Table of Contents
Table of Contents
When you move your entire infrastructure to a cloud provider, the migration will reap many benefits. And these benefits are not only for large organizations; you will benefit even if you don’t swim in high IT budgets. However, there comes a point when users need to consider the correct way to optimize cloud costs.
However, performance will suffer if you don’t optimize the cloud costs by utilizing the resources correctly. While automating the processes is convenient, cloud bills can soon get messy if you don’t put enough effort into optimizing their costs. As a result, the appropriate allocation of resources will make your team perform better.
This is why your organization can create an unnecessarily huge cloud bill. Higher costs will become inevitable if you stuff more resources than needed. Ultimately, the goal of every organization is to minimize overhead costs and reach its maximum potential.
Now, does cost optimization always lead to success? Yes, optimizing cloud costs have generated more gains than losses. The benefits of cost optimization have been availed by many top performers in the market. Whether it’s SaaS, E-commerce, or the entertainment sector:
In the first quarter of 2021, Zoom’s gross margin grew to 73.9% because it focused on optimizing cloud resources.
Similarly, another famous name in the music streaming industry, Spotify, integrated a tool called Cost Insights to help track cloud expenses. Eventually, it helped them reduce their annual expenditures on the cloud by millions.
In contrast, overutilizing resources and overprovisioning is one dangerous consequence that even tech giants can face. One such example is Pinterest. Their cloud bill once crossed their estimated budget expenses because they overused their resources and didn’t allocate costs properly. Next, they had to pay $20 million to Amazon Web Services (AWS).
Cloud computing solutions can often overwhelm your organization. A report by Gartner showed that cloud costs touched $364,062 by the end of 2022.
Many organizations face this problem when they pay higher for peak loads and have to pay when resources are and load decreases. A recent study from Wall Street Journal shows that Netflix is finding it hard to meet its cloud computing costs. However, the company is trying to cut those costs by decreasing the data copies hosted on AWS.
Here’s an overview of annual public cloud spend as of 2019:
Invest in efficient cloud cost management and save more with real-time visibility.
Cloud cost optimization is a combination of efficiently designing and managing cloud architecture. Optimization ensures that cloud architecture meets the needs of cloud-hosted applications. The process ensures a reduction of cloud costs when your organization selects a cloud provider. Your chosen cloud consulting service is the defining body behind managing your cloud infrastructure.
In short, cloud cost optimization includes a set of techniques, tools, and practices to reach the highest potential of business value. When you optimize cloud costs, you can increase efficiency by identifying and reducing resources that are either mismanaged or in excess.
Further, it gives you the advantage of reserving higher capacity and rightsizing your computing resources for specific workloads.
There’s a correlation between cloud cost management and cost optimization. Cloud cost management is the process of tracking, allocating, and analyzing cloud expenses. And cloud cost optimization uses insights derived from it to maximize business value.
However, cloud cost optimization has much more potential than just reducing costs. It understands the importance of aligning it with your business goals. And if your optimization techniques result in an increased revenue stream, increasing costs won’t do any harm.
For example, cloud cost optimization often includes bringing in new customers or launching new features. These are growth indicators that show your business is flourishing. Sometimes they lead to increased revenue; other times, they can increase costs. But optimization should always be focused on generating income from these indicators.
Higher revenue translates into higher profitability which is the most important goal of cloud cost optimization – the costs should always correlate with the productivity levels. This approach could only work with extracting meaningful data, known as cloud cost intelligence.
Let’s discuss in detail how optimizing cloud costs could become the deal-breaker on your way to success.
Cloud cost optimization is a set of strategies enterprises utilize to cut cloud costs. Besides that, these strategies also ensure that they don’t compromise the efficiency of cloud resources across all the business units. Here are some strategies your organization can adopt:
Design and build efficient cloud environments that can replace the existing system. Cloud-native design is an excellent solution to optimize cloud costs. Every cloud environment has a capability that needs to be leveraged to get the best out of it. For example, auto-scaling gives the benefit of billing the cost of only the active servers.
You also need to get clarity on functional vs. non-functional requirements. For example, adding a DevOps cloud development service enables speedy delivery, but engineers must compromise on cost savings. Hence, a better way to use a combination of tools to control cloud costs without sacrificing performance. It’s a better alternative when launching a new product or service because, more than lower cost, the primary goal of a new addition is performance.
For maximum cost efficiency, organizations should also ensure they manage their operations without many design changes. Two main concepts include resource cleanup and rightsizing resource usage.
Resource cleanup is a strategy where organizations have to monitor resources regularly. Implementing a consistent strategy to allocate resources is a good practice for identifying associated resources. It makes it easier to determine the resources that need to be cleaned up.
Rightsizing is an analysis focusing on using resources better while determining that organizations are not paying for unnecessary ones. Implementing a rightsizing tool notifies you whenever costs exceed a defined budget.
For this, your approach should be to recentralize your IT, and each department should use the same account to operate. You can identify over-provisioned and idle resources. The tool also recommends how to rightsize the usage and decrease costs.
