Ankur Mandal

8 Cloud Spend Optimization Strategies


Ankur Mandal

5 min read

Cloud computing has transformed businesses' operations, delivering unparalleled flexibility, scalability, and cost-effectiveness. However, as more companies transition to the cloud, the expenses can quickly spiral out of control, leading to unforeseen bills and budget overruns. 

Optimizing cloud spend is now crucial for companies of all sizes, necessitating careful planning, monitoring, and management to strike the right balance between performance and expenditure.

One challenge with cloud platforms is that they charge based on provisioning rather than actual consumption, making it imperative to optimize cloud costs. This blog will explore the best strategies to help businesses reduce cloud expenses while maintaining optimal performance and functionality.

Cloud spend optimization or cloud cost optimization refers to effectively managing and controlling expenses related to utilizing cloud computing services. Businesses can access computing resources like storage, processing power, and applications via the Internet on a pay-as-you-go basis. However, these costs can escalate quickly without proper management, leading to budget overruns and efficient resource allocation.

Implementing strategies to optimize resource usage, minimize unnecessary expenses, and maximize the value derived from cloud services is essential for optimizing cloud spending. 

The primary goal of cloud spend optimization is to help organizations achieve their desired outcomes from cloud computing while minimizing costs, enhancing operational efficiency, and maximizing return on investment (ROI).

Why Is Cloud Spend Optimization Important?

Cloud spend optimization helps a business gain competitive advantage and operational excellence in the cloud in the following ways-

  • Efficient cost management: Cloud spend optimization enables organizations to streamline expenses, avoid exceeding budget limits, and enhance the return on cloud investments. Businesses can lower their overall cloud expenditure by efficiently utilizing resources and opting for cost-effective services without compromising performance or capabilities.
  • Budget management: Effective cloud spend optimization empowers organizations to exercise greater control over their cloud budgets. Through tactics such as monitoring usage, enforcing cost-saving policies, and leveraging automation, businesses can ensure that cloud costs align with budgetary constraints and financial objectives.
  • Resource allocation optimization: Optimization allows organizations to efficiently allocate cloud resources, ensuring effective utilization to meet workload demands. This involves appropriately sizing instances, dynamically scaling resources, and reallocating as necessary for optimal performance and waste reduction.
  • Scalability enhancement: Cloud spend optimization supports scalability by enabling organizations to provision and scale resources dynamically in response to evolving workload needs. By optimizing resource usage and costs, businesses can adjust more efficiently to fluctuations in demand, enhancing agility and flexibility.
  • Understanding cloud cost: Having a clear understanding of cloud expenses allows one to make informed decisions that enhance the efficiency of cloud operations. For instance, identifying when cloud resources are most heavily used enables us to adjust allocation accordingly, preventing unnecessary costs from over-provisioning. Moreover, a thorough grasp of cloud costs aids in more precise forecasting and budgeting, enabling one to plan for future expenditures accurately and confidently.
  • Improving cloud performance: Improving cloud performance is crucial for achieving top-notch application functionality, increasing user satisfaction, and enhancing overall productivity. Right-sizing instances exemplify this principle by ensuring that applications receive the best resource allocations for smooth operation. Additionally, eliminating idle resources reduces the risk of performance bottlenecks caused by resource conflicts, strengthening the basis for consistently high-performing cloud environments.
  • Embracing a cost-conscious culture: Establishing a cost-conscious culture within an organization extends far beyond mere cost-cutting. It involves nurturing a mindset centered on efficiency, value creation, and collective responsibility. By ingraining a culture where every team member recognizes the importance of cost optimization and actively participates in achieving it; businesses can reap numerous benefits in their cloud operations and overall business ventures.

Operational efficiency naturally increases when employees at all levels grasp how their actions impact costs and are empowered to make decisions that align with optimization objectives. This heightened awareness leads to more informed choices regarding resource usage, procurement practices, and process enhancements, ultimately reducing unnecessary expenses while maximizing the value derived from cloud services.

Understanding cloud costs involves all expenses incurred while using cloud computing services. This financial environment is complex, influenced by various factors, and constantly changing to reflect industry trends and evolving components. Before understanding the impact of cloud spending, let us look at the components of cloud costs.

