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Author : Pratima G Date : Apr 23, 2024

How to Manage Expenses in the Cloud: 11 Effective Cost Optimization Strategies

Navigating the intricate landscape of cloud resources without a firm grasp on cost management isn’t just a challenge but also a financial risk. 

In our progressively serverless world, organizations must exercise rigorous control over their cloud expenses to ensure top-notch performance, absolute security, and more critically, cost-effectiveness. When used skillfully, cloud cost optimization can be the beacon that illuminates the path to operational efficiency and magnified return on investment. 

But how does one traverse this complex maze of pricing models, services, and best practices? In this exhaustive guide, we’re going to delve into the realm of cloud cost optimization, exploring its fundamental principles and its myriad of benefits. Most importantly, we’ll equip you with more than 10 practical, value-laden best practices to optimize your cloud cost management strategy. 

11 Cloud Cost Optimization Best Practices 

The following best practices can help you optimize the cost of your cloud environment: 

1. Review Pricing and Billing Information 

Cloud vendors provide billing details explaining the cost of cloud services. You can leverage this information to identify high-cost areas and generate savings. Prioritize and analyze high-spend services and workflows. Understanding the cost of the cloud allows you to make informed spending decisions and avoid paying for redundant resources. 

2. Set Budgets 

You can control costs by ensuring all parties know the goals and budgets of each project. Never choose an arbitrary number. Instead, facilitate communication between engineering leaders, product leadership, and executives to understand cost requirements. 

Base requirements according to the planned packaging and delivery of products and features. For example, determine if it is a free trial or enterprise plan. Reference these requirements as tradeoffs during planning and development alongside requirements like speed and resiliency. 

Set a monthly budget to plan your cloud computing strategy. This budget may differ according to your organization’s needs. An established budget is crucial for planning your overall spending and optimizing costs. 

3. Identify Unutilized Resources 

You can easily optimize cloud costs by looking for unattached and unused resources. Administrators and developers sometimes provision a temporary server for a certain task and might forget to de-provision it after the job finishes. Alternatively, an administrator might forget to remove the storage attached to terminated instances. 

These practices result in inflated AWS or Azure bills that charge for resources the organization purchased but no longer uses. A cloud cost optimization strategy helps identify unused and unattached resources and remove them to eliminate unnecessary expenses. 

4. Identify Idle Resources 

Like the above practice, you can optimize cloud costs by finding and consolidating idle computing resources. 

Cloud providers charge for idle resources, even if you do not use them. You can optimize costs by identifying and merging these resources to reduce costs. For example, if your CPU utilization is 10% but the provider charges for 100%, you are wasting a significant amount of computing resources. 

You should find all idle resources and merge them to cut costs. There is no need to save idle resources for events such as busy seasons or traffic spikes. You can leverage cloud features like auto-scaling, load balancing, and on-demand options to scale up capacity as needed. 

5. Right-Size the Services 

Right-sizing enables you to analyze computing services and modify them to the most efficient size. However, it is difficult to manually size instances as there are many possible combinations, as well as memory, graphics, database, storage capacity, and throughput options. 

You can use right-sizing tools to get change recommendations across instance families. It helps reduce cloud costs and optimize cloud usage, helping achieve peak performance from existing resources. 

6. Use Reserved Instances 

Reserved instances (RIs) are prepaid compute instances that offer significant pricing discounts. When purchasing RIs from a cloud provider, you select an instance type and typically a region or availability zone and commit to using the instance for a period of 1 or 3 years. In exchange, most cloud providers offer discounts of up to 75%. Because you pay up front, you must do the research and plan based on your historic instance usage. AWS also offers Savings Plans programs that offer similar discounts but allow more flexible usage. 

7. Use Savings Plans 

The Savings Plans pricing model is flexible and helps you save up to 70% on your AWS usage. This model offers consistently low prices, similar to RIs, based on one-year or three-year commitments. 

8. Leverage Spot Instances 

Unlike Reserved Instances, Spot Instances are available for last-minute purchases. AWS auctions its leftover resources at low prices. However, these instances are unreliable because they are not always available and can sell out quickly. Spot Instances are useful for batch jobs or jobs you can terminate immediately, but not critical, time-consuming ones. 

The table below shows Spot Instance offerings from the leading cloud providers and key service parameter’s, such as the lead time for instance shut down and the maximum time a Spot Instance is allowed to run. 

8. Limit Data Transfer Fees 

Migrating data to and from a public cloud can be expensive. Cloud vendors often charge data egress fees to shift data from their platforms and sometimes between regions. You can reduce cloud costs by avoiding unnecessary data transfers. 

Assess your cloud vendor’s transfer fees and adjust the cloud architecture to minimize the necessary data transfers. For example, you can reduce unnecessary transfers by shifting on-premises applications that frequently access cloud data to the cloud. 

Evaluate the fees of the transfer methods intended to secure and accelerate data transfers between the cloud and private data centers. You can compare the costs of using a dedicated network connection service, like AWS Direct Connect, Google Cloud Interconnect, or Azure ExpressRoute, to the costs of a physical transfer device like AWS Snowball or Azure Data Box. 

9. Choose a Single or Multi-Cloud Deployment 

Multi-cloud deployments help you avoid vendor lock-in and increase availability, but they can be expensive. With a single vendor, you can leverage discounts with large-volume purchases. Switching between different cloud platforms can be a hassle and require extra training. Evaluate whether a single-vendor or multi-cloud environment meets your organization’s needs. 

10. Monitor Cost Anomalies 

Use the Cost Management console to set budgets, forecast AWS costs, and optimize your overall cloud costs. The console includes a Cost Anomaly Detection feature that monitors usage and costs with machine learning to identify spending anomalies. You can set alerts to notify you when you approach or exceed expected spending thresholds. Once you analyze an anomaly’s root cause, you can address it to prevent unexpected costs and stick to your planned budget. 

11. Use Appropriate Storage Options 

Amazon S3 is a widely-used cloud storage option in the cloud. It is user-friendly, easy to integrate with other AWS or external services, and offers almost unlimited storage. However, AWS offers various storage tiers with significantly different costs, so choosing the right tier is important to avoid overspending. You can use S3-Intelligent Tiering to automatically track your usage patterns and select the best storage tier. 

This approach will yield significant cost savings over time and makes cloud cost optimization a key part of your software development cycle. 

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