Cloud cost optimization: 8 best practices to reduce your cloud bills

What is cloud cost optimization?

Cloud cost optimization is extracting maximum value from cloud investments and rightsizing your cloud expenses without compromising your usage, performance, and efficiency. 

With cloud applications and services dominating every corner of a business, it’s easier to have spiked bills with preventable expenses. It’s assumed that 32% of cloud expenses of organizations are a wastage that could have been avoided, which brings us to the topic of why cloud cost reduction is important.

Here is what your cloud optimization strategy will focus:

• Identify unused, unwanted, and unmanaged resources.

• Rightsizing workloads. 

• Use cloud cost management tools to monitor spending and make it transparent.

• Establish cross-collaboration across IT, finance, and asset management teams.

Cloud cost optimization benefits

Cloud cost optimization has many other benefits to offer other than money savings. 

Avoid billing surprises  

Pay-as-you-go models require careful planning and management. Else you will lose track of spending and be surprised when the billing arrives. The consequences are unsurmountable for large organizations with way too many cloud resources. By optimizing cloud costs, you can prevent any possible overruns and unnecessary expenditures. 

Reduced cloud expenses lead the way for more innovations

By reducing and right-sizing IT spending, your company could focus more on new innovative technologies that help in growth and automation. Results? Development of new products and services or improvements in existing processes.

Smooth scalability

Controlling cloud costs during nascent stages give you a control when demand for cloud services increases within your organization. It also gives you a way to experiment and find the best ways to control costs utilizing capacity from multiple providers.

Finance and accounting transparency

Financial governance matter a lot to growing organizations. With proper cloud management practices, you can not only control your expenditure but have a clear view of where and how your money is spent.

Seven cloud cost optimization best practices

By doing the following, you could reduce and optimize cloud costs and keep a tab on its consumption.

1. Turn off unmanaged resources

Right now, there might be untapped and underutilized cloud resources which your IT team might not be fully aware of. It can be any—storage, web servers, virtual machines, databases, etc. The first step is to analyze if they are required and turn them off and cut off relevant expenses. 

• Use a cloud asset inventory like AWS config, Google cloud inventory etc and make a list of your entire cloud assets.

• Once it’s all documented, look for resources that are not tagged, used, or unassigned. For example, an employee might have left or a department might be shut down, but the assigned resources might not be released or decommissioned. 

• Monitor user activity levels of instances and turn off them when not in use, if they are not critical. Most cloud provider offers watch tools or periodic insights where you can check this. Example: Azure insights, AWS cloudwatch, etc.

While the above measures can help CIOs optimize cloud costs, there is one more that can be more efficient. It is educating users about cloud consumption and setting up real-time metrics.

2. Re-alter your cloud budget

Cloud optimization strategies also require a little going back to set things straight. One of that is reviewing your cloud expenses and aligning that with your budget and future expenses. 

If you haven’t set any budgets so far, it’s time to create one. Get records of your past months’ spending for analysis. Take into consideration any rightsizing measures you might employ later.

Estimate the average amount required for each month, quarter, or year. Set spending thresholds and convey the same to respective stakeholders—IT managers, application owners, and end users. 

Certain cloud expense management applications allow setting triggers when overspending or overutilization occurs. The latter might happen more often than planned, so it’s better to engage in root cause analysis when bills shoot up beyond the limit.

3. Autoscaling to manage cloud resources

When you set up cloud infrastructure, you will go typically go for base-line deployment, choosing optimal level of memory, compute, and other resources required to run applications. 

But if your organization faces a constant spike and dip in the cloud demand, this launch configuration may not be the suitable solution. 

Enter autoscaling, an option that allows you to scale up or down cloud computing servers and resources based on the demand.

So, there won’t be any idle resources wasting your money away, and you will pay only for what you use. 

Along with load balancing, you could easily tackle the varying requirements across different instances, distributing them evenly without overwhelming one cloud instance all alone. So under any circumstance, your computing requirements are covered, allowing you to handle traffic spikes and downtimes easily. 

Check your cloud providers’ documentation on how to enable autoscaling option or talk to a certified cloud architect who can help you set this up.

4. Single-cloud or multi-cloud? Choose wisely

Single cloud is when you are dependent on one cloud provider like AWS, GCP, Azure, etc. Multi-cloud is when you go for two or more cloud providers and get your infrastructure curated to meet your specific needs. Many organizations prefer multi-cloud strategies to sustain their global ecosystem and manage their varying workloads across different locations.

Choosing multi-cloud certainly has many other advantages too. 

• Every cloud providers plans and offerings are different. By going for a multi-cloud strategy, you can get the best value for your investment. You could take advantage of the varied pricing model, choosing the most cost-effective bundle out of each provider.

• You can dodge heavy bullets like vendor lock-ins as your entire workload isn’t dependent on one provider.

• Reliability and disaster recovery are covered with multi-cloud strategies.

More than all, the ability to choose the right cost-effective option for each workload tops all. You could engage on detailed negotiations, leverage discounts from multiple vendors, and choose custom computing that fit your needs. 

5. Rely on real-time analytics

Continous cloud cost optimization require regular monitoring of expenses. Does this mean going over the billing from cloud providers? It takes more than mere cloud cost management. 

You should tap into detailed insights on cloud consumption and analytics. Every cloud provider allows you to access this information in the form of monthly reports and live dashboards. Through regular monitoring, you can find out any anomalies beforehand and ensure that spending doesn’t crosses the predefined threshold.

Combine real-time cloud analytics with heatmaps to elevate your optimization efforts. Heatmaps show you detailed visualizations demonstrating peaks and troughs of your cloud consumption. Based on what you identify, you could turn off resources running unnecessarily.

6. Pick the right storage

Cloud isn’t the ultimate storage solution for your organizational data. There are multiple factors that decide which option is the right one - cloud, on-premise, or a hybrid approach. 

Cloud storage promises accessibility, agility, and scalability. But that doesn’t mean your entire data should be stored on cloud. For instance, if your business deals with a lot of hot data that you must be readily available for access, it can be stored and accessed via cloud storage with high resources and computational capabilities. But, there are relatively cheaper options available too, ideal for cold data storage. 

If your organization deals with smaller data volumes that might not scale in near real time, on-premise or NAS storage is more appropriate.

Also, compare the upfront costs needed for on-premise storage to subscription-based costs for cloud storage. 

7. Utilize reserved instances (RI)

Cloud service providers offer billing discounts on any new instances you purchase under BI billing basis. You could avail a discount of 20 to 75% on your hourly cloud bill depending on the provider, location, storage and compute resources purchased, etc.

By choosing RI, you will be committing to using a particular amount of cloud usage over a specified period. For this agreed time period, your cloud costs pricing will not be based on on-demand usage and the new discounted pricing will be applied. You must be aware of your cloud requirements, even though providers allow you to flexibly scale up or down.

Many companies align their cloud budgeting with cloud expenses better with the help of reserved instances. This helps them significantly reduce their cloud expenses while meeting IT objectives.

Conclusion

We covered the most important aspects of cloud cost optimization and management. But there are tons of other practices and measures that a right cloud architect could spot and suggest for your organization. Our data engineering team has the right expertise up their sleeves, doing this for scaleups and enterprises, saving a lot and reducing the stress CIOs go through while meticulously planning their cloud strategies. 

We get how overwhelming you feel right now, pointing out noticeable spikes in your cloud bills. Book a call with one of our cloud strategists and see what you can do to minimize this.