5 Hacks for Optimizing Cloud Costs
Two wars continue, violence is starting to break out in different European nations and global economic uncertainties continue to loom large. This is making businesses are scrutinizing their IT expenditures, and particularly cloud computing. While cloud adoption has revolutionized business agility and innovation, its associated costs can quickly spiral out of control if not managed effectively. This has made many businesses hesitate in their acceptance of Cloud, and in many cases has made business shift to other providers.
However, numerous Optimizing Cloud Costs can be possible by seizing opportunities within cloud environments, often requiring straightforward steps. This article delves into five such simple and practical strategies to optimize cloud costs and ensure business resiliency during challenging economic times.
Identify and Eliminate Unhealthy Growth
Cloud cost increases can reflect healthy growth, such as expanding user bases and embracing digital initiatives. But, it can also show unhealthy growth stemming from inefficient resource provisioning and immature consumption practices. To distinguish between the two, companies need to establish comprehensive tagging and reporting capabilities to gain granular visibility into cloud spending. This means allocation of costs to specific business units or product lines to foster accountability and encourage responsible cloud resource usage. The businesses will then need to implement financial controls, such as tracked and managed budgets, to ensure that cloud spending aligns with business priorities.
Prioritize Simple Fixes for Significant Gains
Some easy and common no-regrets actions are releasing unused capacity, implementing scheduling and auto-scaling features, and tailoring service levels to application requirements. For instance, switching from memory-optimized to standard instances or adopting a serverless compute engine for containers can yield substantial savings. Prioritizing these low-hanging fruit optimizations and rapidly deploying them across teams and cloud users will help. As a follow up organisations need to regularly gather feedback and scale successful strategies across the landscape.
Unleash Cloud Elasticity to Eliminate Unnecessary Spending
Cloud elasticity, the ability to scale (and flex) resources based on demand, should inherently lower costs. However, rigid provisioning practices, technical debt, and excessive reliance on reserved instances often hinder effective elasticity implementation. Organisations will want to consider identifying and (often) refactoring inelastic applications, particularly those simply “lifted and shifted” to the cloud, starting with the most resource-intensive ones. Part of the work, also, is implementing standard autoscaling features and exploring capabilities, such as containerization, for greater elasticity. We have often advised against “lift and shift” migrations unless there are compelling strategic reasons.
Reevaluate Vendor Contracts for Optimal Value
Optimistic cloud migration projections can lead to spending commitments that strain budgets during economic downturns. We have recommended our clients to initiate renegotiations with cloud providers much before contract tenure ending to secure favorable terms. This may also include exploring trade-offs, such as deeper discounts for reduced flexibility or extended timelines for meeting targets. Some organisations have effectively incorporated flexibility provisions into new contracts, such as adjusting commitment levels based on pre-defined trigger events or modifying service credit parameters.
Smart Cloud Migrations for Cost Reduction and Growth Readiness
We believed that slowing down cloud migrations to save costs on existing on-premises infrastructure can have adverse results. On-prem data centers require continual op-ex, and cost-cutting measures in these areas can lead to performance degradation and outages. Well planned, sequenced and targeted cloud migrations not only reduce costs but also position businesses for rapid growth once economic conditions improve. Organisations should prioritize migrating workloads that generate value e.g. those supporting critical business initiatives, nearing hardware refresh cycles, or incurring significant operational overhead.
Industry Examples
We looked for available data around the above mentioned 5 hacks for Optimizing Cloud Costs, and were surprised by what we found.
| Study by | Area | Wastage | % companies impacted |
| Gartner | Inefficient resource utilisation | 30% cloud spending | |
| Rightscale | Cloud instances running idle | 23% instances | |
| Study by | Area | Potential Savings | % companies impacted |
| Gartner | Not using reserved instances | 72% | 30% |
| Forrester | Proper tagging, reporting | 25% | |
| Forrester | Obtaining committed use discounts | 20% | |
| Cloudhealth | Releasing unused capacity; and autoscaling | 15% | |
| Cloudhealth | Renegotiating vendor contracts | 10% | |
| IDC | Switching from optimized to standard instances | 20% | |
| Nutanix | Use serverless computing | 90% | 70% |
| Avere | Elastic storage solutions | 30% | |
| McKinsey & Co. | Autoscaling | 20% | |
| Cloudability | Autoscaling | 70% | 50% |
Conclusion
Optimizing Cloud Costs is not about cutting back on innovation but about leveraging cloud resources efficiently to achieve business goals. By implementing these strategies, organizations can effectively manage cloud expenses, enhance business resiliency, and emerge stronger from economic downturns.
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