  • Infrastructure: Infrastructure, including servers, storage, and networking resources, is the fundamental component necessary to operate cloud services. Organizations must find the right balance between resource needs and infrastructure levels to manage costs effectively.
  • Data transfer: Data transfer between systems and cloud providers often involves charges. Therefore, it is essential to understand cost structures and optimize data transfer processes to minimize expenses.
  • Software licensing: Software licensing fees are a crucial aspect of overall cloud expenses, especially when implementing specialized applications on the cloud. Businesses must carefully review licensing models and fees to fully understand the financial impact of utilizing cloud services.

A thorough comprehension of all the elements contributing to cloud costs enables businesses to make well-informed investment decisions. By strategically analyzing and optimizing resource usage, organizations can effectively manage their expenses related to cloud services and maximize the value they receive from them.

Factors That Impact Cloud Spending

Cloud spending can vary greatly for businesses due to a range of factors. These factors depend on the specific requirements, demands, and operational complexities of each business and the industry in which it operates.

  • Organization size: Cloud resources heavily impact the cost of cloud computing. Different cloud services offer a variety of pricing models, with costs directly linked to the amount and type of resources utilized. As a result, enterprises with high storage needs or frequent use of cloud applications often face higher expenses than those with minimal resource usage.
  • Usage time: The time cloud resources are utilized plays a vital role in cost considerations. Cloud service providers commonly levy charges based on usage duration, leading to potentially higher expenses for businesses requiring constant access to resources than those with sporadic usage needs.
  • Egress fees: Many cloud providers offer free data uploads to their infrastructure, but transferring or downloading data from cloud storage comes with additional "egress" fees. Often disregarded, these fees can quickly add up and serve as a hidden cost of cloud computing. As a result, many businesses neglect to factor in egress fees when calculating their cloud computing expenses, leading to unforeseen expenses. This oversight can limit their ability to switch between different cloud environments seamlessly.
  • Cloud providers: Choosing a cloud provider can significantly impact cloud costs. Each provider has unique pricing models and rates, so it is crucial for IT decision-makers to carefully evaluate and compare options to find the most cost-effective solution for their needs. 

By thoroughly understanding these factors and incorporating them into decision-making, businesses can effectively manage and optimize their cloud expenses, ensuring efficient use of resources and financial responsibility.

Cloud Spend Optimization Strategies

Implement the strategies mentioned below to optimize cloud spending in your business

Identify Idle/Unused And Overprovisioned Storage Resources

When there is a conversation about cloud spend optimization, the majority of organizations only think about compute resource optimization. While computing resources visibility impacts cloud spending, it is important to acknowledge other factors leading to high cloud bills, such as storage resources. Storage is one of the significant contributors to the overall cloud bill. According to a study by Virtana, 94% of the cloud decision-makers said their storage cost is continuously increasing. Additionally, 54% agreed that their storage cost is increasing faster than overall cloud costs. 

Our research of over 100 clients utilizing AWS as their cloud service provider revealed that excessive EBS usage and wastage notably impacted total cloud expenses.

  • The utilization of EBS for root volumes, self-hosted databases, and application disks was as low as 35%, indicating a 65% over-allocation of resources.
  • Despite this over-provisioning, organizations were still experiencing downtime issues.
  • Further examination highlighted the need for the DevOps team to implement three manual touchpoints—monitoring, development, and alerting—utilizing separate tools to manage block storage effectively. This manual process requires considerable time.
  • Certain cloud providers require a minimum downtime of 4 hours for shrinking 1 TB of disk space and 3 hours for disk upgrades.
  • Furthermore, a waiting period of at least 6 hours is necessary before initiating the next scaling process to optimize system performance during peak demand periods.

Due to organizations' challenges, they often prioritize overprovisioning storage resources rather than optimizing them. This choice is frequently viewed as a necessary compromise due to restrictions imposed by Cloud Service Providers (CSPs).

  • The limitations imposed by CSPs necessitate the development of a specialized tool, a task that can be complex and time-consuming, requiring significant DevOps efforts.
  • Relying solely on CSP tools can lead to inefficient and resource-intensive processes, preventing the continuous optimization of storage in daily operations.
  • Cloud service providers, such as AWS, Azure, and GCP, do not have an automated shrinkage process. While manual shrinkage is technically possible, it involves a cumbersome process prone to errors and misconfigurations. Additionally, this manual approach includes stopping instances, creating snapshots, and mounting new volumes, potentially causing downtime.

