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11 Cloud Cost Optimization Best Practices

24 Mar 2023

Cloud computing has revolutionized businesses’ operations, providing unprecedented flexibility, scalability, and cost-effectiveness. However, as companies increasingly migrate their workloads to the cloud, the costs can quickly spiral out of control, resulting in unexpected bills and budget overruns. Cloud cost optimization has become critical for businesses of all sizes and requires careful planning, monitoring, and management. It is about finding the right balance between your cloud performance and spending. While cloud platforms offer pay-as-you-go pricing models, unfortunately, they charge you as per your provisioning (orders) and not actual consumption. This fact reveals why optimizing cloud cost is essential.

This blog will explore the best practices (strategies) that can help you optimize your cloud costs without compromising performance or functionality.

Trends to Consider Before Approaching Cloud Cost Optimization

As moving to the cloud is no longer optional for business growth, the rapid acceleration in cloud adoption leads to higher cloud spending.

  • The end-user spending on public cloud is expected to grow by 20.4% from about 410 billion USD in 2021 to approximately 600 billion USD in 2023, with cloud application services being the largest segment, suggests Statista.
  • About 51% (more than half) of IT spending on applications, infrastructure software, business process services, and system infrastructure will transition to the cloud by 2025, says Gartner’s research.
  • Enterprises typically spend 20% more than expected on public-cloud infrastructure, reveals a study by Andreessen Horowitz. The factors leading to this unpredictability of cloud spend include:
    • Cloud waste
    • Increased cloud charges
    • More applications are being delivered with multi-cloud.

The above statistics on cloud spending suggest how optimizing cloud cost has become the need of the hour for businesses. Read on to learn the best practices around how you can optimize cloud costs based on our experience.

11 Cloud Cost Optimization Best Practices

Cloud cost optimization best practices help reduce cloud resource waste, minimize bills, boost visibility, improve performance, and enhance business benefits. They include:

1. Monitor Your Cloud Usage

The first step in cloud cost optimization is to monitor your cloud usage. It will help you identify areas where you can reduce your cloud spending. You can use monitoring tools provided by your cloud provider or third-party tools to monitor your cloud usage. Start by analyzing your cloud investment. You must anticipate the cloud expense based on your jobs and capacity utilization. Identify sections within the bill that exceed your supposed costs. It will help you spot unused and unattached resources.

Identify and remove mismatched cloud resources: One of the top reasons for high cloud bills is overprovisioned or mismatched resources.

Sometimes, after completing a task, your people may turn off a temporary server and terminate the instances to avoid further billing. But they may forget to eliminate the attached storage. So, the cloud keeps billing you for unattached resources no longer in use. You must identify and remove them to optimize cloud spend.

2. Use The Right Pricing Model

Cloud providers offer pricing models such as pay-as-you-go, reserved, and spot instances. Each pricing model has its advantages and disadvantages. It would help to choose the suitable pricing model that suits your business needs.

Define Cloud Cost Metrics and Set Budgets
Cloud optimization is not always about saving costs. It is more about balancing performance, security, compliance, and cost requirements. Each cloud workload or application has its unique needs that vary with time. So, you must identify performance thresholds based on operational metrics for each workload. Cloud cost should be one of the metrics.

Key cloud cost efficiency metrics include:

  • Measuring Uptime for system availability and working.
  • Requests per minute your cloud-based app receives.
  • Memory usage of the cloud environment.
  • CPU utilization measures the computing percentage used for a task.
  • Average time to acknowledge a user request.
  • Latency is the time between user request and response received.
  • Disk usage measures disk volume used on one node.
  • MTBF (Mean time between failure) determines how long a cloud component will work before failing.
  • MTTR (Mean time to repair) finds the time needed to restore services after the failure.

Recognize and Reduce Software License Costs
A significant part of cloud operating costs comprises software licensing. Paying for unneeded licenses or not completely utilizing them increases your cloud costs. Manual processes for managing licenses are complex and risky. You could use AWS License Manager or License Mobility through Software Assurance on Azure to reduce this cloud cost-efficiently.

Set a monthly budget based on your company’s requirements and plan your overall cloud spending. You can use cost management calculators provided by Amazon AWS or Microsoft Azure to set budgets, forecast costs, and much more.

3. Right-Size Your Resources

Another way to optimize your cloud cost optimization strategy is to right-size your resources. You need to ensure that your resources are neither over-provisioned nor under-provisioned. You can use monitoring tools to identify resources that are underutilized or overutilized. You must recognize unused resources. Suppose you are paying for several cloud computing instances, most of which are underutilized. It is a considerable waste of resources. You can combine cloud computing jobs to utilize an instance fully. It will reduce your requirements for instances and cloud costs. Both under and over-provisioning of resources leads to wastages and higher cloud spending.

