cloud cost optimization

Demystifying Cloud Cost Optimization: Best Practices for Efficient Spending


In the modern business ecosystem, the allure of the cloud is undeniable. A multitude of companies, seduced by its promise of reduced maintenance costs and heightened efficiency, have eagerly adopted cloud solutions. However, a common misconception persists: that simply migrating to the cloud will miraculously resolve cost challenges. The reality is more nuanced.

Migrating to the cloud is not an automatic ticket to savings. It’s a journey – and like any journey, it requires preparation, understanding, and the right cloud cost optimization tools to ensure you're navigating in the right direction. To truly benefit from the cloud's cost-efficiency potential, one must strategize and leverage specific cloud cost optimization tools geared towards optimization. In this article, we'll shed some light on the strategies businesses can employ to maximize their return on investment (ROI) from cloud migration.

cloud cost optimization best practices

Understanding Cloud Cost Management and Optimization

As businesses continue to migrate their operations to the cloud, managing the associated expenses becomes paramount. But what exactly is cloud cost optimization, and why is it crucial for modern enterprises?

At its core, cloud cost optimization is the process of adjusting your cloud spending by eliminating waste, right-sizing resources, and ensuring that your money is spent where it brings the most value. It's not just about cost-cutting; it's about maximizing the value received from each dollar spent in the cloud. All in all, cloud cost optimization is the balance of using the cloud's vast resources while not overcommitting or overspending on unused or unnecessary assets.

Cloud Cost Optimization Strategies

Let's delve into the myriad of strategies that enterprises can employ to optimize their cloud expenses. 

1. Monitor Costs Oddities

Middleware tools and various other cost management consoles have become essential for businesses to keep a tab on their cloud expenses. These cloud cost optimization tools can not only detect and monitor usage, but also help in setting budgets and forecasting costs. 

Leveraging machine learning, they can swiftly identify spending anomalies. Coupled with advanced alerting systems, they allow organizations to set benchmarks. Whenever the spending crosses the expected thresholds, alerts can be generated, enabling teams to analyze the root cause of the anomaly, thereby preventing unexpected expenses and ensuring the budget stays on track.

With the insights derived from cloud cost monitoring tools, businesses can better forecast future expenses. This proactive approach helps in setting clear budgets, managing cash flows, and preventing unexpected costs.

For instance, Avalon.AI — a US data analytics company servicing payors, providers, and medical device and pharma companies — was recently on a journey to modify and enhance opioid prescription practices in response to the escalating opioid epidemic in the United States. With the help of Svitla Systems, they built a comprehensive, cost-effective analytics platform, merging data from varied systems into insightful reports that helped stakeholders forecast future expenses. This collaboration transformed Avalon.AI's vision into a groundbreaking solution, enhancing the approach to pain medication prescriptions while keeping close control over cloud expenses.

AWS cloud cost optimization

2. Monitor Resource Usage and Utilization

Just as a company wouldn't leave the lights on in an unused office, businesses shouldn't pay for cloud resources they aren't using. Cloud cost optimization focuses on pinpointing and eliminating these unused resources, whether they're idle virtual machines or unutilized storage.

Right-sizing resources involves tailoring cloud resources to fit the actual usage patterns. For instance, if a database only requires 8GB of RAM but is allocated 16GB, there's potential for savings by resizing it. Resource management ensures businesses pay for what they genuinely need.

By continuously monitoring how cloud resources are utilized, businesses can make informed decisions about scaling, rightsizing, and even decommissioning certain resources.

So, why is continuous monitoring vital?

Informed Decision-Making

Constantly observing the performance and utilization of cloud resources provides businesses with valuable insights. These insights form the bedrock for decisions related to scaling resources up or down, thereby ensuring that applications and services always have the necessary power without excess.

Rightsizing Resources

Not all cloud resources need to operate at their maximum capacity all the time. By monitoring their usage, businesses can determine the most appropriate size for each resource, ensuring that they are neither over-provisioned (leading to unnecessary costs) nor under-provisioned (leading to potential performance issues).

Decommissioning Dormant Resources

In the dynamic world of the cloud, some resources might become redundant or underutilized over time. Continuous monitoring can help identify such resources, allowing businesses to decommission them or reallocate their budgets effectively.