Organizations are often compelled to overprovision their resources, leading to unnecessary costs. Despite this, organizations typically charge based on the allocated storage resources, regardless of usage. This can result in paying for unused storage resources due to overprovisioning.

Lucidity offers cloud cost automation solutions to address this issue and prevent unexpected expenses. Our Lucidity Storage Audit and Lucidity Block Storage Auto-Scaler are designed to effectively identify and reduce hidden cloud costs.

Automate Discovery Processes with Lucidity Storage Audit

Lucidity Storage Audit is a user-friendly and agentless tool that simplifies storage wastage discovery and improves operational efficiency. By providing valuable insights into EBS health and utilization, this tool helps users optimize expenses and proactively address potential downtime risks.

Lucidity provides easy access to critical information with just a few clicks:

  • Overall Disk Spend: Analyze EBS expenses to improve billing strategies and aim for a 70% cost reduction by identifying areas for optimization and implementing cost-saving measures.
  • Disk Wastage: Identify sources of waste, such as idle volumes and over-provisioning, and develop effective strategies to eliminate them.
  • Disk Downtime Risks: Proactively prevent downtimes, minimize financial losses, and protect your reputation.

The Lucidity Storage Audit provides various advantages:

  • Simplified Process: Automating identification and eliminating manual tasks and complex monitoring tools streamline the audit process, making it more efficient.
  • Comprehensive Information: This service offers thorough insights into EBS health and usage, providing valuable information for cost optimization and downtime prevention. It provides clear visibility into your storage environment.
  • Enhanced Utilization: Utilize the Lucidity Storage Audit to analyze storage usage percentages and disk sizes, enabling informed decision-making. This can lead to improved resource allocation and increased efficiency.

Auto-Scale Block Storage Resources

Auto-scaling is crucial for optimizing EBS costs in AWS by automatically adjusting resources based on workload demands. This feature eliminates manual intervention, ensuring resources scale efficiently without unnecessary provisioning or resource wastage. Lucidity's Block Storage Auto-Scaler is the industry's first autonomous orchestration solution that dynamically adjusts block storage to meet evolving requirements.

The Lucidity Block Storage Auto-Scaler adjusts block storage capacity to meet changing requirements. This feature-rich tool offers:

  • Effortless Deployment: Easily onboard the Lucidity Block Storage Auto-Scaler in just three clicks to streamline your storage management process.
  • Storage Optimization: Seamlessly expand and shrink your EBS to maintain a 75-80% disk utilization without any downtime.
  • Highly Responsive: Respond promptly to traffic or workload spikes by expanding or shrinking storage capacity shorter span, ensuring smooth operations during demand fluctuations.

The Lucidity Block Storage Auto-Scaler provides the following benefits:

benefits of Lucidity for storage optimization over manual process
  • Automated Expansion and Shrinkage: The Lucidity Block Storage Auto-Scaler allows for quick and seamless adjustment of disk scaling within 90 seconds, enabling efficient management of large data volumes.
  • 70% Storage Savings: Our solution automatically adjusts storage resources, reducing costs by 70%, as you only pay for the resources you truly need.
  • Calculate Your Potential Savings: Utilize our ROI Calculator for personalized estimates tailored to your needs. Choose Azure or AWS as a cloud provider, then input monthly or annual spending, disk usage, and growth rate to determine potential savings.
Lucidity ROI calculator for finding storage cost saving opportunities
  • Ensure Continuous Operation: Lucidity Block Storage Auto-Scaler prevents downtime by automatically adjusting storage resources in response to changing demands. Using the "Create Policy" feature, you can customize storage policies for specific scenarios and seamlessly increase resources as required.
custom policy feature for maintaining storage buffer

Implement Multi-Cloud Strategy

When major cloud infrastructure providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP) increase their competitiveness, it is advantageous for users of cloud services. However, fully taking advantage of this competition requires a willingness to operate in a multi-cloud environment. While AWS is typically seen as the frontrunner in advanced services, exploring other providers through negotiation can result in cost savings, especially in cases where advanced services are not essential.

