Effective Cloud Spend Optimization - How to Optimize Your Cloud Costs

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With cloud service providers offering more innovative, flexible, and scalable solutions, organizations worldwide are increasingly moving their workloads to the cloud.

As dependency on cloud services and platforms increases exponentially, companies have started to utilize them in abundance, making it challenging to track associated costs due to poor cloud management. Moreover, at least in the initial years, they don’t even think about cloud spend optimization.

Most businesses worldwide struggle with accurate cloud cost allocation because they are unsure what and who drives their cloud spend. In fact, a recent cloud cost intelligence report found that 7 out of 10 companies have no clarity on where exactly their cloud budget is going.

In this blog, we will talk about cloud spend optimization, why it is essential, and some of the best practices that help businesses proactively & effectively optimize cloud spend.

Let us begin with the basics.

What is Cloud Spend Optimization?

Cloud spend optimization is a strategic approach that includes processes and tools to reduce a company's cloud computing costs while maintaining efficiency and performance.

Using this approach, cloud spending can be trimmed to ensure your organization pays only for the services it uses. To optimize cloud spend, you must have a clear and in-depth understanding of your cloud service needs and pricing.

Cloud cost optimization allows the right and most cost-efficient cloud tools and resources to be allocated to each workload or application in your company. It is essentially about balancing required cost, compliance, performance, and security requirements to ensure cloud investments are on par with requirements.

Now, let us understand the need to optimize cloud costs.

The need to optimize cloud spend

Another cloud report by Flexera found that, on average, approximately 32% of their respective cloud spend budgets are wasted by businesses. As organizations increasingly migrate to the cloud, managing and optimizing cloud costs is critical.

Optimizing cloud spend has become a key priority for multiple reasons. Unlike fixed-capacity infrastructure, the public cloud uses a pay-as-you-go model. In this setup, companies tend to spend more with increased cloud resource consumption and usage.

Not monitoring and controlling these costs can escalate cloud bills rapidly, eating into budgets or margins. Without appropriate oversight, a lack of visibility into usage and spending patterns leads to budget overruns.

In many organizations, multiple teams and individuals independently spin up cloud resources, leading to significant waste from unused, underutilized, or duplicate resources. This calls for centralized governance and policy controls to curb overprovisioning.

Cloud spend management is also important for effectively predicting, planning, and controlling cloud budgets and costs. It provides visibility for executives overseeing digital transformation to effectively utilize cloud budgets.

With increasing scrutiny over IT budgets, spend optimization provides controls for responsibly leveraging the public cloud.

Let’s dive into the eight best practices organizations must follow to optimize their cloud spending.

8 Cloud Spend Optimization Best Practices

1. Conduct a cloud audit and identify unused resources

Conducting periodic audits of cloud services and resources to pinpoint and eliminate redundant apps is an effective way of optimizing cloud spend. Audits involve reviewing provisioned assets across a company's cloud environment to remove or right-size resources.

Identify obvious wastage, overprovisioned capacity, duplicate or zombie assets, and test environments left running. Resources that have been unused for more than a month are key cleanup candidates.

Get in touch with application owners and project leads to confirm if flagged assets are still required.

2. Right-size resources for usage

Right-size your cloud resources by ensuring they are neither underutilized nor over-provisioned. This cloud spend optimization practice can be implemented by meticulously identifying underutilized or overutilized services & resources using monitoring tools.

Regularly evaluate your cloud resources and needs, making necessary adjustments to ensure optimal usage. It's crucial to match the size of your cloud resources to suit deployment, operations, customer acquisition, feature development, client engagement, and other aspects.

Identify various workloads and their specific resource requirements to optimize spending in the cloud. An effective approach to adjusting your cloud infrastructure appropriately involves fully automating its management within your CI/CD pipeline.

3. Implement Budgets and Establish Cost Monitoring and governance

A crucial strategy for optimizing cloud spend involves establishing robust budgeting procedures and governance mechanisms to enhance visibility and manage usage and costs effectively. Creating a cloud budget that considers anticipated costs based on the company's requirements, application stack, and scalability plans is essential.

Setting budgets at department/team levels and monitoring overall organizational usage monthly or quarterly cloud spend keeps usage aligned with planned budgets.

The next aspect is establishing cloud access management policies and controls that enable governance. This includes creating separate accounts for development, testing, and production environments.

Implementing approval gates on who can spin up instances or launch new services ensures governance checks before provisioning. Leverage tools like CloudEagle to continuously track service consumption at a granular level. Get visibility into usage trends and costs by resource types, tags, and applications.

4. Choose a Single or Multi-Cloud Deployment

Depending on your requirements, you can opt for either a single or multi-cloud strategy. With a single-cloud strategy, you can optimize cloud spend but must deal with vendor lock-in.

This is an issue if you find out later that the services are incompatible with your needs.

Alternatively, the multi-cloud strategy aids you in avoiding vendor lock-in and increasing the uptime and availability of cloud services.

However, you might have to tackle increased admin processes due to network traffic, training staff, and switching platforms.

Both setups have their pros and cons. Before deciding, you might want to understand the two in-depth and your organizational requirements.

5. Use The Right Pricing Model

Public cloud service providers offer multiple pricing models for subscriptions and instances. You can choose the one that suits your needs and usage profiles.

The core pricing models offered are:

1. Pay as you go

The ‘on-demand’ model is where usage capacity can be scaled up and down dynamically based on real-time consumption. Ideal for applications with short-term and unpredictable demand. However, this one turns out to be the most expensive.

2. Savings Plans

Get discounted flat rates on a per-hour basis but with added flexibility. It comes with committed usage levels without locking into a resource type.

