The Practical Guide to Cloud Cost Optimization: 15 Best Practices You Must Follow

The cloud’s pay-as-you-go model offers undeniable benefits, but are you maximizing your return on investment (ROI)? Many businesses fall victim to uncontrolled cloud spending fueled by new features, configuration changes, or ongoing test projects. These costs can quickly escalate into millions of dollars annually.

Cloud cost optimization offers a solution. It’s a comprehensive approach that identifies areas of wasteful spending and ensures your cloud resources are allocated effectively. By implementing these strategies, you can optimize your cloud environment for long-term cost savings and improved efficiency.

This blog serves as your guide to understanding the importance of cloud cost optimization. We’ll explore 15 best practices to effectively manage your cloud spending and empower you to achieve optimal ROI in your cloud environment.

Let’s dive in!

What is Cloud Cost Optimization?

Cloud cost optimization is the group of strategies, best practices, or methodologies that empower businesses to maximize the return from the cloud while reducing unnecessary costs.

The primary goal of cloud optimization is to equate the balance between funds invested in the cloud with the actual needs of a business, application, or workload. It’s to align cost, security, and compliance requirements, performance, scalability, and performance on the same platter.

Another purpose is to identify the under and over-utilization of resources, rightsizing and rightly allocating resources, and limiting costs incurred on non or least-required facilities like overprovisioned resources, unused features, or inefficient parts of the architecture.

Cloud cost optimization is also known as a practice that addresses the evolving demands of workloads, fluctuating prices, and cloud service options. At the core, these two things take place in cloud optimization:

1. Strategic utilization Of cloud resources

With the increasing need of cloud computing offers is the ability to provide services to authorized personnel as per the requirements. However, sometimes this convenience leads to overutilization of resources if IT teams are unnecessarily procuring assets more than necessary. What helps the best in this circumstance is strong cloud governance policies and careful planning for the procurement of cloud resources. This can include defining budgets, regularly monitoring expenses, applying discounts while buying resources in bulk, avoiding unnecessary spending, etc.

2. Capacity Management In Cloud Or Rightsizing of Resources

The rapid utilization of cloud resources can cost companies millions. With a lack of proper visibility into resource procurement, teams end up over provisioning cloud assets, leading to unused excessive server and storage capacity. Sometimes, IT teams also forget to deactivate unused resources. This issue can be resolved by constantly tracking resources through cloud management tools and regular optimization evaluation, also referred to as “rightsizing.” This practice ensures that all resources are allocated efficiently to each workload or application and tracks unutilized cloud subscriptions, cutting down unnecessary expenses.

This is an overview of what happens when you enter the process of cloud cost optimization. But does this process get you anything good in return?

Let’s discuss that as well.

Benefits of Cloud Cost Optimization

Working on the cloud and with cloud-based resources isn’t enough to achieve success. Controlling costs while using such resources plays an important role in driving maximum results from the cloud. Cloud cost optimization addresses multiple concerns while providing endless benefits to organizations, leading to optimum cloud performance and security.

Following are some of the most common benefits businesses experience post-cloud cost optimization:

Increased Cost Savings

The first step in cloud cost optimization is to identify products, processes, and people using cloud-based services or assets. It helps in recognizing all the cases where you are spending on the cloud, and by analyzing usage patterns and unused resources, you can eliminate them from cost centers and align spending where it is most required.

Further, while assessing processes and products, you can also spot areas that can be improved with cloud resources and invest there instead of unnecessarily buying resources that do not get you anything. You can refactor the most underutilized or non utilized feature and replace it with something more relevant. This approach not only lowers costs but also helps IT and finance teams with efficient spending, leading to ultimate cost savings.

Enhanced Overall Efficiency

When performed with the right cloud consulting partner, cloud cost optimization can restore efficiency in your workflows, infrastructure, and even people. Cloud experts easily identify underused or idle cloud assets, areas where applications can be optimized, and poorly managed cloud services and eliminate waste.

This proactive management will reduce costs but also align both engineer and FinOps teams to work efficiently with the allocated resources, fostering productivity among systems and teams.

More Strategic Budget Allocation

Budget and cloud cost optimization approaches are strategically correlated. When finance and IT teams sit together to develop and define comprehensive cloud budgets that provide clear visibility into resource usage and costs, finances get sorted. Implementation of expert-recommended cloud optimization strategies allows businesses to forecast cloud expenses in the future, assess historical usage, and make informed decisions about resource allocation.