3. Detect the Purpose of Resources Through Tagging

Tagging resources allows for easier identification and can play a crucial role in cost allocation and tracking. To fully comprehend its importance, it’s essential to delve into what tags are, their diverse types, and their pivotal role in monitoring resource ownership and usage in cost services.

Tags are descriptive labels or identifiers that are attached to cloud resources, acting as metadata that provides additional information about each resource. They can indicate the purpose, owner, environment, or any other relevant attribute of a resource. This facilitates easy identification, management, and analysis of resources, leading to more informed and effective decision-making processes

There are different types of tags:

  • Environment tags: These distinguish between development, testing, staging, and production environments. For instance, distinguishing between 'DEV' and 'PROD' resources helps in attributing costs appropriately and ensuring that resources allocated for development are not inflating the production costs.
  • Ownership tags: These indicate the individual or department responsible for a particular resource. It aids in cost allocation, tracking, and accountability, ensuring that resources are used according to owner needs and fit business taks and/or requirements. 
  • Project or application tags: They associate resources with specific projects or applications, facilitating detailed tracking of costs per project and enabling precise budgeting and forecasting.

By attributing resources to specific owners or departments, such as “Financial Department” vs. “Playground” resources, organizations can have a clear insight into where and how resources are being utilized. These tags also play a pivotal role in cost services. They facilitate a detailed and nuanced analysis of resource consumption, enabling organizations to track and manage costs based on ownership. By distinguishing between different types of resources (for instance, “DEV” vs. “PROD”), organizations can evaluate whether the incurred costs are justified. Resources allocated for development and testing should not carry the same weight in cost considerations as those deployed for production.

Through meticulous tagging, organizations gain actionable insights that enable informed decisions. They can identify if the allocation of resources is in alignment with their strategic objectives and whether the associated costs are justified. This nuanced understanding fosters targeted cost optimization strategies, promoting efficiency, and cost-effectiveness.

4. Increase Elasticity Through Autoscaling

With autoscaling, resources can be automatically scaled up or down based on demand, ensuring optimal usage and cost-efficiency. To fully harness the potential of autoscaling, it is imperative to tailor it to the specific needs and patterns of various workloads, which often exhibit different usage peaks.

  • Scheduled scaling for predictable workloads: For workloads with predictable patterns, such as daily or weekly usage peaks, scheduled scaling is a powerful tool. It allows organizations to automate the scaling process according to the expected demand, ensuring that resources are optimally allocated. By pre-emptively scaling resources in anticipation of increased workload, businesses can ensure seamless operation and enhanced user experience while also avoiding over-provisioning and the associated costs.
  • Scaling rules for unexpected traffic spikes: Despite the best forecasting efforts, unexpected spikes in usage can occur. Autoscaling rules can be crafted to address these unforeseen demands, automatically adding resources during high traffic and scaling down during lulls. These dynamic scaling rules are informed by real-time metrics and KPIs, ensuring a responsive and agile resource allocation that adapts to the immediate needs of the workload.
  • Incorporating a backup option: While autoscaling is invaluable for optimizing resource utilization and costs, having a backup plan is crucial. This could involve reserved instances or standby resources that can be quickly deployed in case of sudden, extreme spikes in demand or failures in the autoscaling system. This layered approach ensures that service remains uninterrupted, bolstering reliability and trust.

Challenged to revamp an existing solution from its core, a client that works on spend analysis software partnered with Svitla to carry out a complete tech stack overhaul, culminating in a seamless cloud migration. With the formation of a specialized team spanning back-end, front-end, QA, and DevOps, they embraced Vue.js, Node.js, and Laravel for a redefined tech approach. The game-changer was the implementation of a microservices-based architecture, supported by AWS integrations, which was carefully crafted by monitoring resource usage.

Another example is showcased by Hireterra, a job search web platform, that was looking for reliable and cost-effective ways to create a robust architecture for its solution. Svitla Systems enhanced responsiveness for mobile devices, designed an advanced admin panel for user management, and leveraged AWS for efficient cloud deployment. Svitla Systems' innovative job search platform has revolutionized recruitment across multiple industries. With impeccable user management, the platform boasts real-time metrics, from job postings to user counts. Notably, the platform thrives on cost-efficiency, ensuring near-perfect uptime without any security breaches over the years and a stellar resource management.

