Cloud Cost Optimization: 13 Strategies to Reduce Cloud Bills

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The price of cloud computing can skyrocket as you use more storage and resources. Most enterprises don’t know how to reduce these expenses because of the complex provider bills and analytics. Thankfully, effective cloud cost optimization and financial management practices can help you avoid chaos.

According to Oleksii Glib, Founder at Acropolium,

“Cloud services (like AWS, Microsoft Azure, and Google Cloud) allow reducing cloud costs by rightsizing and allocating resources. But since most providers don’t want users to spend less, the default tools are rarely enough to reduce cloud bills without sacrificing performance.”

This article will tell you how to adapt the right cost management framework for private, public, and hybrid cloud services. Read until the end to discover 13 strategies that can help you use your resources more efficiently. More than that, you will find real-life examples of how we helped our clients reduce their cloud costs thanks to Acropolium’s 12-year experience working with cloud technologies.

Cloud cost optimization benefits for businesses

Companies should recognize cloud spending optimization as an integral part of their workflow. According to Gartner, nearly all legacy workloads that migrated to the public cloud infrastructures require a proper framework to become cost-effective.

Now, why is it important to focus on the efficient use of cloud resources? Let’s start with the obvious advantage.

Reduced expenses

Companies are increasing their cloud spendings, yet only a few are serious about cost analytics. According to the 2021 Flexera’s State of the Cloud Report, responders note that their cloud expenses go over budget by 24% on average. The same report found that most organizations waste about 30% of their cloud resources due to ineffective practices.

What’s the bottom line? Cloud cost reduction should be one of your top priorities. With the right strategies and tools, companies can rightsize their resources to eliminate waste spendings and reduce IT budgets.

Improved visibility

Cloud cost optimization tools can give companies an in-depth understanding of what happens in their IT environment (including over-provisioned and underutilized resources). Additionally, optimization can help companies gain a cohesive view of every business unit, product, and cost center.

The optimization framework allows companies to measure how their teams use resources. You can then use this data to allocate budget between departments, build strategic initiatives, and help employees understand how to reduce cloud costs.

Fewer security vulnerabilities

Some cost management practices can do more harm than good. For example, blindly turning off unused instances and applications can disrupt your staff’s workflow. This will force them to use independent software (shadow IT) that can compromise your cybersecurity.

But effective cloud cost management won’t frustrate your employees or force them to use unapproved tools. Consequently, cost optimization can reduce the risks of data breaches.

Performance boost

Cloud optimization can help your engineers do their job more efficiently. Major cloud providers offer hundreds of instances, each suited for different workloads. Amazon Web Services (AWS) alone has over 500 tools, which is overwhelming even for expert engineers.

Cloud optimization allows you to leave primary instances your staff needs to get things done and disable the unnecessary ones. This will help your engineers focus their efforts on the right software. On top of that, automated optimization can free IT teams from constantly allocating resources and disabling idle programs, allowing them to take care of more important objectives.

So, how can businesses achieve these advantages with cloud cost reduction? We’ve gathered a devil’s dozen of cloud cost optimization strategies.

13 cloud cost optimization strategies

Effective resource management goes beyond turning off idle resources. In some cases, traditional solutions can limit your productivity, which will only add to your expenses.

Enterprises need to establish a strategic approach to cost management. To achieve this, your organization should gain a comprehensive view of stakeholders, cost centers, applications, and deployed resources.

Now, let’s discuss what strategies are the most effective for cost optimization in cloud computing.

Decide on the stakeholders

Cloud cost optimization requires engaging the key stakeholders. This includes:

• Product owners. Owners can help your teams understand the purpose and business value of each application.
• Managers. They define business KPIs for each application in terms of performance, availability, and expected usage.
• DevOps teams. These teams are responsible for managing resources and keeping costs under control.
• Finance department. The finance dept approves budgets and resource allocations, plus it implements chargeback and showback models.
• Cloud custodians. Some companies create CCOE teams that oversee cloud cost management and provide consultations to other parties.

These stakeholders should collaborate to determine critical metrics and governance policies for managing cost optimization practices.

Choose a pricing model

Cloud vendors usually offer two charging models. In the allocation-based model, providers charge for the provided services regardless of usage. Alternatively, providers can follow the consumption-based model to bill companies based on the resources they’ve utilized.

Most organizations will benefit from the consumption-based model. However, you should design your architecture based on the expected usage to minimize spendings.

