The definition of cloud can feel a little… cloudy (sorry, we had to). It’s an arbitrary term for an ecosystem: a network of servers located remotely or at data centers around the world that work together to store and manage data or deliver content or services.
Simply put, cloud computing is a far more expansive and nuanced system than one sentence can convey. The cloud provides organizations with unlimited scalability as well as lower IT costs. Theoretically, public cloud costs can be lower, as you’re only charged for the resources you use.
There are three main types of cloud computing: Infrastructure-as-a-Service (Iaas), Software-as-a-Service (SaaS), and Platform-as-a-Service (PaaS). Throughout this article, we’ll cover cloud cost optimization related to IaaS.
Let’s dig in.
What is Cloud Cost Optimization?
Cloud cost optimization refers to financial operations solutions that help your business manage the cost associated with cloud computing. According to a report from McKinsey, nearly:
Eighty percent of enterprises consider managing cloud spend a challenge.”McKinsey & Company
While public cloud cost is based on usage, there are also reports that organizations waste about 35 percent of their cloud spend.
Getting ahead of cloud computing costs by understanding the hidden costs of cloud computing beforehand is helpful. However, for many, it’s not until after services have been initiated that cost becomes a concern. This is likely due to choosing the wrong service or not having a strategy in place.
Decision-making around cloud computing is often decentralized, which makes determining cloud costs difficult. Without a cloud cost monitoring or optimization strategy in place, your staff can easily spin up services without stopping to consider the cost. No strategy and lack of oversight can create spikes in cost, unused resources, and poor performance.
There are a few ways you can save on cloud computing immediately, such as scaling back or even eliminating resources. However, long-term cloud cost optimization will come over months.
Setting up best practices now will further ensure your business is using cloud computing efficiently.
5 Benefits of Optimizing Your Cloud
The main benefit of optimizing cloud cost spend is obviously to decrease cost. However, there are also several other benefits that come with cloud cost optimization:
1. Decrease Cost
The main driver behind cloud cost optimization is likely decreased spending. Approaching cloud computing proactively can help your business take advantage of cost-saving opportunities such as advance payments, volume discounts, or spending less due to unused resources.
No one likes being surprised by a sudden increase in expenses. Failing to plan for or properly forecast cloud computing costs can set you up for a surprise hike in costs. There are a number of cloud monitoring tools that can help you determine how much you’re spending and where you can reduce costs.
Wasted resources are inefficient resources. Taking advantage of things like load balancing and automatic or on-demand scaling can help ensure your business is using cloud computing resources efficiently and optimizing cloud cost.
Choosing the right fit for the needs of your business is crucial - cloud computing services that don’t fit your business can cause overspending or underperformance. By carefully examining your needs and having a cloud cost optimization strategy in place, you can ensure your business doesn’t experience any hiccups.
Without transparency and visibility into how your organization builds, uses, and manages the cloud, you’ll have a hard time managing cloud costs. Increased visibility doesn’t just serve your business when it comes to cloud cost optimization; it can also positively impact other areas of your business, like cloud security.
10 Best Practices for Cloud Cost Management
The difference between cloud cost optimization and cloud cost management is simple: management is the tracking, reporting, analyzing, and allocation of cloud spending while optimization is the actions you take based on those metrics to maximize your cloud value.
Creating a cloud cost optimization strategy requires some research. These best practices can help you understand your cloud activities and how you’re spending.
1. Cloud Monitoring
Cloud Monitoring allows you to gain insights into the health and upkeep of your resources. In order to properly monitor your infrastructure, you must pay attention to every component contained within.
You need to monitor:
- Cloud databases and servers.
- Applications and websites.
- Containers, hypervisors, code repositories, etc.
There are also several tools you can use to monitor your cloud infrastructure. Some tools are native to public providers such as Amazon Web Services (AWS), and others come from third parties such as Big Panda.
These tools generally fit into these categories:
- Performance Monitoring: Ensures cloud tools are working properly.
- Cloud Cost Optimization: Shows you how much you’re spending and where opportunities to reduce costs exist.
- Security Monitoring: Helps you monitor security concerns such as malware and intrusion. Cloud security is critical for keeping your infrastructure safe.
- Administration Monitoring: Helps ensure only authorized users are accessing your cloud infrastructure while also allowing you to see the who, what, when, and sometimes why behind any changes that have been made.
2. Budget Alignment
Ensuring everyone understands their goals and budgets related to their projects is mission-critical to creating a cloud cost optimization strategy. Creating a budget is a conversation that should involve product leaders, engineering leaders, and executives.