5. Optimize Storage

Inefficient storage solutions can lead to a plethora of issues: from escalating costs and poor performance to potential data losses. Optimizing storage is not just about conserving space; it's about ensuring that data is accessible, secure, and used to its fullest potential.

Here are some factors to consider for storage optimization:

  • Type of storage: Cloud providers offer various storage types, from object storage suitable for vast amounts of unstructured data to block storage ideal for databases. By understanding the nature of their data, businesses can pick the storage type that aligns perfectly with their requirements.
  • Size: Over-allocating can lead to wasted costs, while under-allocating can result in performance issues. Regular audits can help businesses adjust storage sizes based on actual usage, ensuring they only pay for what they need.
  • Performance: The performance of storage solutions varies, with some designed for high-frequency access and others for long-term archival. By matching storage performance with data access patterns, businesses can ensure swift access to critical data while relegating infrequently accessed data to slower, cheaper storage options.
  • Pricing model: Cloud providers often offer multiple pricing models, from pay-as-you-go to reserved instances. By analyzing their data storage and access patterns, businesses can select a pricing model that provides the best value for money.

For example, imagine a client who manages a web application on virtual machines and stores data on ephemeral disks. After experiencing unexpected data loss, the client approaches Svitla for the design of a modern cloud infrastructure tailored for the web application, with a focus on performance, cost optimization, and reliability. In response, we develop a new solution where data, depending on its type and purpose, is stored on object storage and shared file volumes.

6. Implement Cost-Aware Architecture Design

The architecture of a cloud environment acts as its blueprint, dictating how various components interact and function. Just as the blueprint of a building can influence its long-term maintenance and operational costs, the architecture of a cloud environment can significantly impact its cost of operations. Architecture plays a pivotal role in cloud cost optimization:

1. Designed for Cost

Adopting a "designed for cost" approach during architecture creation simplifies cost control at later stages. From the inception of a cloud project, embedding cost considerations into the architecture's very fabric can prove immensely beneficial. By adopting a "designed for cost" philosophy:

  • Proactive planning: Cost considerations are made upfront, allowing for better budgetary planning and forecasting.
  • Future-proofing: As the cloud environment grows and evolves, having a cost-aware design makes it easier to scale without incurring disproportionate costs.
  • Simplified cost control: Making changes to optimize costs at later stages becomes more straightforward when the initial design already has cost efficiencies built-in

2. Architecture Review

Monitor current resources, conduct a thorough architecture review, and pinpoint areas ripe for improvement. Static architectures can become cost sinks, especially as the cloud environment and business requirements evolve. Hence, a dynamic approach to cloud architecture is essential:

  • Monitoring current resources: Add required resources and use services to provide continuous monitoring.
  • Pinpointing areas for improvement: A comprehensive architecture review can highlight components that are cost-inefficient or those that could benefit from newer, cost-effective solutions.

3. Re-architect Migration

For existing architectures, consider migration scenarios that optimize costs. Some of the design patterns and techniques that promote efficiency include:

  • Decoupling: This allows components to scale independently, facilitating better cost control.
  • Caching and content delivery: Implementing these can reduce data transfer costs.
  • Data tiering: Adopt cost-effective storage solutions.
  • Managed SaaS and serverless options: Leveraging these can bring about significant cost savings.

For businesses with established cloud architectures, there's still ample room for cost optimization:

  • Migration scenarios: Consider migration paths that align better with cost-optimization goals. For instance, transitioning to serverless architectures or adopting managed services can reduce management overhead and costs.
  • Cost-benefit analysis: Before undertaking a migration, weigh the potential savings against the costs and potential disruptions involved. It ensures the migration offers genuine value and isn't just change for change's sake.

