many companies struggle to develop infrastructure for the cloud, relying on on-premise strategies. 

"Don't bring all your same habits over cause you're not going to want them, and you're not going to need them anymore," said White. 

"The reality is there is optimization and approaches you want to adjust as you move from on premises into the cloud," she said. "On premises you put your capacity at whatever your peak is going to be. In the cloud you can make it completely on demand and elastic."