What Is Cloud Cost Optimization?
Cloud cost optimization is the practice of selecting and allocating the appropriate cloud resources for your application or workload. You achieve efficiency when you balance workload performance, cost, and compliance by optimizing infrastructure in real time.
According to research from Hashicorp, over a third of organizations surveyed have an annual cloud computing budget of over $2 million. At the same time, 51% said cloud cost is a concern for them, 39% said their organization spent too much in the cloud in the past year, and respondents estimated that as much as 20% of their cloud spend is wasted.
Every application and workload has unique infrastructure requirements, which can change over time. Traditionally, cloud operations teams would establish baseline performance using their experience or domain knowledge, and in this way, choose the resources for their workloads. Today, teams can use automated tools to optimize any workload and match it automatically to cloud resources.
In this article:
- The Importance and Benefits of Cloud Cost Optimization
- 8 Best Practices and Strategies for Cloud Cost Optimization
- Establish an Understanding of Cloud Usage Patterns
- Use Auto Scaling
- Use Cloud Optimization Tools to Analyze Resource Usage
- Choose Between Single-cloud vs. Multi-cloud Architecture
- Reduce Data Transfer Costs
- Avoid Cloud Sprawl
- Tag Cloud Assets and Infrastructure
- Leverage a Continuous Optimization Solution
The Importance and Benefits of Cloud Cost Optimization
Understand Your Cloud Costs
Understanding your cloud costs can help you make more informed decisions about your cloud deployments. For instance, by identifying the peak times of usage, you can adjust your resource allocation to ensure that you’re not overpaying for resources you don’t need. Moreover, understanding cloud costs can help you forecast future costs and budget more accurately.
Cost savings from cloud cost optimization can be substantial. According to a report by Gartner, companies can save up to 30% on their cloud spend by following best practices for cloud cost optimization. These savings can be reinvested into the business, contributing to overall growth and profitability.
Improve Cloud Performance
Improving cloud performance can lead to better application performance, improved user experience, and increased productivity. For instance, by right-sizing your instances, you can ensure that your applications have the resources they need to run efficiently. Similarly, by eliminating idle resources, you can reduce the risk of performance issues caused by resource contention.
Creating a cost-conscious culture is not just about reducing costs. It’s also about improving operational efficiency and driving business value. When everyone in the organization understands the importance of cost optimization and is committed to achieving it, you can expect to see significant improvements in your cloud operations and overall business performance.
Related content: read our guide to cloud cost management
8 Best Practices and Strategies for Cloud Cost Optimization
Use the following practices to optimize your cloud costs.
1. Establish an Understanding of Cloud Usage Patterns
The first step in a cloud cost optimization strategy is to accurately understand your organization’s IT resource usage requirements and workload patterns. When you understand key factors such as demand patterns and seasonality, it becomes easier to leverage techniques and tools to predict cloud spend.
If your organization is already using the cloud, it may be best to use a cloud cost optimization tool to get a comprehensive picture of your established usage and spending patterns. Some tools are cloud native or vendor-specific, while other third-party solutions can extend your analysis and visualization capabilities.
2. Use Auto Scaling
Cloud services are scalable, allowing you to use more resources when demand spikes and reduce the provisioned resources during low-demand periods. You might use auto scaling to optimize your organization’s cloud spending.
Ensure you always understand your business requirements and verify that your cloud usage matches your needs. You might also use historical reports to view cloud usage and business growth trends —these insights will help you make the appropriate changes.
3. Use Cloud Optimization Tools to Analyze Resource Usage
Data visualization is important for understanding how your organization uses a system. For example, a heatmap makes identifying potential hotspots easier, allowing you to catch them before they disrupt your system.
If you see the system load starting to go in one direction, you can balance and adjust it before it becomes an issue. While viewing raw numbers doesn’t always help, looking at a graph or map can provide quick insights. Administrators often cannot make the necessary adjustments because they can’t view the data in an easy-to-understand format.
4. Choose Between Single-cloud vs. Multi-cloud Architecture
Your organization might opt for a multi-cloud solution because you can easily add new tools when you need them. However, you can also create a flexible single-cloud solution using a powerful infrastructure like AWS or Azure, providing all your organization’s needs.
A managed service provider (MSP) can run various single—and multi-cloud solution scenarios. Sometimes, migrating to a single-cloud solution while optimizing available resources can provide significant savings. Single-cloud solutions typically cost the same and operate more efficiently than multi-cloud solutions.
Many organizations assume that they can’t get everything from a single cloud, but this is untrue. Today, many cloud providers offer numerous add-ons, integrations, and customizations.
5. Reduce Data Transfer Costs
Moving data in and out of public clouds can be expensive. Cloud service providers charge data transfer fees to move data off-platform or between geographic regions. Avoiding unnecessary data transfers helps reduce cloud costs.
Start by evaluating the CSP’s data transfer fees and adjusting your cloud architecture to minimize the number of data transfers required. For instance, an on-premises application that frequently accesses data hosted in the cloud can move to the cloud to eliminate these transfers.
Check the pricing for various data transfer methods designed to secure and accelerate data movement between public clouds and private data centers.
6. Avoid Cloud Sprawl
Cloud sprawl, an uncontrolled proliferation of resources in the cloud, is often the reason for excessive cloud bills. If you don’t eliminate the cloud services you no longer need for your overall strategy, you will continue to pay in vain.
Cloud storage instances often accumulate, especially when disconnected from compute instances or used for data protection. You might ignore the attached storage instance when deleting a cloud server instance. Identify unnecessary storage instances and delete them based on your organization’s data retention policy.
You can minimize the risk of cloud sprawl by using application and infrastructure management and monitoring tools to gain better visibility into cloud environments. Establish corporate policies to determine when and how to decommission unwanted cloud resources —terminate old workloads with auto-provisioning. Carefully track your cloud bills and service agreements to determine if you are paying for services you no longer use.
Related content: Read our guide to cloud server costs
7. Tag Cloud Assets and Infrastructure
Tagging is important, even if you don’t see the need for it now, because it will help you manage your assets when your cloud spending and usage grow. Establishing an asset tagging mechanism later is more difficult.
Tags help you identify the team responsible for all infrastructure assets and help you attribute costs when your bill arrives at the end of the month.
Tagging also helps to decommission resources you no longer need automatically. For example, you can search for the relevant application tag when you stop using a specific application —this lets you view all the resources related to the application, allowing you to delete everything safely.
Most CSPs let you use tags to specify budgets to help control spending and alert you when you approach a specified threshold.
8. Leverage a Continuous Optimization Solution
Managing cloud costs is too complex for humans to do alone. This complexity boils down to three specialties that every IT professional knows but, as a whole, are impossible to master at a deep level.
When cloud services and workload requirements change, a continuous optimization tool can automatically respond to optimization recommendations from infrastructure management tools. It implements the appropriate internal and external policies and controls, applying the changes necessary to keep the infrastructure in an optimized state.
Continuous optimization ensures that your infrastructure matches your workload requirements and application goals.
Like manual workload optimization, continuous optimization helps match the right infrastructure with your workloads, ensures peak application performance, maximizes cloud instances, and prevents unnecessary spending. The difference is that continuous optimization can respond automatically and dynamically make the appropriate changes without manual intervention.