Cloud Cost Optimization: Strategies for Managing Cloud Expenses and Maximizing ROI

The promise of cloud computing is efficiency at scale and cost. The last decade saw a transformative shift of organizations towards the cloud. The result? The global spending on cloud computing infrastructure is expected to exceed $1 trillion, a third of which goes to waste. If this trend continues, we will see more than $300 billion of wasted cloud spend by 2028. This is a scary number! So, how can business organizations reduce cloud waste and adopt cloud optimization best practices to realize the full potential of the cloud without the hefty bills?

In this blog, we’ll discuss:

• What is cloud cost optimization?
• Five best strategies for managing cloud expenses and maximizing ROI.

Let’s get started!

What Is Cloud Cost Optimization?

Cloud cost optimization goes beyond cost reduction, maximizing business value at the lowest cost and aligning costs with business goals. Increasing cloud costs can be justified if accompanied by revenue growth, often driven by onboarding more customers or releasing additional features. The goal is to ensure costs correlate with productive and profitable activities, requiring meaningful data, known as cloud cost intelligence. Success or failure in cloud cost optimization hinges on how effectively you utilize this intelligence to make better decisions.

5 Best Strategies for Managing Cloud Expenses and Maximizing ROI

Organizations can manage cloud costs and avoid anticipated overspending by using the below strategies.

1. Get Detailed Information on Cloud Pricing Models

Cloud providers provide various pricing models and service levels to align resources and costs with application needs, availability requirements, and business value. To navigate these options effectively, consider the following strategies:

• Consider savings plan pricing by opting for one- or three-year commitments to access low prices and enhance cost predictability.
• Explore spot instances for last-minute purchases. It is ideal for use cases like processing big data/machine learning workloads, managing distributed databases, and running CI/CD operations.
• Avoid unnecessary data transfers to limit costs associated with data transfer between services and regions.
2. Consider FinOps for Optimizing Cloud Costs

FinOps, a blend of finance and DevOps, is a cloud financial management practice that enhances business value in hybrid and multi-cloud environments. Organizations often adopt a cross-functional FinOps team—comprising members from IT, finance, and engineering—to instill financial accountability in the cloud. FinOps relies on reporting and automation to boost ROI, continually identifying efficiency opportunities and implementing real-time cloud optimizations. Automation ensures that an organization’s cloud infrastructure consistently meets service-level objectives by dynamically adjusting resources.

3. Take Advantages of Reserved Instances

Reserved instances are nothing but prepaid computer instances that offer huge discounts. Organizations can choose an instance type, region, or availability zone and commit to a one or 3-year usage period. In return, most cloud providers grant discounts of up to 75%. Since payment is upfront, meticulous research and planning based on historical instance usage are crucial. AWS also provides Savings Plans programs, offering comparable discounts with greater usage flexibility.

4. Streamline Cloud Spend Optimization through Automation

Identifying, reviewing, and monitoring ongoing rightsizing and cost-optimization opportunities can be time-consuming and labor-intensive. Manual processes often lead to overlooked opportunities. Automation, exemplified by tools like AWS Auto Scaling, provides an efficient solution.

Modern cost platforms enable swift scaling down of resource usage, reducing costs as your application demands fewer resources. Additionally, some tools can automatically terminate EC2 instances based on predefined times or capacity limits. Implementing such measures in real-time and manually can be challenging without compromising performance.

5. Foster a Culture of Cloud Cost-Consciousness

A cloud cost-conscious culture is one in which every cloud user takes ownership of their cloud spending throughout the software development lifecycle( PDLC). Here’s how organizations can integrate cloud cost optimization into the SDLC:

Planning:

• Justify the budget using cost data for informed technical debt decisions and product roadmap planning.
• Reduce unexpected spending and adjust the budget rapidly as needed.

Deployment and Operation:

• Quickly identify unforeseen spending during deployment and operation phases.
• Adjust costs and budgets promptly to maintain financial control.

Design and Build:

• Record data necessary for cost-effective architecture decisions during the design and build stages.
• Inform reports on planned spending and understand the costs of sold goods (unit costs).

Monitoring:

• Reassess costs by team, feature, and product to report operational expenditures and ROI aligned with business initiatives.
• Remember, engineering decisions carry associated costs. Shifting cost optimization left transforms each stage into an opportunity to maximize cloud ROI as soon as possible.

Conclusion

The outlined strategies—detailed pricing awareness, FinOps adoption, leveraging reserved instances, automation, and cultivating a cost-conscious culture—serve as a foundational starting point for technology organizations looking to maximize Return On Investment(ROI) and control expenses. Optimizing cloud costs is imperative for businesses looking to improve their spending and profitability.