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Battling Cloud Complexity: How to manage and optimise costs of the public cloud

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By Hamish Auld, Senior Manager at Efficio

 

Organisations have become increasingly dependent on cloud computing – not only to scale up effectively and meet new growth demands in a continuously evolving market, but also to ensure rapid access to top technology in a world where hybrid working has become the norm.

The complexity of cloud-based services, however, presents a novel challenge to procurement, finance, and engineering teams – one that simply cannot be ignored. The surging demand for ‘pay-just-for-what-you-use’ means that services are metered by the second and with fewer built-in checks to stop rapid proliferation of resources. This means costs can quickly spiral out of control within businesses.

This is a growing concern for the C-suite as organisations struggle to get to grips with cloud service expenses and long-term usage. Yet, by setting out key cost-reduction steps and service management strategies, you can control and improve the governance of your organisation’s cloud spend.

Understanding and getting to the heart of the cloud cost problem

The C-suite must first understand what has changed, and second how vital it is to adjust the IT-spend planning process accordingly. For procurement teams, the general process for datacentre financial planning is relatively clear and easy – however, planning for cloud-based services is considerably different.

While transitioning to the cloud does bring significant benefits to organisations, the move generates one substantial challenge: decentralisation of decision-making. Traditional central controls are rapidly becoming outdated – it is now the developer on the front line who oversees buying that resource, creating more challenges for the C-suite.

With proprietary tools being purchased based on the individual developer needs rather than the organisations, a lack of consistency has been created with regards to cost control, meaning the spend is more difficult to predict and manage.

The importance of cost visibility and forecasting

The first step to gaining control and improving the governance of your cloud spend is visibility. The objective here should be to help all teams within the business that affect cloud usage, by translating your cloud spend into a language that is understandable within your organisation. Unless every level of the organisation that is involved in the cloud understands this premise, then the strategy of controlling and improving the cloud spend problem will not be effective.

Once your organisation can see and understand cloud spend, the next step to cost optimisation is a detailed forecast. This forecast serves as the so-called backbone of technical optimisation, purchasing optimisation, and pricing negotiations.

Determining discounted pricing on cloud services

As an organisation, you want to be in the best possible position when it comes to agreeing a price for cloud services, and to do this you have to have a strong understanding of your organisation’s current cloud usage and the forecasted future growth – then your organisation can look into enterprise commitments. Enterprise discounts, also known as dollar-value commitments, are closely guarded offers so it is important to note several key variables before agreeing to any commitment:

  1. Amount of committed spend (term and annual spend)
  2. Level of growth of commitment
  3. Presence and scale of migrations of workload to the vendor’s cloud
  4. Mix or adoption of new services
  5. Partnership status with the service provider

While for many organisations it is tempting to agree to larger and longer cloud service commitments, many organisations miss out on significant savings. If your organisation’s sum of spend to date and forecasted spend is much higher than your enterprise commitment, then it is likely that you have significantly under-committed. To avoid this, it is important to identify this early on and use the forecast to drive renegotiation of the enterprise commitment to prevent any money from being left on the table.

It is also important to avoid overcommitting. This occurs when an organisation has no way of meeting its spend target and risks having to pay a significant amount of money at the end of the agreement. The key here for businesses is to find a middle ground when negotiating the enterprise discount to avoid significant under or overcommitment.

Negotiation, negotiation, and more negotiation

Negotiating is a key part of this process – whether renegotiating a current deal or starting a new one. The more information you can offer on your organisation’s current spend, new product plans, and business growth, the stronger your organisation’s position for a greater discount.

Once you have determined the enterprise commitment for future spend that your business is comfortable committing to, it is important to allow for multiple rounds of negotiations. Cloud service vendors can offer specific discounts or a variety of credits, but it is vital to carefully consider these offerings against your organisation’s needs. It’s important to that push for discounts that will reduce the overall cost of your business’s current usage or future growth.

Understanding reservation strategy and capacity

Key negotiating strategies, reservations, savings plans, and committed-use discounts (CUDs) all offer organisations a simpler way to access heavy discounts – however, this is usually in exchange for a commitment of continuous usage. Rather than purchasing each service on demand, your organisation can commit to purchasing a service at a much lower price for several years. The benefit is that cloud service providers are more easily able to plan capacity and growth.