3. Cost as a Metric
Cost should be a performance metric within your organization, which means you must make cloud costs easy to understand. Your metrics related to cost should be measurable, current, and have clear definitions of valuable vs nonvaluable costs.
4. Right Data, Right People, Right Time
There’s no need to track metrics and data that won’t actually impact your cloud cost. It’s important to get the right data to the right people at the right time. While the data you deliver is generally the same, it should be formatted differently for individual teams. Your finance team needs to answer different questions with data than your engineering team.
5. Optimize Cloud Costs with Data
As mentioned earlier in the article, cost sometimes becomes a concern only after the fact. Cost optimization should be a consideration throughout the development lifecycle:
- Planning: Use cost data and budget to create and inform your roadmap. This will empower your team to quickly adjust spend as necessary.
- Deployment: Unexpected spend is quickly identified and adjusted.
- Design and Build: To make informed and cost-effective infrastructure decisions, your teams should have data readily available and be able to report on unit cost and planned spend.
- Monitoring: Every decision has a cost. Monitoring allows you to quickly reassess spend by team, feature, or product.
6. Real-Time Analytics
This goes back to getting the right data to the right people at the right time. Discovering opportunities for cloud-cost optimization too late is frustrating. Instead, you should be able to observe and immediately identify trends and take immediate action. However, this is not possible without real-time reporting.
7. Right-Size Resources
Finding and consistently reviewing and modifying your cloud computing resources to fit your needs is an undertaking that is well worth the effort. Every business has unique challenges and needs, and there is no one-size-fits-all approach. Not only does rightsizing reduce costs and wasted resources, but it can also improve performance.
If you’re not holding your engineers accountable, you can’t expect them to help save money. Since engineering projects typically create the bulk of cloud costs, it’s important to ensure you’re involving your engineering team in cost discussions.
9. Quick Scaling
Manual processes take time and energy that your business may not have the time for. That’s where autoscaling or on-demand scalability comes in. Modern platforms can rapidly scale usage up or down as your business requires more or fewer resources.
10. Continuous Optimization
Cost as a metric is not set-it-and-forget-it. You must continuously foster a culture of cost awareness. Making cloud cost optimization a continuous process that goes hand-in-hand with your development lifecycle ensures you’re creating and maintaining an efficient cloud system.
Best Ways to Reduce Cloud Spend
Cloud cost optimization requires a practical and defined approach. From rightsizing to reducing wasted resources, there are several simple ways to reduce costs associated with the cloud:
Find and Reduce Wasted Resources
As mentioned at the beginning of this article, 35 percent of cloud resources are wasted. By reducing the instances of wasted resources, you can have an immediate impact on your cloud costs.
Identify and eliminate unused resources. For instance, temporarily spinning up a server and then never turning it off or forgetting to remove storage can arbitrarily inflate your cloud costs.
Instead of allowing room for a traffic spike, on-demand scaling allows your business to quickly add additional resources at any time. Eliminating that wiggle room allows you to reduce the costs associated with resources that are going untapped for long periods of time.
It’s very important to choose the right size service for your needs. Too many resources lead to increased costs and too few resources lead to bad performance (which makes your customers unhappy). However, the right size can be difficult to determine; there are 1.7 million different configurations, after all.
You can optimize server sizes as well as graphics, computing, capacity, memory, data, and more.
A heat map is a tool that provides visual cues for the peaks and valleys associated with computing demand. These maps can help you determine when to shut down servers safely, allowing you to automate scheduled start and stop instances and further optimize costs.
Multi cloud can help ensure that you’re fulfilling every niche and providing a solution to every problem. Your business can use a multi-cloud solution to ensure that you’re taking advantage of specializations and enjoying the benefits that come with using different providers.
Consolidate and Elevate Your Cloud with VMware Private Cloud
Creating a strategy, building a cost-aware culture, and continuously improving and monitoring your cloud cost management is a huge undertaking. But you don’t have to go it alone.
A managed private cloud means you don’t have to do all of the technical work of configuring, maintaining, and managing your private cloud infrastructure. Private cloud is your own, personal virtual data center. Powered by VMware and NetApp, Liquid Web’s Private Cloud combines the benefits of a public cloud with a streamlined experience and predictable pricing.
Whether you’re moving to the cloud or would like to consolidate your infrastructure as a cost-saving measure, you’ll find the perfect managed Private Cloud solution at Liquid Web.
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