7. Pick the Right Pricing Model

A crucial element of cloud cost optimization is choosing the right pricing model, and here's why. Cloud service providers present a smorgasbord of pricing models, each designed to cater to different usage patterns and business objectives. Some of the most common ones include:

  • On-demand pricing: Pay for what you use without long-term commitments or upfront payments. This model offers maximum flexibility but might come at a higher per-unit cost.
  • Reserved instances: Here, you commit to a specific period (typically 1-3 years) in exchange for discounted hourly rates. This suits organizations with predictable workloads.
  • Spot instances: These allow you to use spare computing capacity at reduced prices. While cost-effective, they're best for flexible workloads since availability can fluctuate.
  • Savings plans: A commitment to a consistent amount of usage (e.g., $10/hour) in return for discounted rates over a specific period.
  • Free tier: This option provides users with a limited amount of cloud resources for free, typically on a monthly basis, offering an opportunity to explore and experiment with cloud services without incurring costs. It’s an ideal starting point for individuals and small businesses looking to understand the cloud environment before scaling their operations.

To pinpoint the ideal pricing model, delve deep into your organization's usage patterns. Consider:

  • Predictability of workloads: Regular, consistent workloads might benefit from reserved instances or savings plans, while erratic or experimental projects might align better with on-demand or spot instances.
  • Business growth projections: If you're expecting rapid growth, locking in a long-term contract without room for scalability might not be ideal.
  • Budget flexibility: Organizations with fluctuating budgets might prefer the flexibility of on-demand pricing, while those with set financial allocations might opt for reserved instances or savings plans.

Lastly, it's essential to match the pricing model with overarching business objectives. Ask:

Are cost savings a priority? If so, consider longer-term commitments that offer discounts.

Is flexibility more crucial? On-demand or spot instances might be more apt.

Is stability a concern? Avoid models where resources might be unavailable due to demand fluctuations.

8. Leverage Monitoring and Analysis Tools

Monitoring and analysis tools provide essential insights, serving as the magnifying glass that highlights areas for potential savings. Most cloud service providers furnish users with built-in tools designed to oversee and manage various cloud aspects. These cloud-native tools are often:

  • Integrated seamlessly: Being a part of the cloud provider's ecosystem means these tools usually offer straightforward integration and setup.
  • Tailored to the platform: They are custom-built for the specific cloud platform, ensuring compatibility and comprehensive monitoring.
  • Cost-effective: Many of these cloud cost optimization tools come bundled with the cloud package or offer cloud cost optimization benefits when used within their native environment.

While cloud-native tools present a plethora of advantages, third-party tools often bring advanced capabilities to the table. They:

  • Offer broader perspectives: Designed to function across various platforms, third-party tools can provide a consolidated view if you're operating in a multi-cloud environment.
  • Bring specialized expertise: Some cloud cost optimization tools specialize in specific areas, like security monitoring or performance optimization, offering depth in their chosen domains.
  • Enable enhanced customization: With a wide range of features, third-party tools can often be tailored to better fit unique organizational needs.

Both cloud-native and third-party tools play pivotal roles in uncovering areas ripe for cost-cutting:

  • Anomaly detection: Monitoring tools can flag unusual spikes in resource usage, helping teams act before costs balloon.
  • Resource utilization analysis: By analyzing how resources are used, organizations can rightsize their deployments, ensuring they're not overpaying for unused capacity.
  • Budget forecasting: Advanced cloud cost optimization tools can project future costs based on current usage patterns, aiding in budgetary planning and adjustments.
  • Optimization recommendations: Some tools offer actionable insights, suggesting specific changes to enhance cost efficiency.

Incorporating both cloud-native and third-party monitoring tools into your cloud strategy is akin to hiring a dedicated financial advisor for your cloud investments. By continuously analyzing and suggesting, these cloud cost optimization tools empower organizations to stay ahead of costs, making proactive adjustments and reaping the rewards of a lean, optimized cloud infrastructure.

9. Adhere to Cloud Cost Governance and Policies

Ensuring the optimal use of cloud resources isn't just about selecting the right cloud cost optimization strategies or cloud cost optimization tools. Effective cloud cost management also requires the establishment of clear governance and policies. By doing so, organizations can maintain better control over their expenses, reduce wastage, and promote accountability. Here’s how you can fortify your cloud cost management strategy:

Budgetary controls: Define and assign budgets for specific projects, departments, or cloud resources. This will create a clear financial framework within which teams should operate.