The drawback is that this commitment is an hourly usage commitment, meaning should you stop using this type of resource as it will have to continue paying for the length of the original agreement. The key is understanding what portions of workloads should be reserved – forecasting is therefore critical.

Organisations forget that optimisation of cloud costs is a continuous process. To ensure optimal benefits, governance policies and continuous coverage of usage and spend is essential. While there will be challenges, with a well-planned utilisation assessment and continuous management of cloud services within all levels of the organisation, businesses can make use of all the benefits the cloud services have to offer while avoiding uncontrollable cloud costs.

Banking

Wealth Managers and the Future of Trust: Insights from CFA Institute’s 2022 Investor Trust Study

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Author: Rhodri Preece, CFA, Senior Head of Research, CFA Institute

 

Corporate responsibility is more important than ever. Today, many investors expect more than just profit from their financial decisions; they want easy access to financial products and to be able to express personal values through their investments. Crucial to meeting these new investor expectations is trust in the financial services providers that enable investors to build wealth and realise personal goals. Trust is the bedrock of client relationships and investor confidence.

The 2022 CFA Institute Investor Trust Study – the fifth in a biennial series – found that trust levels in financial services among retail and institutional investors have reached an all-time high. Reflecting the views of 3,588 retail investors and 976 institutional investors across 15 markets globally, the report is a barometer of sentiment and an encouraging indicator of the trust gains in financial services.

Wealth managers may want to know how this trust can be cultivated, and how they can enhance it within their own organisations. I outline three key trends that will shape the future of client trust.

 

THE RISE OF ESG

ESG metrics have risen to prominence in recent years, as investors increasingly look at environmental, social and governance factors when assessing risks and opportunities. These metrics have an impact on investor confidence and their propensity to invest; we find that among retail investors, 31% expect ESG investing to result in higher risk-adjusted returns, while 44% are primarily motivated to invest in ESG strategies because they want to express personal values or invest in companies that have a positive impact on society or the environment.

The Trust Study shows us that ESG is stimulating confidence more broadly. Of those surveyed, 78% of institutional investors said the growth of ESG strategies had improved their trust in financial services. 100% of this group expressed an interest in ESG investing strategies, as did 77% of retail investors.

There are also different priorities within ESG strategies, and our study found a clear divide between which issues were top of mind for retail investors compared to institutional investors. Retail investors were more focused on investments that tackled climate change and clean energy use, while institutional investors placed a greater focus on data protection and privacy, and sustainable supply chain management.

What is clear is that the rise of ESG investing is building trust and creating opportunities for new products.

TECHNOLOGY MULTIPLIES TRUST

Technology has the power to democratise finance. In financial services, technological developments have lowered costs and increased access to markets, thereby levelling the playing field. Allowing easy monitoring of investments, digital platforms and apps are empowering more people than ever to engage in investing. For wealth managers, these digital advancements mean an opportunity for improved connection and communication with investors, a strategy that also enhances trust.

The study shows us that the benefits of technology are being felt, with 50% of retail investors and 87% of institutional investors expressing that increased use of technology increases trust in their financial advisers and asset managers, respectively. Technology is also leading to enhanced transparency, with the majority of retail and institutional investors believing that their adviser or investment firms are very transparent.

It’s worth acknowledging here that a taste for technology-based investing varies across age groups. More than 70% of millennials expressed a preference for technology tools to help navigate their investment strategy over a human advisor. Of the over-65s surveyed, however, just 30% expressed the same choice.

 

THE PULL OF PERSONALISATION

How does an investor’s personal connection to their investments manifest? There are two primary ways. The first is to have an adviser who understands you personally, the second is to have investments that achieve your personal objectives and resonate with what you value.

Among retail investors surveyed for the study, 78% expressed a desire for personalised products or services to help them meet their investing needs. Of these, 68% said they’d pay higher fees for this service.

So, what does personalisation actually look like? The study identifies the top three products of interest among retail investors. They are: direct indexing (investment indexes that are tailored to specific needs); impact funds (those that allow investors to pursue strategies designed to achieve specific real-world outcomes); and personalised research (customised for each investor).