By aligning costs with business goals, organizations can optimize their cloud spend, ensuring that resources are allocated effectively and efficiently, ultimately leading to better financial planning and strategic budgeting.

Optimized Cloud Performance

Surprisingly, cloud cost optimization also helps restore application performance by ensuring that cloud services are purchased only when they are needed and efficiently allocated and utilized further. The elimination of irrelevant resources empowers businesses to resolve or avoid performance bottlenecks.

Additionally, rightsizing cloud assets in order to align them with workload or application requirements adds more to delivering high-quality services and end-user experiences.

Mitigating the Security Risks

Cloud cost optimization strategies cannot directly contribute to mitigating security-related risks. When you analyze cloud resource usage and eliminate underused or overprovisioned ones, the scope of any cyber threats or attacks surfaces. Optimization of the cloud also opens the way for maximizing resource visibility, where teams can monitor cloud usage and identify potential threats or vulnerabilities.

In such scenarios, Automated cloud provisioning is one of the strategies that help in strengthening the safety measures to reduce the risk of security breaches and provide companies with a secure and reliable infrastructure.

Identification and Correction of Cost Anomalies

It is important for a business to identify and track cost anomalies, and cloud optimization is something that helps by providing real-time visibility into cloud spending patterns. Since companies are using the cloud provided by third-party providers, fluctuation in costs at a certain period of interval is quite common.

By actively tracking these expenditures, you can estimate the possible spikes in the costs as compared to the current usage with historical trends. Once these anomalies are continuously monitored and thresholds are settled for expected costs, cloud cost optimization enables timely alerts and helps organizations take prompt action to control their cloud budget.

Improved Sustainability Through Cloud Solutions

Another benefit of optimizing the cloud is an increase in resilience by even distributing resources across regions as per availability, reducing downtime risks and disruption impact. Not only does this maximize the business continuity span, but it empowers teams with recovery tools like Infrastructure as Code (IaC) for smooth deployment and testing.

Furthermore, approaches like merging unused or less used resources and rightsizing improve sustainability as all the waste and unnecessary energy consumption is balanced, which minimizes the carbon footprints.

We have talked enough about cloud optimization strategies or cloud cost optimization best practices, but what actually are the cloud expert recommendations?

Don’t worry; we have got you covered here.

15 Best Practices Of Cloud Cost optimization: An Expert Curated Guidelines

Here are some hand-picked best practices for cloud cost optimization outlined and practiced by leading cloud advisors:

1. Conduct Multi-Dimensional Cost Analysis

Your organization is complex, and so are the factors that drive your cloud expenses. Just a one-dimensional view won’t help you get the maximum output. In order to define the comprehensive cloud costs, you must drill down data across different sources like billing information to identify high-cost areas, etc. You can also use tagging and cost allocation, monitor usage patterns for each resource allocated, right-size them, and continuously improve.

Real-time monitoring, cost intelligence, and resource-wise budgeting are also recommended to align costs with business goals. This approach helps you get an accurate and actionable view of your entire cloud spend.

2. Review Finances and Set Budgets

Before you control costs for each project, communicate all financial aspects to the related parties, like product leadership, engineering team leads, and executives, to understand cost requirements. Considering the gathered requirements, plan a periodic budget, like monthly or quarterly, for your cloud computing strategy and overall business goals. A well-outlined budget plays an important role in designing the balance between cloud expenditure and cost optimization.

3. Identify unused resources

Unused resources also add a lot to the per-month cloud bills. Identify unattached and unused cloud resources that you are paying for even when they are not in use. There are instances where developers and testers provision a feature or cloud service and forget to close their subscription once their purpose is completed.

Similarly, you might also find some idle cloud resources and providers charging for them, even when not in use. What’s best here is that you can either merge them with any usable resource or get their accounts closed. Additionally, you can take advantage of load balancing, auto-scaling, and on-demand features to expand capacity elastically as required.

4. Perform Rightsizing of resources

Right-sizing is one of the approaches for cloud optimization that allows you to analyze and align resources with the right people and on the right workflow. Performing right-sizing manually might not be the best way to keep in mind the number of resources (databases, storage, memory, graphics, etc.) you are using.

Achieving and maintaining optimal resource sizing will ensure that your performance objectives are being met while minimizing costs. There are plenty of right-sizing tools you can use to align instances and optimize cost and usage. While various tools are available to assist with rightsizing, a lot solely focus on CPU utilization, while others concentrate on memory usage.

To make sure you are finding the correct right-sizing opportunities and their applications, analyze factors like disk I/O Performance and network. This holistic approach can help you make informed decisions about right-sizing your cloud resources, ultimately optimizing your cloud spending and aligning it with your business requirements.