How do you predict your resource usage and choose the right model? Here are the factors you should consider:

• Service availability. Providers can offer cheaper plans in exchange for lower uptime.
• Backup. The provider can charge more because it copies your data to multiple locations.
• Embedded software. You need to consider software license fees because they can comprise a significant part of the operating costs.
• Tenancy. Multi-tenant infrastructure is usually more profitable for startups and small businesses, while single-tenant environments have better uptime and security.
• Performance target. CPUs and block storage volumes with higher IOPS will deliver better performance, although at a higher price.

You should also learn about the available discount models. For example, the provider can offer negotiated and programmatic discounts for higher upfront payment or commitment to use their service for an extended time.

In any case, you’ll need to monitor your cloud consumption level for several weeks (or months) to find the optimal pricing model. But how do you track your resource spending?

Tag resources

Major cloud vendors offer native tools to help you classify resources. However, that won’t be enough for effective financial management. That’s why companies should add a tagging (labeling) strategy to track resource spendings across all their projects and accounts.

Tagging means attributing resources with metadata that will appear next to each line item in the provider’s bill. Organizations can customize their tags and apply them to instances and resources on different projects or subscriptions. On top of that, labels don’t create any implications or dependencies on the resources.

We recommend creating a unified dictionary and naming conventions for your tags. This will help you promote these tagging practices during the company’s workshops and meetings.

Doing this will also help you analyze complex cloud bills and allocated costs accordingly. Speaking of costs…

Allocate costs for shared resources

Different departments consume different amounts of resources. So, if you’re using a consumption-based cloud billing model, you’ll need to distribute costs between all parties accurately.

Larger enterprises can encounter difficulties during allocation management if multiple departments share platforms.

For example, an entire organization can use only one network connection for accessing cloud services or train from a single e-learning app.

However, you can determine how to split costs for these resources by tagging nested virtual resources instead of the primary services. Alternatively, you can create multiple copies of a single platform on smaller resource sets, label them, and distribute these sets between departments.

Select an appropriate governance model

Companies need to choose between two governance modes:

• In-the-way governance, where centralized IT collects and manages all requests for cloud services. The cloud interface is hidden from other departments, which eliminates any autonomy.
• On-the-side governance, where departments and specialists can control resource allocation via a native cloud interface according to the governance policies.

The on-the-side approach is proven to be much more scalable for cloud computing environments. Your employees won’t have to wait for the central department to approve every minor change request, greatly improving their productivity. However, on-the-side models require a strong culture of cost awareness in the organization.

Improve accountability

Companies can create dashboards and report generation tools to help managers analyze:

• Regular trending patterns
• Differences between forecasted and actual spendings
• The most and the least spending departments, accounts, and applications
• How changes impact performance

You can use these tools to allocate spendings between your departments and cost centers with chargebacks and showbacks. Doing so will improve the spending culture across your organization, which is effective for reducing cloud bills.

Set up alerts on anomalies

Monitoring and controlling cloud spend can be overwhelming, considering hundreds of metrics. However, you can free up your team’s time by introducing automation tools that will notify you about the deviations from expected performance (normal states).

Imagine that one of your departments spends almost half of its monthly resources during the first week. Well, correctly configured alerts can help you take corrective actions immediately instead of waiting for the provider’s bill.

Dispose of unused resources

Eliminating unused instances is one of the most cost-effective cloud cost optimization strategies. But before considering what to dispose of, organizations need to define rules for the “unused” resources based on several utilization parameters. They include:

• RAM & CPU usage patterns
• Network bandwidth
• Login sessions (Secure Shell and Remote Desktop Protocol)

After you define policies based on these metrics, we recommend looking for the following instances:

• Compute instances. Idle compute instances are common in testing environments and have extremely low usage metrics.
• Storage volumes. You should consider deleting or snapshotting unattached volumes that haven’t been used for a long time.
• Old snapshots. Regularly monitor snapshots and delete those that become inaccessible after long idle periods.
• IP addresses. Some companies preserve IPs for future use, but you should consider releasing them to the provider if they haven’t been associated with any resources for too long.
• PaaS resources. Application PaaS are mapped to underlying compute resources, which is why you should monitor them and decommission those you don’t need.

We recommend setting individual disposal policies for critical resource types if you’re using an on-the-side governance model.

For example, your IT specialists can mark unused application PaaS, after which the stakeholder will approve the deletion.

