Cloud computing is quickly gaining prevalence on the market. That’s hardly surprising - cloud infrastructures have revolutionized the way we manage...
Cloud Cost Optimization: Best Practices and Tools for Cloud Cost Reduction
Gartner predicts that more than half of enterprise IT spending within the application software, infrastructure software, business process services, and system infrastructure markets will transition to the cloud by 2025.
The growth in the cloud computing market has resulted in increased competition among cloud service providers, who have been heavily investing in expanding their offerings and solutions. Consequently, cloud pricing models also got significantly more convoluted. Now every cloud platform has its unique pricing model, each with multiple tiers.
Since cost savings is one of the main reasons that companies decide to migrate from traditional solutions to the cloud, it is important for organizations to understand the full implications of cloud pricing as they scale their cloud infrastructure. It’s imperative to identify, analyze, and implement strategies to optimize cloud costs to maintain a reasonable spending rate while you maximize the value of cloud resources.
This article will explore the business value of optimizing cloud investment, the teams involved in the process, how to embark on a cloud optimization journey, best practices to follow, and the best cloud cost optimization tools available to streamline the process.
In this article:
What is Cloud Cost Optimization?
Cloud Cost Optimization allows businesses to align their cloud spending with actual usage, avoid over-provisioning, and ensure cost transparency across the organization. Moreover, adopting cloud cost optimization strategies allows organizations to achieve better financial visibility and allocate cloud resources efficiently to meet their specific business requirements.
Your bill can get overinflated by unexpected costs like data egress fees, API request charges, and premium support plans. Cloud overspending can also result from over-provisioning or under-utilizing resources.
Cloud Cost Optimization empowers organizations to make data-driven decisions and get better business value from their investment in the cloud.
4 benefits of Cloud Cost Optimization
There’s a range of benefits to be unlocked with cloud cost optimization. These benefits can contribute to financial savings, better control over expenses, and the overall value derived from cloud investments.
By delving into cloud cost optimization, organizations can achieve:
#1 Improved margins
Cloud cost optimization plays a crucial role in improving businesses’ financial performance and profitability and ultimately translates into improved margins.
By analyzing and optimizing cloud usage, companies can identify opportunities to save money, eliminate cloud waste, reduce cloud costs, and make informed decisions about resource allocation. This financial optimization can have a direct impact on your cloud bill, enabling your organization to allocate its resources more efficiently and invest in other areas of its business.
#2 Improved application performance
To optimize cloud costs, start by maximizing the performance of hosted applications. Inefficient practices like memory leaks, suboptimal database queries, unnecessary data transfers, excessive storage usage, or redundant data can drive up cloud expenses.
Cloud environments are less tolerant of poor development practices compared to traditional IT setups. Non-optimized applications often require over-provisioning, allocating more resources than necessary to handle unpredictable patterns and variable workloads.
For cost-aware decision-making in the cloud, businesses must prioritize application optimization. This improves development practices, enhances performance, and boosts user satisfaction. Optimizing applications sets the stage for efficient cloud operations and significant cost savings.
#3 Improved architecture
Applications lacking cloud-native principles fail to fully leverage the scalability and capabilities of cloud environments. Missing features like autoscaling, load balancing, and distributed architectures hinder efficient handling of variable workloads.
Managing monolithic applications on the cloud is challenging and costly. Scaling incurs expenses through resource over-provisioning. Suboptimal database design, such as improper indexing and lack of caching, increases resource consumption.
To reduce cloud costs, businesses break applications into smaller services, optimize databases, adopt efficient storage strategies, minimize data transfers, and improve the overall architecture. These optimizations yield long-term cost savings by aligning applications with the cloud environment.
#4 Improved scaling
As organizations grow, applications face increased server traffic and computing demand. Scaling infrastructure to meet this demand can lead to additional resources and increased cloud waste.
To optimize cloud costs, you can employ automation and self-service capabilities. These automate resource provisioning, deployment, and scaling, enabling rapid and seamless operations. Elasticity facilitates fast scaling without delays, disruptions, or costly inefficiencies.
Moreover, cloud providers offer global infrastructure for geographic expansion. With optimized costs, companies leverage cloud scalability to enter new markets and cater to a broader customer base, scaling their business without financial constraints.
As a software house, we work with cloud ecosystems a lot. We’ve seen the scale of savings that proper cloud optimization can generate. Our general advice is to take the time to closely review what you’re paying for and to always seek a balance between cost efficiency and operational requirements. Leverage robust tools, follow established best practices, but also remember to tailor strategies to your unique needs – because every business, and its cloud usage, is different. COO, ASPER BROTHERS Let's Talk
Where to start with Cloud Cost Optimization?