Humans might be extremely skilled in DevOps and cloud computing; however, it’s still quite a complicated task for them to configure exact computations for your cloud cost optimization strategy. On top of that, continuously determining storage and database calculations at the lowest possible cost is essential for delivering optimal performance.
However, smarter solutions to optimize cloud costs are already here. IBM has launched an AI-powered automation tool for cloud optimization Turbonomic that ensures high application performance and cost optimization. It integrates with all major cloud providers for smarter investments.
The difference between single and multi-cloud cloud cost optimization strategies is that the former allows you to leverage discounts on large volumes with a single vendor.
The latter is a little costly, but they don’t let you be dependent on a single vendor by avoiding vendor-lock-in.
Say, for example, that your organization is choosing three vendors with $2,00,000, $2,00,000, and $1,00,000. You might miss reaching the $5,00,000 tier with a single vendor, losing potential discounts. Switching between different vendors is also difficult due to network traffic and training staff expenses.
Each stage of a Software Development Lifecycle (SDLC) requires regular assessment. One of the most effective strategies to reduce costs is to track data and monitor the system through each stage. The four stages of a cloud development service SDLC are planning, designing, development, and monitoring.
Here’s how to reduce costs at every stage:
Plan your budget and track cost data to make informed technical decisions. When you have a roadmap, you can assess and adjust the expected spending accordingly.
As you move to the design stage, you’ll better understand deploying the framework. It involves analysis of key points, their architecture, and their impact on performance.
This stage involves analyzing expenses and recording the ROI to prepare reports on planned spending. It further helps in planning automation and improves efficiency.
The last stage involves monitoring the performance costs by analyzing the performance and defining standard benchmarks. This way, you can assess the team’s costs, products, and features and reduce costs while rectifying errors.
Stop guessing and pull the right strings to balance costs and performance.
As explained earlier, optimizing cloud operations involves learning to utilize resources and eliminate excess. In this section, we’ll elaborate on gaining strategic advantages by understanding the basics of cloud cost optimization. Further, we’ll also discuss a proven strategy for cost reduction through computing and cloud consulting services.
When organizations invest in deploying cloud environments with various cloud development services, some resources will always be unused. These include storage volumes, idle resources like load balancers, etc. It means you might pay unnecessarily extra. Why? Because it’s very human to forget to turn them off when not in use. Sometimes when you bring a server to an end, there’s a high chance you forget to remove its storage. So, there’s a lot of cloud waste, and the issue is that you’ll be paying for it too.
The infrastructure expenses differ from the money you spend onboarding a customer, releasing a software feature, or a project. Other times you also have to calculate cloud costs on your development team, start a new service, or deploy an environment.
Your expenses towards these must be appropriately calculated and segregated based on the resources. It’s the first step toward understanding intelligent utilization to gain a thorough understanding. In turn, it would give you a clear picture of where your cloud costs are higher. Plus, you’ll be able to determine unnecessary costs and ways to cut those costs.
Always make sure to monitor the cloud bill when you use cloud consulting services. It helps identify bottlenecks and the cloud resources you once paid for but are no longer needed or in use. This way, you can eliminate them and lower your running costs. Similarly, sandbox environments also need regular clean-ups of instances not running currently. Lastly, you should prioritize consolidating your computing jobs and removing idle resources.
The next step is to divide the costs spent on each resource. Now that you’ve segregated everything, it becomes clear where to minimize costs and find areas where you need more efficiency. There are two ways to do that:
Identifying anomalies is easier when you have tools to help you set a budget, monitor usage, and estimate future costs. AWS and Microsoft Azure are two powerful cloud providers we use at Moon Technolabs to help scale your business apps and enhance user experience. Such programs will help you find the root cause, prevent unexpected costs, and set benchmarks to notify you when you exceed your budget.
Another way is autoscaling – a feature of cloud consulting services that adjusts your resources automatically based on real-time demand. It’s an excellent way to reduce or increase your resources as needed. It ensures that your resources, like virtual machines, are perfectly balanced depending on different workload levels. Further, you can save time and encourage cost savings and manual work when responding to traffic spikes. It changes the number of servers and automatically activates the required resources.
When you optimize your cloud costs, evaluation of COGS forms an integral part of it. How? Because cost optimization heavily impacts the profit margins of your business. If the COGS is higher, your gross margins would be lower. Such an analysis would help you set benchmarks to compete in the market. Eventually, you can figure out the factors that led to the increased COGS and optimize for higher margins accordingly.
Most organizations go for on-demand pricing models. However, there are more options for them. For example, deploying Reserved Instances (RI) can help you save almost 75% on cloud services. RIs allow you to pay in advance for a specific cloud capacity. So, it can help you save money when you have a balanced workload and don’t anticipate scaling your cloud resources up or down.
When you discover the most interacted cloud consulting services and features, you can generate revenue streams aligning with your business goals. Because cloud cost optimization isn’t only about reducing costs – they also direct how you can refine your marketing efforts. Ultimately, it would help you attract similar types of customers and increase your profits.