Avoid Cloud Sprawl

Cloud sprawl, the uncontrolled expansion of resources within the cloud environment, frequently increases costs. Neglecting to remove unnecessary cloud services may lead to continuous spending without any significant advantages for the larger business strategy.

One prevalent factor contributing to cloud sprawl is the accumulation of cloud storage instances, especially when they are not linked to computing instances or used for data backup. It is crucial to consider associated storage instances when removing cloud server instances and to identify and delete unnecessary storage instances by the organization's data retention guidelines.

Utilizing tools for managing and monitoring applications and infrastructure can improve visibility into cloud environments, reducing the risks of cloud sprawl. Creating corporate policies for dismantling unnecessary cloud resources, such as retiring old workloads through automated provisioning, is essential. It is also important to closely monitor cloud expenses and service agreements to pinpoint and resolve any instances of paying for unused services. By adopting these strategies, companies can effectively control cloud sprawl and optimize cloud spending.

Measure Performance

When evaluating cloud performance, it is crucial to pinpoint relevant metrics and key performance indicators (KPIs) that align with your organization's objectives. These KPIs should enable us to gauge whether the cloud deployments align with the expectations and deliver the anticipated business value. Consider the following factors when selecting metrics and KPIs:

Performance Metrics:  These metrics are geared towards evaluating the technical performance of your cloud infrastructure and services. Examples include:

  • Response Time: Measure the time cloud services take to respond to requests.
  • Uptime and Availability: Monitor the percentage of time your cloud services are accessible and functioning.
  • Scalability: Assess how effectively the cloud infrastructure can adapt to fluctuations in demand.
  • Throughput: Evaluate the speed at which data is transmitted to and from the cloud environment.

Cost Metrics: Understanding the cost implications of your cloud deployments is essential for optimizing expenditure. Key metrics to consider include:

  • Total Cost of Ownership (TCO): Compare the overall costs of running applications in the cloud versus on-premises.
  • Cost Per Transaction: Calculate the cost associated with each transaction or operation performed in the cloud.
  • Cost Allocation by Service: Break down costs by individual cloud services to identify areas of high expenditure.

Business Metrics: These metrics assess the influence of cloud deployments on business results and efficiency. Some examples include:

  • Revenue Generation: Calculate the revenue earned from applications or services hosted in the cloud.
  • Customer Satisfaction: Measure customer satisfaction levels regarding cloud-hosted applications or services.
  • Time to Market: Analyze the efficiency of delivering new features or products to the market using cloud resources.

Comparative Metrics: When evaluating cloud performance, comparing it against past on-premises performance or industry benchmarks is essential. This allows for a clear assessment of improvement and optimization opportunities.

  • Performance against on-premises benchmarks:
  •  Organizations can effectively identify improvement areas and track progress by comparing cloud performance metrics with historical data from on-premises systems.
  • Industry benchmarks:
  •  Benchmarking cloud performance against industry standards or best practices provides valuable insights into an organization's performance compared to competitors.

By continuously tracking these metrics and KPIs, organizations can evaluate the effectiveness of their cloud deployments, optimize costs, and align with strategic business objectives. Utilizing cloud cost management tools can further enhance this process by identifying areas for improvement and maximizing the value derived from cloud investments.

Consider FinOps Tools

FinOps, or Financial Operations, is a framework that promotes financial responsibility in utilizing cloud services. It requires collaboration among finance, operations, and engineering teams to efficiently manage cloud expenses while maximizing the benefits of cloud investments. The primary objective of FinOps is to empower organizations to monitor and regulate their cloud expenditures to enhance cost-efficiency without compromising performance or innovation.

 Critical components of FinOps typically include:

  • Visibility: Obtain a comprehensive overview of cloud usage and costs throughout the organization. This involves monitoring resource consumption, identifying cost influencers, and understanding the impact of various teams or projects on overall cloud expenditures.
  • Governance: Establishing guidelines, controls, and best practices to oversee cloud usage and expenses. This may involve implementing budget limits, defining resource allocation principles, and ensuring adherence to cost optimization protocols.
  • Optimization: Constantly improve cloud expenditure to strike the optimum balance between cost and performance. This entails pinpointing chances to adjust resource sizes, utilizing discounts and savings plans, and executing cost-effective measures such as instance scheduling or auto-scaling.
  • Collaboration: Cultivate collaboration among finance, operations, and engineering teams to synchronize cloud spending with business objectives and priorities. This encompasses consistent communication, exchange of knowledge and best practices, and mutual decision-making on efforts to optimize costs.

