Fear of commitment and the pain of waiting

by a Foundation Member

I worked with an FTSE 100 UK retailer who had millions of dollars a month of cloud spending, but zero RIs. They knew that by buying even a modest amount of RIs, they could save a lot of money. In fact, working closely with their team to analyze the company’s infrastructure, I found they could save millions over the coming three years. Because they’re a retailer, margins were tight, and the RI purchase could help them achieve critical cost reduction goals mandated by leadership.

However, despite all of this, it still took them a full nine months to buy their first RIs. What happened? Why was the organization so slow to adopt such an obvious cost-savings measure despite aggressive top-down cost-cutting goals? The answer is because they had to educate—and align—many stakeholders in the organization around what buying RIs meant, and, in the process, dispel many misconceptions cemented during years of data center hardware purchasing.

First, they had to get their finance team on board with how to financially account for RIs. Upfront payments for RIs appear to be capital expenditure (CapEx) spending that finance should depreciate as a physical asset. However, RIs are intangible prepayments of operational expenditures (OpEx) that need to be amortized over the period they’re used.

Next, they had to get their technical teams comfortable with committing to current infrastructure. The strength of cloud lies in your ability to use only what you need and to adapt infrastructure to fit the shape of your workload. Then you introduce new approaches like serverless or containerization and the promise (or threat) of completely refactoring infrastructure on a new set of cloud services. The risk of changing the infrastructure makes teams hesitant to commit to their current stack for the one or three years of a reservation. Foot-dragging by these teams, who were grounded in the admirable plan to improve their infrastructure, caused multiple delays in purchasing reservations.

Stories like this are sadly common. As companies implement their first reservations, getting all teams on board can take a long time, and the lost opportunity of savings can add up to millions of dollars. Had this retailer purchased some RIs as they educated the business during that nine-month period, they would have realized significant savings—and avoided millions in unnecessary on-demand spending.