Beginning your cloud cost optimization process involves several essential steps that will set the stage for maximizing the value of your cloud investments. Here are key actions to get started:
# Review pricing and billing information
Begin by thoroughly understanding your cloud service provider’s pricing models and billing details. Familiarize yourself with the different pricing tiers, instance types, storage options, and any additional charges or discounts. Doing so will help you make informed decisions as you review your current resource usage.
It is also a good idea to consider diversifying your cloud environments instead of relying on a single cloud vendor to benefit from a multi-cloud setup and avoid vendor lock-in.
# Set budgets
Work with your finance teams and external auditors to establish a clear and realistic cloud budget. Determine your spending limits for different cloud services and allocate budgets accordingly. Regularly monitor and track your expenditures to ensure they align with the defined budgets and do not exceed expected spending thresholds.
This practice will allow you to proactively identify any cost overruns and take necessary actions to mitigate them.
# Define other metrics important to business goals
Beyond budgeting, it’s essential to define other metrics that align with your business goals. These may include performance indicators, efficiency measures, or operation benchmarks.
By tracking these metrics alongside cost data, you can gain deeper insights into the correlation between costs and key business outcomes. This information will enable you to make data-driven decisions that optimize both costs and overall performance.
# Allocate cloud costs to stages of software development
Assign costs to development phases such as testing, staging, and production. This practice will give you visibility into the cost distribution across the software development lifecycle and allows you to identify areas where optimization is most needed.
Allocating costs can also help you avoid unnecessary expenses during non-production stages.
# Identify un-utilized resources
Unused and unattached resources can quickly add up to unnecessary costs. Regularly review your cloud infrastructure and identify any instances, storage, or services that are no longer in use or not fully utilized.
Decommissioning or rightsizing these resources can lead to significant cost savings without impacting your operational requirements.
# Identify idle resources
Similar to unused resources, idle resources can also contribute to wasteful spending. Identify instances or services that are constantly running but not actively utilized.
Consider implementing automated schedules or resource management strategies to ensure resources are only active when needed.
# Track cost center spending
Implement a system to track and monitor cost center spending within your organization. Assign cost centers to different teams, projects, or departments, so you can attribute costs accurately and understand the distribution of cloud expenses across the organization.
This transparency enables you to identify areas of high spending, track cost efficiency at the granular level of individual unit costs, and make informed decisions about resource allocation.
Cloud Cost Optimization: Best Practices
To get the most value out of your cloud investments, you need to adhere to certain key strategies that are designed to ensure maximum efficiency and cost savings.
These practices are based on the experience of those who have navigated the complexities of cloud management. They serve as the roadmap to smarter and more efficient cloud usage and provide a proven approach to achieving optimization goals.
- Rightsize the services. Analyze your workload requirements and choose appropriately sized instances or resources to avoid over-provisioning.
- Use savings plans. Take advantage of savings plans offered by cloud providers to commit to usage levels and receive discounted rates.
- Utilize reserved instances. Reserved instances provide significant savings by committing to long-term usage contracts for specific instance types.
- Leverage spot instances. Spot instances offer substantial cost savings for non-critical workloads by utilizing spare capacity at significantly discounted prices.
- Limit data transfer fees. Optimize data transfer between regions or availability zones and reduce costs by minimizing unnecessary data transfers.
- Choose a single or multi-cloud deployment. Evaluate your business needs and choose the most cost-effective deployment model, whether it’s a single cloud provider or a multi-cloud strategy.
- Monitor cost anomalies. Regularly monitor and analyze your overall cloud costs to identify any unusual spikes or anomalies that could indicate inefficiencies or potential cost optimizations.
- Use appropriate storage options. Select the most suitable storage options for your data, such as object storage, block storage, or archival storage, based on performance and cost requirements.
- Identify and minimize software license costs. Review your software licensing agreements and explore options to optimize licensing costs, such as utilizing bring-your-own-license (BYOL) models or considering open-source alternatives.
- Implement a cloud-native design. Design your applications and infrastructure with cloud-native principles to maximize efficiency and scalability while minimizing unnecessary costs.
- Release idle elastic IP addresses. Unused elastic IP addresses can incur costs, so ensure that you release them when they are no longer needed.
- Automate infrastructure rightsizing during provisioning. Implement automated processes to rightsize your infrastructure based on workload demands, ensuring optimal resource allocation.
- Delete unused EBS snapshots. Regularly review and delete unused Amazon Elastic Block Store (EBS) snapshots to free up storage space and reduce costs.