FinOps tools are essential for supporting cloud cost management practices by offering key capabilities like:

  • Cost Visibility and Analysis: These tools aggregate and present cloud cost data, enabling organizations to monitor spending trends, pinpoint cost drivers, and accurately assign costs.
  • Budgeting and Forecasting: These tools allow organizations to establish cloud budgets, predict future expenditures, and compare actual spending with budgeted goals.
  • Cost Allocation and Chargeback: These tools help allocate cloud costs to specific teams, projects, or departments, promoting accountability and transparency in cost distribution.
  • Cost Optimization Recommendations: These tools analyze cloud usage patterns and recommend cost reduction strategies, such as resizing instances, purchasing reserved instances, or implementing cost-efficient storage solutions.
  • Automating Governance and Cost Optimization: Implement tools that automate cost optimization tasks, enforce governance policies, and issue alerts for cost anomalies. By utilizing FinOps techniques and tools, organizations can effectively manage cloud spending, optimize costs, and enhance the value of their cloud investments.

Use the right storage options: Utilizing the appropriate storage solutions in the cloud can greatly enhance cost efficiency by aligning the storage solution with the specific needs of your data. Consider the following examples:

  • Opt for Object Storage for Data with Rare Access Needs: Object storage services like Amazon S3, Google Cloud Storage, or Azure Blob Storage are well-suited for storing large quantities of seldom-accessed data. By utilizing object storage for infrequently accessed data, you can leverage its cost-effective storage tiers, such as Amazon S3 Glacier or Google Coldline, which offer lower storage costs with extended retrieval times. This can lead to substantial cost savings compared to high-performance storage options for data that doesn't require frequent access.
  • Utilize Tiered Storage for Efficient Data Lifecycle Management: Various cloud providers provide tiered storage solutions that automatically transfer data between different storage tiers depending on usage patterns and access frequency. For instance, Amazon S3's Intelligent Tiering feature shifts objects between frequent and infrequent access tiers to optimize storage costs while maintaining performance. Similarly, Azure Blob Storage offers Cool and Archive tiers with varying pricing structures based on access frequency. By incorporating tiered storage and implementing data lifecycle management protocols, organizations can ensure that data is stored in the most cost-efficient tier according to usage patterns.
  • Consider Block Storage for High-Performance Workloads: Block storage services like Amazon EBS, Google Persistent Disk, and Azure Managed Disk Storage are well-suited for performance-sensitive tasks demanding quick data access. Although block storage may come with a higher price tag than object storage, it delivers superior performance and dependability, making it a reliable choice for databases, virtual machines, and other crucial applications. Utilizing block storage exclusively for high-performance workloads can sidestep unnecessary expenses linked to allocating pricey storage for less critical tasks.

Use Reserved Instances

Cloud providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP offer Reserved Instances (RIs) for purchasing. This option allows users to reserve compute capacity before use for a set period (usually one or three years) at a discounted rate compared to on-demand pricing.

 Optimizing Cloud Spend with Reserved Instances

  • Cost Savings: Reserved Instances (RIs) offer significant discounts compared to on-demand pricing, ranging from 30% to 75% depending on the type of RI and term length. Organizations can secure lower rates and achieve substantial cost savings by committing to a specific usage level over a set period.
  • Predictable Costs: Purchasing Reserved Instances allows organizations to forecast their cloud costs over the long term accurately. RIs provide a fixed price for compute capacity regardless of demand fluctuations, offering increased cost predictability and helping prevent unexpected spikes in cloud spending.

Reserved Instances are an effective cost-saving tool for organizations to efficiently manage cloud expenses, enhance cost forecasting, and maintain reliable computing capacity. When used strategically with other cloud cost optimization tips, organizations can realize substantial cost savings and maximize the return on their cloud investments.

The above-mentioned cloud spend optimization strategies can prove instrumental in reducing cloud costs without compromising performance and security. 

If, despite your best efforts, you cannot understand what is causing the high cloud cost, we suggest reaching out to us for a storage audit and block storage auto-scaling. Through our demo, we will help you realize how automation can make your cloud infrastructure cost-efficient.

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