You also have to consider cloud security and performance when implementing such changes. Why? Because you have to direct your cost optimization according to the different departments like specific teams, products, and services. It would help you prioritize the areas that deliver maximum positive results.
A mistake most organizations might commit here is moving their infrastructure to a cloud development service from physical resources without bringing any modifications. It might sound cost-conscious, but they are ignoring the inefficiencies that their infrastructure already carries. If they move without modifying them, it can increase cloud spending.
Instead, a better solution would be to move to microservices architecture. This way, they can save funds and time by partially moving some limited resources.
Don’t ignore the inefficiencies and invest in a cost-conscious culture.
Since the remote working model took over, organizations have been using cloud consulting services to increase the performance of their IT infrastructure. However, they must also ensure a proper cost management plan to continue seamless data access. A robust cost management strategy saves excess cloud spending due to unlimited data access. If they don’t invest in it, they might find it difficult to manage the costs associated with:
These problems can arise if they follow a pay-as-you-go pricing model. And they can still increase their cloud spend if they don’t solve these major challenges:
Organizations may fall into the practice of not using the right tools to determine how much they spend on cloud computing.
Moreover, when they don’t have the right tools, hidden costs may arise that they haven’t expected. Hence, the wrong interpretation of cloud bills would lead them to spend more.
The solution to optimizing costs is to make the cloud expense reports accessible to everyone to get a proper idea of how each activity impacts the expenses. Additionally, implement cloud cost optimization tools that provide a holistic view of your organization’s cost centers. Always choose an in-depth visibility feature to gain more insight into cloud expenses. It would help you see and eliminate hidden costs and optimize them with a comprehensive usage report.
Organizations can face a challenge in predicting cloud expense forecasts. When you have many cloud consulting services and resources, chances are high that you may change the action plan for more cost savings. Or there could be some tasks that can increase the costs. It can create inconsistencies in forecasting cloud expenses and can ruin the cost management process. Under-budgeting can exploit an active application, and over-budgeting can force you to pay for unnecessary resources.
A 2021 survey estimated that till 2024, public cloud cost overruns would harm the on-premises infrastructure of almost 60% of organizations. Similarly, another survey shows that almost 82% of organizations with public workloads ran into unnecessary costs. A good solution to adopt here is using a test environment to predict what to use in the future. There are cost management tools that help you analyze the state of resources. Such an analysis works on historical data and trends to give you an overview of expectations.
A cloud environment with improper architecture makes applications vulnerable to crashes and hackers. Even though AWS has released a framework that provides reliable, secure, and scalable workloads, most users don’t implement it accurately. It leads to unauthorized access and data loss. Overprovisioning can often lead to increased costs when organizations exceed expected spending thresholds. When organizations use more cloud resources than needed, instances may run idle when the load is low, resulting in higher costs.
Selecting the right virtual machine to make a well-constructed architecture can change the game massively. However, it’s a complex task because the AWS cloud development service has over 400 instances to help you optimize costs. Each delivers different performances; even an expensive one can’t guarantee higher performance. Here’s a better way:
A cloud-first approach is the best way forward to reduce overprovisioning costs. It allows you to identify underutilized resources, eliminating idle instances and checking for memory leaks.
No matter which cloud provider you choose, billing is a complex issue that further impacts overall cloud cost savings. The finance team alone can’t handle such huge cloud bills. Hence, each department of an organization must understand its invoicing system. Sometimes, the development team directs all their focus on efficiency and forgets about managing cloud costs. There must be transparency in all the charges to avoid billing complexities. Such complexity can also lead to poor negotiation with the cloud providers. Price fluctuations are another major challenge due to complex billing systems affecting cloud cost optimization.
One way to resolve billing issues is by constantly reviewing the statements to understand the underlying causes, like usage patterns, cloud resource configurations, and recent changes. Further, you can utilize allocation and tagging features to track unused resources and expenses across teams, departments, and projects. Then, you can also use monitoring tools to identify cost-saving opportunities and explore pricing options accordingly. Lastly, review your cloud provider’s contracts to check if your current requirements align with the usage patterns.
Cloud cost optimization is a systematic approach to cutting costs and reducing your cloud bills. It requires pulling many levers and managing different processes simultaneously. The key lies in regular monitoring of each aspect of your cloud consulting service to understand and prioritize tasks. But more than everything else, turning off unused resources is necessary to save more on bills. Excess costs are the biggest reasons behind increased cloud bills. The common goal is to increase the efficiency of resources; hence, it’s important to perform rightsizing and understand the amount paid for each.
Our developers and engineers at Moon Technolabs help you move your physical infrastructure to the cloud seamlessly without any hassles. Optimizing cloud costs can drive your business app to achieve target goals that escalate your profit margins and boost revenue streams.
Jayanti Katariya is the CEO of Moon Technolabs, a fast-growing IT solutions provider, with 18+ years of experience in the industry. Passionate about developing creative apps from a young age, he pursued an engineering degree to further this interest. Under his leadership, Moon Technolabs has helped numerous brands establish their online presence and he has also launched an invoicing software that assists businesses to streamline their financial operations.
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