Regularly assess your resources and adjust them to utilize the optimum size of computing services required. For instance, you could right-size your cloud resources needed for operations, deployment, feature development, customer acquisition, client engagement, etc. Also, determine the types of workloads and resource types required for each workload to optimize your cloud costs.

Activate autoscaling involves automating the scaling up and down of cloud computing resources for your apps in real-time based on web traffic fluctuations and the load on servers. It helps optimize cost while providing steady performance, saving cost, and eliminating manual processes of responding to traffic spikes.

4. Use Serverless Architecture

Serverless computing architecture helps you to reduce costs by allowing you to pay only for your application’s resources rather than idle resources.

5. Consider AWS Reserved Instances (RIs) or Azure Reserved VM Instances (RIs)

Compared to on-demand capacity, you can use equivalent reserved instances and save costs up to 75%. Amazon AWS and Microsoft Azure offer high discounts against a commitment to use their cloud services for a certain period, like one to three years. So, paying for RIs in advance allows you to manage your cloud bills better, especially if you have a steady workload.

6. Benefit from Spot Instances

If you do not want to invest in advance on reserved instances, keep an eye on spot instances that cloud platforms offer on auction. Sometimes, spare computing capacity is available for auction at a reduced price. You can purchase them immediately if the price is right for you.

7. Determine If A Multi-Cloud Or Single-Cloud Strategy Suits You Better

Cloud vendors offer substantial volume discounts to companies crossing specific overall cloud spend thresholds. They provide preferred status and facilities to such organizations. So, a single-cloud strategy could help you with optimizing cloud costs. However, there’s the challenge of vendor lock-in, especially when the services you receive are incompatible with external services.

A multi-cloud strategy helps you get increased availability and Uptime of cloud services. While you avoid vendor lock-in, your administration processes increase due to switching between platforms, network traffic, training staff for handling multiple clouds, etc.

Both these cloud strategies have pros and cons, and you should select the one that meets your business needs.

8. Consider Moving To A Microservices Environment

Using the lift and shift method, you may find migrating from on-premises to the cloud cheaper. It could also bring on-premise inefficiencies to the cloud leading to high bills. Migrating your legacy applications to the microservices-based architecture is a better option. It helps you save both time and money.

9. Minimize Data Transfer Fees

Shifting data across platforms and regions attracts data transfer fees, leading to high cloud expenditures. You can avoid unnecessary data transfers between on-premise and cloud setups. By adjusting your cloud architecture, you can minimize mandatory data transfers. For instance, you can transfer the apps from on-premise to the cloud that regularly derive data from the cloud. You can evaluate which transfer method suits you better depending on your business needs. Physical transfer devices (Azure Data Box, AWS Snowball) or a dedicated network connection service (Azure ExpressRoute, AWS Direct Connect).

10. Restrict Shadow IT Activities

When your employees utilize the company’s cloud resources for personal use, it is called shadow IT. Such practices increase your cloud bills and create security risks. Build a culture of accountability towards cloud spending by educating employees and establishing processes to monitor and control costs. For instance, regular cloud audits, blocking unsanctioned applications, and more.

11. Optimize Cloud Cost At Each SDLC Stage

Your cloud development strategy should include cloud spend optimization considerations. It should be an integral part of your software development lifecycle (SDLC), not an afterthought. You can integrate cloud cost optimization into every step of the SDLC.

  • At the planning stage, reduce unexpected spending by justifying the budget and using cost data to make informed decisions concerning technical debt.
  • The deployment stage is the time to identify any unpredicted expenditures. You can adjust your budget to incorporate such costs here.
  • At the development stage, record costs concerning planned spending and unit costs to make cost-effective architecture decisions.
  • During monitoring, you must reassess your cloud costs by product, feature, team and report operational expenditure. Here, you should check if your ROI (return on investment) aligns with your business goals.

Summing Up

Moving to the cloud is not enough to leverage its benefits. It would help if you optimized cloud cost to achieve your business goals concerning cost and time saving, value addition, performance, security, and compliance. This post provides a comprehensive overview of strategies and techniques that organizations can use to optimize their cloud spending.

As an experienced tech partner providing cloud application development services, we can help you. We enable enterprises to manage and allocate costs, optimize spending, and save money on cloud investments. Our cloud cost optimization services allow you to optimize workloads, help you identify idle and unused resources & promptly update on potential vulnerabilities across cloud environments.

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