Communication Service Providers

Managing Hidden Costs in Cloud and Telecom Operations

The telecom industry has undergone a dramatic transformation, shifting from infrastructure with physically dedicated, highly customised, and on-premises systems to the scalable, dynamic world of cloud computing. This evolution was driven by the inherent limitations of traditional infrastructure, which proved siloed, expensive, and ill-equipped to handle the weight of skyrocketing data traffic, the burgeoning IoT landscape, and the competitive onslaught of over-the-top (OTT) players. Cloud computing emerged as the answer, offering a pathway to address these mounting challenges.

Embracing cloud solutions has empowered telecom companies to enhance their agility and scalability, enabling them to rapidly adjust resources to meet fluctuating demands. The pay-as-you-go model and reduced hardware needs have also led to significant reductions in both capital expenditure and operational costs. Also, this shift has streamlined operations, improved service quality, and paved the way for innovative offerings like cloud gaming and edge computing. In short, cloud computing has positioned telecom companies to better serve their customers, compete effectively in a dynamic market, and unlock new avenues for growth and innovation.

However, the cloud's allure should not overshadow potential pitfalls. Telecom companies must be wary of hidden costs that can quickly accumulate, exceeding initial budget projections and creating substantial financial strain. Such cost overruns can have a cascading effect, negatively impacting other essential telecom operations.

The silent drain on cloud and telecom budgets

The most insidious hidden costs in cloud and telecom operations often stem from:

• Data transfer
  • Inter-region data movement costs that aren't immediately visible in basic pricing
  • Egress charges when data transfers occur across regional boundaries
  • API call costs that accumulate over time
  • Content Delivery Network (CDN) usage spikes


• Resource inefficiencies
  • Overprovisioned instances and unused reserved capacity
  • Zombie resources that remain active but unused
  • Shadow IT implementations creating duplicate services
  • Improper instance sizing leading to waste


• Integration and management overhead
  • Multiple vendor management costs
  • Integration between different cloud services
  • Training and certification requirements for staff
  • Additional monitoring and management tools

Hidden costs are a common problem: nearly half of all telecom contracts do not align with actual service usage, resulting in wasted resources and inflated costs. This inefficiency is made worse by telecom companies typically wasting an additional 15-20% of their budgets on services that are inactive or underused—think dormant phone lines and unused data plans.

Maximising your cloud ROI

Organisations could potentially save 10-30% of their total telecom expenses by adopting a streamlined telecom expense management (TEM) strategy. This involves a multi-faceted approach, touching everything from infrastructure management to application design. Let us examine key infrastructure optimisation strategies.

• Infrastructure optimisation
  • Auto-scale: Scale policies (based on metrics such as CPU, memory, and request volumes), use machine learning for predictive scaling (particularly during high-traffic events), and establish separate policies for different application tiers (front-end, middle-tier and back-end ) with suitable cool-down periods to align resource allocation with actual demand.
  • Use spot instances: Utilise spot instances for interruptible, non-critical workloads like batch processing or testing, and implement spot fleets across different instance types and locations to maintain capacity while optimising costs.
  • Leverage reserved instances (RIs): Analyse usage patterns of predictable workloads to identify consistent baseline resource needs, and choose the appropriate RI term (1-year or 3-year) based on your confidence in long-term requirements for flexibility to change instance types as your needs evolve.


• Data management
  • Apply tiered storage: Automate data movement between storage tiers based on access frequency. Balance performance requirements with cost optimisation.
  • Optimise data transfer path: Place data near compute resources, use regional endpoints, implement efficient replication, use CDNs, and schedule large transfers during off-peak periods to minimise cross-region traffic.
  • Cache: Implement multi-layer caching strategies for frequently accessed data from application to browser level. Use read replicas for databases and monitor cache effectiveness.
  • Compress data: Apply appropriate compression methods for different data types and transfer scenarios to balance compression benefits against computational overhead.
  
  
• Architecture Improvements
  • Design for cloud-native operations: Use infrastructure as code (IaC), managed services, and horizontal scaling. Implement proper service discovery and monitoring to create applications that are truly optimised for the cloud.
  • Implement microservices: Optimise resource utilisation through proper service boundaries and efficient communication patterns. Use container orchestration for simplified management of these distributed systems.
  • Use serverless architectures: Implement computing for event-driven applications, carefully manage timeout settings, concurrency limits, and cold starts, and utilise step functions for complex workflows–to minimize operational overhead
  • Optimise application code: Regularly profile performance to identify bottlenecks, optimise database queries and indexing strategies, implement efficient API calls, and align instance types with workload requirements.

The verdict: Smart spending is the silver lining

In conclusion, while cloud computing offers telecom companies significant opportunities for agility, scalability, and cost savings, it also introduces potential pitfalls in the form of hidden costs and inefficiencies.

To fully capitalise on the benefits of the cloud, telecom companies must adopt robust cost optimisation strategies for managing expenses, optimising infrastructure, and improving data management. By implementing cost-saving measures such as streamlined telecom expense management (TEM), intelligent scaling, and more efficient resource allocation, companies can reduce waste and maximise their return on investment. Ultimately, a proactive approach to cloud optimisation will enable telecom organisations to thrive in a competitive market, serving their customers better while driving growth and innovation.

How can Infosys BPM help?

Take control of your telecom and cloud spending and unlock significant savings with our Cloud and Telecom Expense Management Solution (CTEMS). We address key challenges: limited spend visibility, complex cloud pricing, manual processes, vendor errors, and inventory management. Benefit from improved business performance, operational efficiency, financial management, and automation.