Alert mechanisms: In today's dynamic cloud environments, costs can escalate rapidly. Establish automated alert systems that notify stakeholders when the actual spending approaches or exceeds the budgeted amount. This allows for timely intervention and prevents budgetary surprises.

Role-based access control (RBAC):

  • Limit resource access. Not everyone in your organization needs the ability to spin up any and all cloud resources. With RBAC, you can allocate access privileges based on roles, ensuring that only those with the necessary permissions can provision particular resources and services.
  • Security. By assigning roles and permissions, RBAC ensures that sensitive and critical cloud resources are accessed only by authorized personnel. This minimizes the risk of unauthorized access, modifications, or breaches. It also aids in compliance with regulatory standards by ensuring that the access, modification, and deletion of data are strictly monitored and controlled.
  • Prevent overprovisioning. By controlling who can create and modify resources, you prevent unnecessary or redundant provisioning, ensuring that only approved size resources are utilized.

Tagging policies: track, allocate, and analyze:

  • Structured tagging: Implement a standardized tagging strategy across all your cloud resources. Tags might include details such as the department responsible, the purpose of the resource, or the project it's associated with.
  • Improved cost allocation: With proper tagging, organizations can easily determine which departments or projects are incurring which costs. This promotes accountability and facilitates more precise budgeting.
  • Optimization insights: Over time, analyzing costs based on tags can yield valuable insights. For instance, you might find that a particular project consistently uses less than its allocated resources, suggesting a potential area for cost-saving.

10. Optimize Cloud Security

While the objective of cloud cost strategies is to minimize expenses, cutting corners on security measures can lead to costly breaches and reputational damage. In reality, the balance between cost and security isn't a zero-sum game. By making wise security decisions, organizations can achieve both cost benefits and robust protection.

The Interplay between Cost and Security

Don’t get misled by a false economy.  Initially, opting for cheaper, less secure options might seem like a cost-saving measure. However, the potential financial consequences of a security breach, including regulatory fines, litigation costs, and lost business, far outweigh the initial savings.

Instead, opt for efficiency through security: a secure cloud environment reduces the likelihood of disruptions and outages, ensuring smooth operations and preventing loss of revenue from downtime.

Managed Security Services: A Win-Win Solution

Employing an in-house team with the latest security expertise can be expensive. Managed security services give businesses access to top-tier security experts without the overhead of hiring full-time personnel.

Besides, managed services typically offer round-the-clock monitoring of your cloud environment. This continuous oversight not only ensures a swift response to any security threats but also reduces the chances of costly breaches.

Keeping up with the latest security threats requires constant vigilance. Managed security services ensure that your cloud environment is always updated with the latest patches, reducing vulnerabilities.

Future-Proofing with Security

As technology evolves, so do cyber threats. Investing in comprehensive cloud security now prepares your organization for future challenges, potentially saving costs down the line.

Beyond immediate financial implications, robust security helps maintain customer trust. The reputational damage from a security breach can have long-term financial implications as customers and partners lose confidence in an organization's ability to protect data.

The Continual Journey of Cloud Cost Optimization

Cloud cost optimization isn't a checkpoint; it's a continuous path that requires ongoing commitment and adaptation. As the cloud landscape evolves, so should your strategies. By keeping a vigilant eye on costs, adopting cloud cost optimization best practices, and leveraging advanced cloud cost optimization tools, businesses can ensure their cloud journey remains both cost-efficient and performance-optimized.

However, navigating the complexities of the cloud landscape doesn't have to be a solitary endeavor. Our experienced team is here to guide you, offering insights and expertise on cost-friendly cloud migration and budget optimization strategies. For a more in-depth discussion on how to optimize your cloud expenses without compromising performance, we invite you to contact our team. Together, we can craft a cloud strategy that aligns with both your financial and operational objectives.

Illya Reznykov - Svitla Systems
by Illya Reznykov
CTO and Senior Cloud Architect
A seasoned and certified Cloud Architect with over 25 years of experience, Illya has a proven track record of transforming legacy applications through codebase review, refactoring, optimization, migration, and integrating new features. His hands-on experience with CI/CD pipelines, on-premises, and cloud deployments in AWS and Azure and supporting multiple environments further illustrates his versatility as a leader in the cloud domain.

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