The cloud cost paradox - Wrangling your cloud costs
Cloud computing is often promoted as a more cost-effective solution, and it can be, but only with proper management. Many companies overlook this crucial detail, mistakenly believing that merely migrating to the cloud will automatically reduce costs. Without careful optimization, cloud adoption can actually result in higher expenses than previous on-premise setups. This is because the cloud offers greater flexibility, more opportunities for innovation, and immediate agility, which, if not managed well, can lead to increased spending.
2024-07-17
Randy Kreitzman - Director, Cloud Economics
QUITE THE RUDE AWAKENING FOR MANY BUSINESSES
They expect savings and get the exact opposite.
That is why migrating to the cloud requires cloud cost optimization (CCO). CCO provides a set of processes and strategies to ensure your organization only pays for the cloud resources it genuinely needs and effectively utilizes. When you employ CCO, you’ll actually receive the cost-effective benefits that the cloud is advertised for while still allowing for the innovation and agility your developers demand.
What is Cloud Cost Optimization
Cloud Cost Optimization (CCO) is a critical practice that involves strategically minimizing cloud computing expenses while maintaining high performance and reliability. Organizations employ various techniques to achieve this, including right-sizing resources to align with actual usage patterns, leveraging discounts and reserved instances offered by cloud providers, identifying and removing unused resources, and implementing automated cost management solutions.
By optimizing cloud costs, businesses can enhance the value they receive from their cloud investments, ensuring that expenses align with the organization's specific needs and objectives. This not only helps maximize the benefits of cloud services, but also contributes to the business's overall financial health and success.
Why Cloud Cost Optimization matters
Unmonitored cloud spend can escalate quickly due to several factors, including over-provisioning resources, lack of governance, and unused resources continuing to accrue charges. Insufficient tools for visibility, unexpected data transfer costs, and complex pricing models further contribute to the issue. Examples of unmonitored cloud spend can balloon rapidly due to factors like:
Overprovisioning
Paying for virtual machines (VMs), storage, or databases, regardless of whether they're fully utilized.
Zombie assets
Resources left running with no clear ownership or purpose.
Lack of rightsizing
VMs or other cloud services are not accurately matched to workload requirements.
Missing out on discounts
Insufficient use of reserved instances, savings plans, or other cost-saving mechanisms.
Lack of governance
Absence of policies and controls to monitor and manage cloud usage, leading to unchecked spending
Shadow IT
Departments or teams independently procuring cloud services without centralized oversight, leading to duplicated efforts and inefficiencies.
Without CCO, your organization could waste substantial resources on inefficient cloud usage, hampering innovation and growth.
The pillars of Cloud Cost Optimization
Successful cloud cost optimization isn't magic; it rests on a few key pillars:
Visibility
The foundation of everything. You can't optimize what you can't see. Implement robust cloud cost monitoring and tagging strategies to gain detailed insights into where your cloud spend is going and which teams, projects, or applications are responsible.
Governance
Establish clear policies, budgets, and accountability frameworks. Define resource ownership, set up alerts for overspending, and encourage a culture of cost-consciousness across your organization.
Rightsizing
Continuously match cloud resources to their true workloads. If an application's usage has decreased, downscale or turn off resources. Rightsizing isn't a one-time activity but requires ongoing adjustments.
Automation
Leverage tools for automatically scheduling resources to power down during off-hours, automating rightsizing recommendations, and providing intelligent cost anomaly detection. Automation reduces manual effort and ensures optimizations are consistently applied.
Architecture optimization
Where feasible, explore serverless architectures, which shift operational costs to the cloud provider. Consider containerization to optimize resource usage and leverage cloud-native storage options designed for cost efficiency.
Essential Cloud Cost Optimization strategies
Here are actionable strategies to begin implementing CCO within your organization:
Leverage reserved instances and savings plans
Commit to a certain usage level upfront for significant discounts on popular services like Amazon EC2 and Azure VMs.
Spot instances
For non-critical or fault-tolerant workloads, use spot instances (often heavily discounted but interruptible) to reduce compute costs significantly.
Eliminate idle resources
Actively hunt down and decommission unused or underutilized resources. Implement time-based auto-scaling to shut down unused instances during non-peak hours.
Optimize storage
Use lifecycle policies to automatically archive older data to lower-cost storage tiers or delete unnecessary data. Consider object storage or data compression to reduce storage footprints.
Consider cloud-native services
Refactor applications to use cloud-native managed services to optimize for cost alongside scalability and reliability.
Utilize heatmaps and dashboards
Visualize cost patterns through heatmaps and dashboards to quickly identify optimization opportunities and track progress over time.
Continuous improvement – The CCO mantra
Cloud cost optimization is an ongoing process, not a one-time project. To implement cloud cost optimization, start by establishing robust governance policies to monitor and manage cloud usage, ensuring all stakeholders adhere to these guidelines. Leverage cost management tools to gain visibility into resource utilization and identify inefficiencies. And most importantly, embrace the following practices:
FinOps Culture
Foster a culture of "you build it, you own the cost" to promote accountability throughout your organization.
Cost-Aware Design
Consider cost implications as a part of your solution design and architectural choices.
Regular Reviews
Establish scheduled reviews of cloud bills, usage patterns, and opportunities for optimization.
Tools of the Trade
There are various tools at your disposal that can streamline your journey:
Cloud provider tools
AWS Cost Explorer, Azure Cost Management, etc.
Third-party cost optimization platforms
CloudZero, Cloudability, Densify, and others offer more advanced analytics and automation capabilities.
Why Ollion?
At Ollion, we believe that it's crucial to control your cloud, or it will control you. Cloud cost optimization involves aligning your cloud spending with business value. A well-optimized cloud environment can drive innovation, agility, and growth while saving money without compromising performance or reliability.
Ollion can help you in planning, governing, and optimizing cloud consumption, thus managing costs effectively. When paired with engineering services, we can implement this plan on your behalf, freeing you to concentrate on adding value to your business. Ollion takes a comprehensive approach to cloud cost management, adhering to the FinOps Foundation Principles to ensure the efficiency of your cloud environments.
Our experienced data scientists and architects utilize our proprietary Innovation Scoring system to help you identify data-driven opportunities for optimization and modernization. We customize our recommendations and optimization engine specifically for you, enabling you to manage your cloud spending using the following optimization process. Contact us today to discover how Ollion can enable you to take charge of your cloud costs!
Glossary
The cloud cost paradox refers to the conflicting situation where organizations adopt cloud services expecting significant cost savings and operational efficiency but often find themselves facing unexpectedly high expenses and complex cost management challenges.