5 Best Practices for Cloud Cost Optimization

September 4, 2023

The cloud has taken over the digital landscape, with more organizations ditching their on-premises infrastructure than ever before. Taking advantage of the cloud provides organizations with countless benefits such as low maintenance, automatic scalability, enterprise security, and much more.

But cloud spending can quickly get out of control if not monitored and optimized. According to recent statistics, over 50% of enterprises are struggling with cloud cost management as their biggest problem in 2023. On average, enterprises overspend on their cloud budget by 30%.

Cloud cost monitoring is the process of observing, evaluating and managing the health, performance and availability of cloud-based applications, architecture and services. It uses automated or manual techniques and tools to determine if the cloud environment is performing as expected in real-time and identify issues affecting service availability.

Learn more about the factors that contribute to overspending on the cloud, as well as five strategies to curb them.

Factors that Lead to Overspending on the Cloud

Decentralized Teams

In some organizations, the application development team is siloed from the finance and procurement teams. There is little alignment or communication on cloud spending decisions.

Lack of Visibility

You can’t manage what you can’t measure. If your organization doesn’t have visibility into its cloud spending, it’s difficult to understand where costs can be cut.

Variable Spending

Cloud spend tends to be variable rather than fixed. This means it can be difficult to predict, especially if your organization doesn’t have a clear picture of its cloud usage.

Unlimited Scalability

Instant access to resources enables innovation, as developers are able to instantly start new projects and keep up with rapidly changing business environments. However, unlimited scalability also makes it easy to overprovision cloud resources, without a solid governance strategy.

5 Ways to Optimize Cloud Costs

Leverage Cloud Cost Management Tools

One of the most significant contributors to cloud cost inefficiency is over-provisioned resources. Leveraging tools provided by cloud providers or third-party solutions can help identify underutilized or oversized instances, allowing you to resize or terminate them as needed and eliminate wasteful spending.

Cloud providers offer various tools and dashboards that provide insights into your spending patterns. Additionally, third-party cost management tools can offer more granular insights and recommendations for optimizing costs. These tools can help you rightsize your cloud costs right: identify unused resources, analyze cost trends, and set budget alerts to avoid unexpected overages.

Implement Auto-Scaling and Load Balancing

Auto-scaling enables your infrastructure to automatically adjust resources based on demand. By setting up auto-scaling policies, you can ensure that you have enough resources during peak periods and reduce them during off-peak hours. Additionally, load balancing distributes traffic evenly across multiple instances, optimizing resource utilization and enhancing availability.

Utilize Spot Instances and Reserved Instances

Many cloud providers offer spot instances, which allow you to use spare capacity at a significantly reduced cost. While these instances can be terminated if the capacity is needed elsewhere, they are an excellent option for non-critical workloads. For predictable workloads, reserved instances provide cost savings by committing to a specific instance type for a fixed term. Using spot and reserved instances helps reduce on-demand or unplanned purchasing.

Implement Cloud Governance Policies

Establish clear cloud governance policies within your organization. Define who can provision resources, what types of resources can be provisioned, and for what purposes. Implementing tagging policies can help track resources and their associated costs, making it easier to allocate expenses to specific projects or departments.

Regularly Review and Optimize

Reviewing right-sizing reports generated by native tools on a monthly basis is a good practice to continue to keep cloud costs under control. Organizations should delete and/or downsize underutilized resources identified by the tools. Additionally, setting time aside for weekly or biweekly checks to clean up storage spaces and cleaning up non-production environments after use are good practices.

By following these best practices, you can take control of your cloud spending, reduce costs, and ensure that your cloud resources are used efficiently. Cloud cost optimization is an ongoing process that, when done right, not only saves your organization money but also helps you maximize the benefits of the cloud’s scalability and flexibility. With the right strategies in place, you can fully harness the power of the cloud while keeping your budget in check, allowing your organization to thrive in the digital landscape.

Not sure where to get started? Contact our experts to discuss building a cloud financial management plan for your organization.