This post was originally published on IT Pro Today
By Bill Buckley, SVP of Engineering, CloudZero
Today, cloud-driven businesses face a trio of deep-rooted problems, headlined by rising costs. The State Of Cloud Cost In 2024 report found that less than half of participating companies had “healthy” cloud costs.
Another impending challenge is the AI cost crisis. AI’s cloud workloads require massive resources that can quickly consume an organization’s cloud budget.
Third — but not least — is organizational misalignment. A company’s disparate teams or departments often lack alignment regarding their goals, understanding, and management of cloud resources.
Cloud unit economics is a system of using objective measurements to ensure that your business maximizes profit when delivering and developing cloud-based software and services. This is especially helpful in highly dynamic environments where absolute cloud costs change quickly. Organizations need an approach that consistently tracks cloud spending, regardless of where they are on their cloud journey.
Cost Allocations vs. Unit Cost Metrics
Beyond the essential cloud cost management tools, you need to understand cost allocations and unit metrics. These are often confused, so let’s examine what each means.
Let’s start with cost allocations, separating absolute costs into custom business buckets. Examples:
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