5. Use Savings and Reserved Instances

Cost optimization can also be done through reserved instances and savings plans. While reserved instances offer a decent discount on committing to a certain amount of cloud resource usage, savings plans usually offer lower costs, which can be ideal for teams having flexible and on-demand usage.

This is a good way of saving money, but it is certainly a good way to commit to the consumption of a specific capacity in a given time frame. To avoid overcommitment, align teams to assess the current savings you will need in different scenarios prior to the commitment.

6. Allocate Instances to Resources

For efficient tracking of assigned resources and costs incurred, allocated cloud instances to each one of them. You can use tagging to segregate resources by department, project, or team and then assign cost allocation rules to distribute costs accordingly.

In this way, you can easily discover which areas or teams are consuming a maximum number of resources and re-align them whenever needed in order to save more.

7. Make Rules and Constraints on Rightsized cloud assets

Specifically for right-sized cloud assets, you need to outline all the requirements that are certain to your organization or the individual profiles. You can do so by implementing rules and constraints that ensure all the cloud resources are well-provisioned and used efficiently.

Setting limits on instance types, storage volumes, and network bandwidth helps prevent the over-provisioning of resources. Auto-scaling can also come in handy here to automatically adjust resource capacity depending on the demand, ensuring that costs are aligned with usage.

8. Align Tomorrow’s cost today with the cloud-native design

Many companies out there are still stuck with traditional patterns like migrating to the cloud using the rehosting (simple lift and shift) strategy. This approach transfers your entire setup from on-premises to the cloud as it is, but again, keeping everything the same costs a fortune at times.

Here, in this scenario, you can collaborate with a company offering the best cloud computing consulting services. With the help of their certified cloud advisors, you can get a cloud architecture that optimizes costs from day 1. Rehosting is one of those fast and cost-efficient options, or you can connect with a cloud consultant to find you the most optimum solution that takes care of cost-effective instance types, storage options, and network configurations. Leveraging your cloud maintenance of cloud-native services and cloud-managed services can significantly lower the operational overhead and maintenance costs.

9. Monitor cost anomalies

This is another crucial practice that you can’t miss out on. To track the cost anomalies, utilize the cost management console to set budgets, forecast resource-wise costs, and optimize the overall spending for your cloud infrastructure. These tools are built to identify spending anomalies using machine learning functionality, help the team define benchmarks, and notify you when you exceed expected spending thresholds.

10. Appropriate usage of cloud storage options

When you are working on the cloud, it is highly recommended to select the most cost-effective storage options for each of your workloads. You can use object storage for infrequently accessed data, block storage for frequently accessed data, and archive storage for long-term retention.

Furthermore, a cloud professional should be aligned to design and implement lifecycle policies to move data between storage tiers based on access patterns automatically.

11. Optimize Cloud cost at all stages of SLDC

Cost considerations come into the scene when a product or service is completely developed and rolled out. However, according to experts, cost optimization should be practiced from the beginning of the software development lifecycle.

During the planning phase, ask your teams to justify their budget requirements and utilization plan for cost data usage to make informed decisions related to the product roadmap and technical debt. This helps in minimizing unexpected expenses and allows for swift budget adjustments when necessary.

Similarly, both in the deployment and operational phases, make your team be proactive and quickly identify any unforeseen expenditures and make timely adjustments to manage costs effectively.

In the monitoring phase, you can reevaluate costs by team, product, or feature and provide reports on operational expenses and ROI. It’s important to remember that every engineering decision carries a price. By prioritizing cost optimization early in the process, each stage of development presents an opportunity to enhance your cloud ROI as soon as possible.

12. Automate cloud spend optimization

Automating the cloud spend optimization includes leveraging advanced technologies to ensure all your resources are used efficiently. You can implement rules and policies that automate the provisioning of resources based on demand, scale them down automatically in off-peak season, and shut down the idle ones when not required.

Automating cloud spend optimization can be done through dynamic resource provisioning, resource management, and AI-based recommendation. Automated scaling adjusts allocation based on demand, while machine learning provides an estimate of usage patterns to minimize waste. AI-driven tools analyze data and spot-on inefficiencies to provide actionable insights, with continuous learning improving recommendations over time.

13. Identify and Optimize Software License Cost

Identifying and minimizing software license costs is crucial for cloud cost optimization. You can look for cloud-native and cloud managed services to minimize the dependency on licensed software. Take help from license optimization tools that tracks and manages licenses throughout the organizations.

