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Healthcare Providers Are Wasting Millions on Cloud Hosting

A study by Communications for Research showed that healthcare organizations are now spending $40 billion a year on IT programs, while MarketsandMarkets research indicates $3.73 billion of that budget is spent on cloud services. By 2020, cloud spending is expected to triple and reach $9.5 billion. MedGadget healthcare market research suggests there will be a 21.95 percent CAGR for spending on cloud computing by the healthcare industry by 2019.

More and more healthcare organizations are seeing the benefits that can be gained from switching to cloud computing, especially as a way of reducing IT spending. The public cloud is elastic and capacity can be increased or decreased on demand, but the reality is most organizations use of the cloud involves considerable wastage.

Organizations are paying for the public cloud and are ensuring their instances have sufficient capacity, yet for a lot of the time much of the capacity that is paid for is redundant.

The 2017 Rightscale State of the Cloud Report suggests 46% of enterprises are carefully monitoring cloud use and are rightsizing their resources appropriately, yet 54% of companies are doing nothing to reduce cloud wastage.

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The report shows that only 31% of companies are monitoring their use of the cloud for unused storage volumes, while cloud services are left running for non-production workloads when they are not needed, not only during the weekend and on public holidays but also during the working week. Rightscale’s figures indicate between 30% and 45% of cloud spending is being wasted.

Gartner calculates the size of the public cloud used for infrastructure-as-a-service (IaaS) to be $23 billion a year, while figures from ParkMyCloud, a provider of automated scheduling software for cloud compute resources, suggests $6 billion is being lost each year on cloud waste.

Healthcare organizations are looking for areas where costs can be cut, yet many are failing to consider the amount that is being lost on unnecessary cloud spending. Use of the cloud can be seen as a cost saving measure, yet if cloud resources are not carefully monitored and managed, a considerable amount of money is spent unnecessarily.

Using MarketsandMarkets figures together with average figures for cloud wastage, the healthcare industry is currently losing almost $1.4 billion a year on cloud waste. By 2020, cloud waste will be costing the healthcare industry $3.56 billion a year – money that could be put to much better use.

Healthcare organizations must think carefully about the capacity they really need to avoid unnecessary spending on oversized resources, while use of the cloud should be carefully monitored – to reduce orphaned volume storage for instance.

However, one of the easiest ways to make huge savings is to turn of cloud services when they are not required. While turning off cloud services when they are not in use makes a great deal of sense, many healthcare organizations are failing to address the issue. They are essentially leaving the tap running and failing to turn off the lights when leaving the house, except, the unnecessary expenditure on cloud wastage is considerably higher.

The biggest savings to be gained come from turning off non-production resources. Typically, 44% of spending goes on non-production resources (staging, testing, and development work), yet those resources are used for just under a quarter of the work week and all too often are left running when they are not needed. With charges by the hour, it makes financial sense to only pay for what is needed.

Preventing cloud waste can result in considerable savings, but for that to happen there needs to be a change in thinking. Organizations need to get into the habit of good housekeeping and should removing old machine images, snapshots and old volumes that are no longer needed and ensure what is paid for is actually needed.

One of the biggest elements on any public cloud bill is compute instances and VMs. Typically, these make up around 70% of an average bill, yet this is an area where there are huge savings to be made. Figures from ParkMyCloud indicate savings of around 65% on compute spend are possible, while around 15% is lost on large scale inventory waste.

One way of tackling the compute overspending issue is for DevOps personnel to write scripts to turn off cloud instances when they are not needed; however, while this has potential to result in considerable savings, the cost of writing and maintaining scripts can be more that the costs that those scripts can save.  A better solution would be to use a software solution to automate and schedule cloud instances to reduce cloud wastage. The time spent by DevOps personnel on writing and managing scripts could then be devoted to more productive tasks such as those related to application delivery.

Reducing cloud wastage has potential to save healthcare organizations tens of thousands of dollars, and with IT budgets already stretched, that money could be put to much better use elsewhere.

Author: Steve Alder is the editor-in-chief of HIPAA Journal. Steve is responsible for editorial policy regarding the topics covered on HIPAA Journal. He is a specialist on healthcare industry legal and regulatory affairs, and has several years of experience writing about HIPAA and other related legal topics. Steve has developed a deep understanding of regulatory issues surrounding the use of information technology in the healthcare industry and has written hundreds of articles on HIPAA-related topics.