4 KPI’s to Measure Cloud Efficiency – Part 1

With all the buzz around cloud usage lately and the need for advanced cost management capabilities, the question that most often arises is:

  • How is it possible to effectively measure cloud spend efficiency?
  • What metrics can help an organization gain insight into their cloud efficiency?

Many organizations understand that as their cloud consumption increases, the need to measure efficiency becomes a critical task.
In this article I want to focus on 4 KPI’s that can help anyone measure their cloud efficiency:

  1. On-Demand Coverage
  2. Commitment Utilization 
  3. Cost Per Hour
  4. Percentage Of Waste (based on open recommendations to optimize billing, like right-sizing)

The ability to be able to define the organization target and display the target vs the actual performance is critical in the ability to improve cloud efficiency.

When using cloud services, there are several options for which you can use the servers and pay:

  • On-demand – pay according to consumption:  use without any commitment on time usage (the most expensive method).
  • RI / Saving Plans– use of servers with a significant discount: users commit to use a certain server in a certain amount for a period of one or three years.
  • Spot – users use AWS ‘Spare Capacity and get a significant discount: the downside here is only receiving a 2-minute notification that AWS can take the server back and you have to deal with setting up another server.
On-Demand Coverage

Using On-Demand is the most expensive option. One of the metrics that users want to measure is the percentage of coverage of On-Demand for each service that it’s possible to pay on the usage of another option (Spot / Commitment).

Using Spot or workloads that can handle a 2-minute notice before interruption is a great way to optimize your savings. Generally, they should be stateless applications. It is very common to use Spot on test and development environments.

With stable workloads, the preferred way is usually to buy a commitment that will help you maximize your discount without any interruptions on your workloads.


Commitment Utilization 

On the other hand, we want to ensure that all of the commitments bought are being utilized.

This is what we call commitment utilization.

In this KPI, 2 things are being measured:

  1. How much is saved due to the commitments vs how much waste there is due to the commitment, and the ratio between them
  2. A specific percentage of utilization

Both of these indicators help ensure that not only are you achieving great coverage, but that you are also using your commitment and not wasting money, as the target here is to achieve great coverage.

These two KPI are the first steps in measuring the efficiency of your cloud and helping ensure that you are using the commitment capabilities that the cloud provider supplies as well.

In Part 2, we will expand on the other two KPI’s: Cost Per Hour & Percentage of Waste – coming soon.