You can negotiate with the service providers for optimal pricing and terms, looping the factors such as growth projections, usage patters and bundling opportunities. Inform your IT teams to regularly keep tabs on software usage and license requirements to prevent overspending on the cloud resources. Software procurement and retirement policies can be of some help to maintain an efficient software ecosystem.

14. Enable Flexible and Customized Reporting and Analytics

For clear view of cloud assets usage, utilize cloud cost optimization tools for getting flexible and customized reports and dashboards. These tools provide detailed visibility into where you are spending in cloud and help IT teams to analyze their spending patterns and find inefficiencies and do the needful.

These reporting and analytics tools also provide automated recommendations for saving big while continuously monitor and alert teams on the alignment of spending and budgets. By tracking costs against predefined budgets, leaders can make informed decisions, re-consider strategies as needed, and foster a culture of accountability.

15. Make continuous cloud cost optimization an ongoing Practice

Establish a culture of cost optimization for long-term success. Train teams and provide incentives to encourage them on prioritizing cloud cost optimization. Also, you can delegate this responsibility to team or an individual to dedicatedly oversee loopholes and optimize wherever it is possible. Looking forward to the changing business needs, keep reviewing and refining your strategy and check whether there is anything that you need to change in your existing cloud infrastructure.

By making cost optimization a core part of your cloud strategy, you can ensure sustainable growth and maximize the value of your cloud investments.

Future Trends To Look Forward In Cloud Cost Optimization

Cloud cost optimization is one such area where businesses are developing more interest and taking actionable steps to regulate their spending. With such growing interests, we cannot overlook the ever-changing dynamics of cloud and coming trends:

Increasing multi-cloud adoption

Companies are exploring several cloud strategies and adopting them instead of sticking to traditional legacy systems. A multi-cloud strategy is one of them, and it is growing faster than any of them. Not only are professionals experiencing this, but a report from Flexera also shows that 89% of participants are running operations on multi-cloud setups. This trend will emerge the need for intelligent tools that can manage and optimize various cloud services, provide a wholesome view of bifurcated costs spent on each asset, and help teams make smarter calls.

Increased Inclination Towards FinOps Tools and Practices

Do you know that 57% of big companies are already utilizing FinOps tools to keep their multi-cloud strategy and cost well-aligned? And no doubt, in coming times, its significance is going to rise, considering the benefits such as improved financial accountability, increased visibility into different costs, and introducing cost-saving initiatives in multi-cloud environments these organizations are reaping.

Advancement in AI-Driven Cloud Optimization

The rapid advancements in AI-driven cloud optimization have captured the attention of many organizations in 2024, as they are introduced with their immense potential. Recently introduced AI tools hold the capacity to offer smart solutions for real-time cost monitoring, automated resource allocation, and predictive analytics, empowering organizations to manage their cloud costs more effectively.

However, the recent surge in Generation AI technologies has introduced cost prediction uncertainties, necessitating careful planning and monitoring to balance innovation with effective cloud spending management.

Escalating Cloud Storage Spending

In previous years, we have witnessed businesses expanding their cloud storage and relying on storing their data mostly on the cloud, which is significantly impacting its pricing, taking it to the top of the graph. With the increase in cost, the speed of budget exhaustion also increases, putting companies in a tougher spot than ever. It’s high time companies started prioritizing their cloud expenses by re-aligning data storage strategies and optimizing their cloud optimization strategies whenever the cloud resources prices fluctuate and go against it.

Growing Focus Towards Cloud Sustainability

Sustainability also takes up space on the center stage. More organizations are going towards cloud sustainability and have seen adopting tools to reduce/eliminate carbon footprint. Not only are they moving towards technological advancements, but they are also focusing on the well-being of the surrounding environment. Research from IDC says 85% of organizations have already included sustainability goals that are comprised of cloud optimization.

The Final Words

Cloud cost optimization isn’t a one-time thing, but more of a continuous process. From the beginning of the software development process till the current date, cloud costs can be taken under control if your IT teams are exhausting the budget. It’s more of a collaborative efforts that requires input from across the organization, not just the IT department. Regular cost assessments and strategic adjustments are suggested to maximizing cloud investment and driving business value.

Cyntexa, as a leading cloud computing consulting services provider, can be your trusted partner in this journey. Our cloud advisors and experienced architects will help you implement these strategies, optimize your cloud infrastructure, and achieve significant cost savings.

Connect with our experts to utilize the maximum power of the cloud without breaking the bank.