When it comes to this last product, it’s worth noting that choosing advisors with shared values is also becoming more significant. Three-quarters of respondents to the survey said having an adviser that shares one’s values is at least somewhat important to them. Another way a personal connection with clients can be established is through a strong brand, and the proportion of retail investors favouring a brand they can trust over individuals they can count on continues to grow; it reached 55% in the 2022 survey, up from 51% in 2020 and 33% in 2016.

 

TRUST IN THE FUTURE

As the pressure on corporations to demonstrate their trustworthiness increases, investors will also look to financial services to bolster trust. Wealth managers that embrace ESG issues and preferences, enhanced technology tools, and personalisation, can demonstrate their value and build durable client relationships over market cycles.

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Technology

UK Organisations turn to artificial intelligence to fight sophisticated cyberattacks

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New research by cybersecurity expert Mimecast finds that email attacks are becoming more frequent and sophisticated

More and more companies in the UK are using artificial intelligence (AI) and machine learning (ML) to fend off increasingly sophisticated cyber-attacks, according to new research from cybersecurity specialist Mimecast. The research finds that 40% of UK organisations are already using AI or ML in their organisations’ cybersecurity programme, with 30% planning to do so within the next 12 months.

The use of advanced technologies such as AI and ML is in direct response to the growing sophistication of cyberattacks that UK businesses are experiencing. 53% believe that increasingly sophisticated attacks will be their biggest email security challenge in 2022, leading to 80% believing it is at least likely their organisation will suffer a negative business impact from an email-borne attack this year.

 

Growing threat landscape

The research shows that email remains the largest threat vector for UK businesses, with 71% of respondents reporting an increase in the volume of email threats their organisation has faced in the last 12 months. This includes phishing with malicious links or attachments (56%), impersonation fraud or Business Email Compromise (53%), and malicious insiders (43%). However, it isn’t just email attacks that are on the rise, as 90% of UK businesses experienced at least one spoofing attack that uses a lookalike web domain or a clone of their organisation’s website in the last 12 months. The average UK company has experienced 11 of these attacks.

On top of this, employees are also presenting organisations with a very real threat to their cybersecurity. The survey identifies that IT decision makers have relatively low confidence in their colleagues’ cyber awareness , believing that there is a risk of an employee making a serious security risk due to oversharing company information on social media (84%), poor password hygeine (80%), using personal email (80%), or using cloud storage and other shadow IT functionality (81%). When an employee does full victim to an attack, it frequently results in more widespread consequences. 85% of respondents say threats have spread from one infected user to other members of the organisation.

 

AI to the rescue

To overcome this growing threat landscape, more and more UK organisations are turning to advanced technologies to strengthen their cybersecurity position. The 40% of UK organisations that are already using AI as part of their cybersecurity strategy are already seeing a number of benefits, including increased accuracy in terms of threat detection (54%), reduced human error within cybersecurity team (51%), and reduced workload/working hours for cybersecurity team (45%).

Despite these very real benefits, there is the very real danger that many UK organisations will miss out due to a lack of budget dedicated to cybersecurity. The research highlights a clear discrepancy between the amount IT decision makers believe should be spent on cyber resilience and how much budget is actually allocated by business leaders. IT decision makers in the UK believe that 16% of their IT budget should be allocated to cyber, but at the moment they see less than 12% allocated. Missing out on new technology innovations such as AI is identified as the most likely consequence (49%) for organisations where the cybersecurity budget is not as high as respondents believe it should be.

Elaine Lee, AI expert at Mimecast, said: “There is no doubt that cyberattacks are becoming more frequent, as UK businesses adjust to the world of hybrid work. On top of this increase in frequency, we are also seeing a rise in the sophistication of attacks. This is creating a perfect storm and making it more difficult than ever for organisations to keep their businesses secure. With this in mind, it is no surprise to see so many organisations turn to advanced technologies such as AI to bolster their cybersecurity defences. AI solutions can help businesses to automate security processes, ensuring they are better able to fend off attacks, as well as providing their security experts with more time to focus on high-level analyses that require human interaction.”

Lee continued: “Organisations that have yet to invest in AI technologies as part of their cybersecurity strategy should do so. Cyberattacks are going to continue to be a major threat to UK businesses and these businesses need to respond accordingly with sufficient budget. A successful cyberattack has the potential to cause serious ramifications for a business, including both financial and reputational damage. Now is the time to take this threat seriously and get prepared.”

 

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