- Purchase instances using savings plans and reserved instances. Commit to long-term usage and purchase instances using savings plans and reserved instances to achieve significant cost savings.
Who should perform Cloud Cost Optimization?
Finding the right team to perform cloud cost optimization is crucial in ensuring effective management of cloud expenses and achieving maximum cost savings.
As cloud environments become increasingly complex, businesses need skilled individuals or teams with a deep understanding of cloud technologies, financial analysis, and optimization strategies. Having such knowledge allows for identifying cost-saving opportunities, analyzing usage patterns, implementing cost-control measures, and continuously monitoring and optimizing cloud spending.
By entrusting the task of cloud cost optimization to a capable team, organizations can achieve the full potential of their cloud investments and drive significant financial benefits.
# In-house teams
Optimizing cloud costs should be a collaborative effort involving various teams within the organization. While the Cloud and DevOps teams typically lead the charge, other teams, such as Engineering, Finance, and Business Operations.
This collective effort ensures a comprehensive approach to cost optimization, considering both technical and business aspects. Engineering teams can focus on optimizing application performance and resource utilization, while Finance teams can provide insights into budget allocation and cost-saving opportunities.
Collaboration among teams fosters a culture of cost-consciousness and ensures that cloud optimization efforts align with overall business objectives.
# External auditors
Engaging an external auditor or consultant specialized in cloud cost optimization can be a valuable option for organizations. These professionals bring expertise in identifying cost-saving opportunities, optimizing resource utilization, and implementing best practices.
An external auditor offers an impartial and objective perspective, helping businesses uncover improvement areas and providing cost optimization recommendations. They can conduct thorough audits, assess cloud usage patterns, look at cost indicators, analyze billing data, and offer tailored strategies to reduce cloud bills while maximizing efficiency.
External auditors also have extensive experience working with various cloud providers and understanding the intricacies of their pricing models, allowing them to identify potential pitfalls and negotiate better terms on behalf of the organization.
Remember that engaging an external auditor is an investment aimed at achieving long-term cost savings, so it’s crucial to thoroughly evaluate a potential auditor’s credentials, experience, and reputation in the field to choose a reliable partner.
Top tools for Cloud Cost Optimization
Amidst the complexity of Cloud Cost Optimization, software tools designed specifically for cloud cost optimization emerge as a significant asset in resource management. They offer detailed insights into cloud usage and suggest cost-saving measures.
Below, we list the best tools available for cloud cost optimization, describe their features, and explain how they can help streamline your cloud cost management strategy.
# AWS Cost Explorer
This tool from Amazon Web Services (AWS) provides a comprehensive view of your AWS costs, allowing you to analyze and visualize your usage patterns, identify cost-saving opportunities, and create custom reports.
# Azure Cost Management
Microsoft Azure’s cost management and billing tool offers insights into your Azure spending, helps you track costs, set budgets, and optimize resource usage to reduce overall expenses.
PerfectScale is a cloud cost optimization tool that offers automated rightsizing recommendations, resource usage insights, and cost optimization strategies for AWS, Azure, and Google Cloud Platform (GCP). It helps businesses optimize their cloud spend based on real-time data.
Kubecost is a cost management tool designed explicitly for Kubernetes environments. It provides detailed cost breakdowns, optimization recommendations, and budget tracking, helping businesses manage and optimize the costs of their containerized workloads.
DoiT is a cloud cost management platform that offers cloud cost intelligence, optimization, and governance features for AWS, GCP, and Azure. It provides real-time cost visibility, helps identify areas for optimization, and offers recommendations to improve cost efficiency.
Harness is a cloud cost optimization platform that helps businesses automate costs, control cloud costs, optimize cloud spend, and manage their cloud resources efficiently. It offers features such as budget tracking, resource optimization, and cost anomaly detection.
Vantage is a cloud cost optimization and management platform that provides insights into cloud spending, helps identify cost-saving opportunities, and offers automated optimization recommendations. It supports multiple cloud providers, including AWS, Azure, and GCP.
Tying it all together
Cloud cost optimization is a crucial aspect of managing cloud expenses and maximizing the value of cloud investments for businesses. By implementing the right strategies and utilizing effective tools, organizations can improve their margins, further optimize costs and resource utilization, and scale their business faster.
It is essential to involve cross-functional teams, set budgets, track costs, and leverage best practices to achieve optimal cloud cost management. Additionally, utilizing tools tailored to your cloud environment can streamline cost analysis, provide valuable insights, and enable proactive cost optimization.
Embracing cloud cost optimization practices empowers businesses to optimize their cloud spending, improve operational efficiency, and stay competitive in today’s cloud-driven landscape.
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