Schedule application instances

Development and test workloads typically remain idle only for specific hours or days. You can develop a scheduling policy and power them down to optimize cloud costs. According to the 2020 Gartner Research, companies who schedule these instances can save up to 70% of their cloud costs.

Your scheduling policy needs to match the expected usage patterns based on historical data. Alternatively, you can configure the system to turn these instances off when the usage is low.

Companies need to account for developers who work outside of business hours. In that case, you can allow them to turn in these workloads manually and set limitations for how long they can work on them.

But you should know that scheduling isn’t always the best option.

For example, you shouldn’t use this strategy for production workloads and services without data persistence because you can lose the data created between sessions.

Rightsize allocation-based services

Rightsizing means adjusting cloud resources according to the workload demand. When done right, rightsizing is the most effective optimization strategy for public and hybrid clouds.

Here are the most valuable practices you can implement:

• Start rightsizing with the resources that have the highest costs and the lowest demand
• Divide instances into smaller resource sets and distribute the workload between them
• Consider CPU, RAM, network and storage bandwidth before sizing instances down
• Introduce continuous rightsizing (downsize and measure performance in multiple steps to avoid performance drops)

Rightsizing involves the ongoing control of the entire cloud infrastructure. In addition to cloud cost reduction, it can improve the general performance of your apps.

Use different cloud services

The multi-cloud approach is one of the most common strategies adopted by over 92% of enterprises. Why?

Not all of your data requires services with a 99.99% uptime and low latency. So consider using cheaper cloud services to store old data like snapshots and idle applications.

Additionally, some providers offer reasonably priced managed services for file storage. For example, the Amazon S3 Intelligent-Tiering S3 class can automatically redistribute some of your instances to cheaper storage based on access frequency.

Read also: AWS vs. Google Cloud vs. Azure comparison.

Introduce horizontal autoscaling

Companies can configure policies that automatically scale the number of parallel application instances based on the load. For example, you can set autoscaling to be triggered by:

• Infrastructure performance (CPU load, network latency, available memory)
• Middleware components (queue length and database load)
• Schedule-based scaling (expected resource utilization peaks)
• Application-specific metrics (open chat sessions, active video conference members, loaded online shopping carts)

Horizontal autoscaling usually includes limits for available resources, such as a maximum number of provided instances.

Adopt third-party apps

Most public cloud services offer native software for cost optimization and management. For instance, AWS and Microsoft Azure have tools that gather valuable cost metrics. However, native tools often lack functionality and have limited usefulness outside their cloud platforms.

Companies can address gaps in functionality by augmenting the default analytics software with third-party cloud cost optimization tools. According to the 2020 Forrester Cloud Cost Management and Optimization Report, market leaders often use solutions like AppDynamics, New Relic, Dynatrace, and Datadog to help optimize their resources.

But remember!

You should carefully assess each third-party provider before buying the tool. After all, the market is full of similar third-party apps, many of which don’t even come close to the default AWS, Azure, and Google analytics tools.

That’s why it’s an excellent idea to hire an experienced IT company to audit your business and recommend the most effective solutions for cloud governance, performance monitoring, and cost management. A company like Acropolium.

Acropolium’s solution for cost-effective cloud operations

Acropolium is an experienced technology partner with decades of expertise in cloud computing. Our team carried out over 93 successful cloud migrations and reduced cloud bills for many logistics and transportation, healthcare, and HoReCa companies.

Previously, we created a flexible SaaS communication platform for an enterprise medical vendor. Our in-depth audit identified that the client’s storage had access issues and was generating excessive administrative expenses.

Afterward, we adjusted the cloud-based data storage for heavier load capacities and resolved asset-compliant problems. Then, we built a comprehensible computerized maintenance management system for client-to-client and client-vendor communication.

Another of our projects includes proprietary enterprise email migration software for an international technology company.

Our solution had to transfer a large amount of data between different cloud services and on-premise servers.

The result? We developed a migration tool with backup measures and industry-leading data transfer speeds. On top of that, we reduced 46% of IT costs by implementing SSO authorization.

The bottom line

Effective cloud cost reduction is much more than merely disposing of unused resources to control prices. Instead, companies should find the balance between expenses and performance to reduce cloud bills without sacrificing productivity. To achieve that, you need to introduce appropriate practices, apply iterative monitoring, and ensure tight collaboration between stakeholders.

Acropolium can assess your current cloud infrastructure to find cost leaks, anomalies in usage patterns, and performance gaps. Our cloud infrastructure consulting can help you rightsize your resources while improving your efficiency and security. How? Contact us to find out.