3. Reserved Instances

Best suited for steady-state usage for predictable workloads. Available as 1 to 3-year reservations, trading off upfront commitment.

Choose the suitable pricing model for usage per your application architectures, environments, and hourly usage results, as it will result in better-optimized cost spend.

6. Test the waters with Serverless Architecture

Businesses can dramatically minimize infrastructure costs and administrative overhead by leveraging serverless services. With serverless, you only have to pay for the resources consumed per execution.

Serverless platforms can also be auto-scaled seamlessly based on usage spikes and troughs, eliminating the risk of overprovisioning. It also drastically reduces the operational costs related to admin tasks, like scaling, patching, or uptime management.

Additionally, with serverless architecture, leaner teams can deliver features faster by removing complexity around infrastructure management. They also offer high availability and fault tolerance without additional effort via distributed architecture and replicated instances in different availability zones.

7. Restrict Shadow IT Activities

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When employees use the organization's cloud services or resources for personal use, it is called shadow IT. Cloud bills will inevitably increase when there is unpermitted personal use of cloud resources.

Not only that, but it also puts your organization's infrastructure at security risk.

The following steps can help you curb shadow IT:

• Implementing strong cloud governance and oversight controls deep-rooted in open policies, honest follow-ups, and data analysis.
• Implement policies that mandate governance, security, and procurement reviews before adopting any cloud service.
• Educate teams about your company’s corporate standards. Training can curb adoption only for department-level convenience versus broader needs.
• Set and follow budgets with department heads and watch for any overruns indicating shadow IT sprawls.
• Configure anomaly detection and suspicious instance discovery to spot rare instance types and unknown services that can indicate shadow activity.
• Maintain consolidated visibility into cloud spending through dashboards and drill-downs to spot unusual activity, asset tags, and labels to indicate orphan resources.

8. Automating cloud spend optimization measures

While governance policies and oversight are imperative, depending only on manual techniques has limitations for optimizing cloud spending effectively at scale. This is where automating cloud management & optimization through tools proves significant.

Automation shifts spend optimization from reactive human-led processes to proactive event-driven system-managed processes for consistent enforcement and continuous optimization.

Here’s how you can automate spend optimization:

• Use tools to run daily to gauge savings opportunities from under-utilized resources or idle load balancers and act on their recommendations automatically.
• Set scripts for low-traffic periods to right-size resources and instances to optimal capacity. You can also downsize when needed using the cloud cost management tools.
• Leverage orchestration services for handling tasks, such as shutting down non-production resources after hours and scheduling start/stop workflows, resulting in minimized waste.
• Configure auto-scaling groups that scale instance counts up or down based on metrics, such as CPU utilization or queue depth. This helps in dynamically optimizing capacity as per the current load.
• Ensure you tag resources accurately and map those tags to cloud budgets for setting and receiving usage alerts or controls.

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Optimize Cloud Spend with CloudEagle

CloudEagle is a top-tier SaaS spend management solution developed to help organizations optimize costs & maximize cloud performance. Distinguishing itself from other platforms available, CloudEagle offers a complete array of features designed specifically to streamline and enhance the efficiency of SaaS & cloud spending.

With a critical focus on SaaS cost management, CloudEagle helps organizations achieve up to a 30% reduction in their software spending. Seeking end-to-end visibility into SaaS vendors and aiming for substantial savings on each SaaS application? Look no further than CloudEagle.

When you opt for CloudEagle, you not only facilitate immediate savings in SaaS spend but also get the expertise of cloud professionals dedicated to this endeavor. Moreover, businesses can expect a remarkable 4x return on their investment with CloudEagle.

Usage and Spend visibility

CloudEagle can integrate with your internal systems, and its connectors can directly integrate with your cloud solutions to provide complete visibility into usage and spend.

You can get detailed spend details based on departments and accurate usage insights for each user. This oversight will enable you to identify overutilization or underutilization and make necessary cost-optimization decisions to save on cloud spending.

Automation

As the best practices mentioned, automation is key, and CloudEagle is an automated cloud spend optimization solution. It’ll automatically highlight underutilization or redundancies so you can rationalize your cloud effectively.

License reclamation workflow enables you to automatically deprovision user from cloud applications if their usage is low. You can then harness and reallocate it to another user or right-size it during renegotiations.

Shadow purchases

Shadow purchases lead to unnecessary spending. You can configure proactive alerts using CloudEagle. When it detects a new cloud application entering your system, you will be notified so you can eliminate it at the early stages and prevent budget overruns.

Shadow purchases will also increase the number of duplicate applications in your system, which can escalate your spending. CloudEagle will automatically identify these duplicate applications and alert you so you can eliminate them, rationalize your stack, and keep your spend optimized.

Features of CloudEagle:

• Pinpoint redundant & duplicate apps
• Accurate usage insights
• License reclamation workflows
• 37 Custom spend reports for financial analysis
• Renewal workflows to prevent auto-renewals
• Procurement workflows to streamline SaaS buying
• Price benchmarking data
• Shadow IT detection
• Negotiation assistance/assisted buyers

Conclusion

Managing cloud costs is imperative to ensure businesses derive maximum value from their investments in cloud computing.

By keeping close tabs on cloud usage and spending, finding and fixing waste, putting checks and balances on new services, and automating oversight, companies have optimized their cloud footprint to undergo a true transformation.

Responsible cloud consumption unlocks more business bandwidth to imagine freely and build for the future. Rather than simply focusing on micro-optimizations, it looks at the bigger picture of how cloud platforms enable strategic objectives cost-efficiently.

With just a little diligent governance and a company-wide culture of cloud cost-consciousness, cloud spending can be optimized for the company's overall benefit.

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