Cloud Cost Management: Purpose, Advantages, and Best Practices

Traditional on-premises setup allows companies to know what they’re spending on infrastructure and resources. The more flexible cloud computing paradigm allows access to a wide range of services and resources, but it can sometimes be difficult to understand in terms of pricing. The pay-per-usage cloud model often makes it difficult to estimate overall cloud costs and to break down the charges for individual items as they are consumed. With more than 70% of all major enterprises and small- and medium-sized businesses (SMBs) having migrated at least some portion of their workloads to the cloud, there is an upsurge in the usage of associated cloud services. This trend creates numerous challenges in controlling cloud costs at an enterprise scale. The ongoing COVID-19 pandemic is further surging cloud adoption. Many industry experts believe that this will continue being an upward trend in the coming years.

Cloud Cost Management Advantages

Defined cloud cost management techniques and procedures can help companies save significant capital. They can also help them to better understand and manage the costs associated with the subscribed cloud services. With increasing usage and growing cloud services, cloud costs are turning more opaque and difficult to track. Several factors such as scaled usage of memory, storage, network traffic, virtual infrastructure, software licenses, web services, and support can account for cloud costs. While public, private, and hybrid cloud infrastructures vary in different ways, companies need to perform intelligent procurement of cloud services for the optimization of cloud usage. 

cut cloud costs

The main reasons for cloud cost management is to save money, control the spending on cloud resources, and maximize usage. Cloud cost optimization can help businesses focus on other essential aspects of business without having to worry about the cost overheads. 

Best Practices for Cloud Cost Management

Cloud Costs Analysis

Establishing visibility on cloud costs is crucial for any business. Companies can rely on their experienced IT staff, outsource to external consultants, or rely on cloud usage monitoring services to find the usage patterns. These cloud services and applications usage patterns can be then analyzed to calculate and perform consolidated cost analysis. These projections can be used to predict future cloud costs based on scalability, increased usage, and additional cloud services. The data generated can also be used by the companies in establishing performance, operational, and usage metrics.  

Application and Service Assessment 

One of the most common mistakes many organizations make in their early phase of cloud migration is a lack of proper application and service assessment. Companies need to invest efforts in coming up with a strategy to access the workloads to be migrated to the cloud. Companies should also leverage the phased migration approach (if applicable) to get a detailed understanding of the cloud costs per application or service. 

If feasible, the infrastructure and operation teams can create an application or service segmentation before migrating to the cloud. Cloud vendors can provide an early estimate of the pre-migration costs. They can also submit a revised statement of work and final price after the application assessment phase is complete. 

Timely Reviews

Performing regular cloud resource and usage audits can be very beneficial in cloud cost control and optimization. Using cost analysis and optimization tools to perform quarterly or half-yearly audits can provide invaluable insights to the company about its cloud usage. This can also help companies to categorize under-utilized resources to potentially drop them and save cloud costs. Major cloud providers such as Amazon, Google, and Microsoft already provide these monitoring tools and dashboards for the users to actively monitor and review the usage. 

Storage and Memory Management

Managing your cloud storage is as important as choosing the right storage type for your cloud instances. Deleting unused storage snapshots, regular data backup management, and usage monitoring can help companies keep their cloud costs in check. Organizations also need to discard useless data to save costs while avoiding clutter in their organizational data. There are several managed tools and services available in the market that can help manage cloud storage and instances. 

Leverage Reserved and Spot Instances

Every cloud vendor provides on-demand instances to help companies keep up with the sudden spike in usage or scalability. While this is a major advantage of using the cloud, it is also costly compared to using reserved or spot instances. While there are potential caveats of using reserved or spot instances, they can save companies up to 90% in costs when deployed and used properly. They can be used to reserve the required instances from their cloud vendor to bring down the costs. Any additional use of resources on top of these reserved or spot instances is an additional charge to the users/companies, making it both cost-effective and on-demand scalable. 

In addition to these best practices and tips, companies can also work on:

  • Defining role-based access management
  • Right-sizing their cloud instances
  • Governance
  • Power scheduling
  • Memory management
  • Automatic scaling
  • Strong firewalls to avoid unwanted traffic

Finally, some other important practices to avoid cloud cost overruns include:

  • Performing cost projections
  • Constant monitoring
  • Careful usage
  • Optimizing storage 

Exceeding the cloud budget is one of the major problems of the contemporary IT world. IT needs to work hand-in-hand with finance to optimize their cloud costs.

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