Why optimise your Cloud costs?

As more organizations shift their operations to the cloud, there’s an increasing need to understand, monitor, and manage the costs of Cloud computing effectively. This need is driven by the complexity of cloud pricing models, the dynamic nature of cloud workloads, and the challenge of allocating costs to the right parts of the organization.

Cloud cost management involves a range of activities. These include cost tracking, budgeting, forecasting, allocation, and optimization.

It’s about more than just keeping your costs under control; it’s about making sure you’re getting the maximum value from your cloud investment. With effective cost management, you can ensure that every dollar spent on cloud services is driving tangible business value.

The Benefits of Cloud Cost Management

Here are a few reasons your organization should invest efforts in cloud cost management:

Lower Costs

The most obvious benefit of effective cloud cost management is to lower costs. By gaining visibility into your cloud spend and understanding where your money is going, you can identify areas of waste and inefficiency. This can help you eliminate unnecessary costs and ensure that you’re only paying for the services you need.

Predictability

Cloud cost management can also bring predictability to your cloud spend. With the right tools and practices, you can track your costs in real-time, forecast future costs, and keep your spending within budget. This predictability can help you avoid surprises on your cloud bills and plan your IT budget more effectively.

Efficiency

Another significant benefit of cloud cost management is more efficient usage of cloud resources. By monitoring your cloud usage and costs, you can identify underutilized resources and take steps to improve their usage. This can help you get more value from your cloud investment and make your operations more efficient.

Better Performance

Finally, cloud cost management can lead to better performance. By optimizing your cloud costs, you can free up cloud resources for other applications and workloads. This can allow you to provide better performance with the same financial investment.

What’s in a name? Cost Management vs. Cost Optimization

While cloud cost management and cloud cost optimization are often used interchangeably, they are not the same.

Cloud cost management is a broader discipline embracing all aspects of managing and controlling cloud costs. It includes cost tracking, budgeting, forecasting, and allocation.

Cloud cost optimization is a subset of cloud cost management, focused specifically on reducing costs and improving the efficiency of cloud usage. Cost optimization involves identifying and eliminating waste, rightsizing instances, and choosing the right pricing models.

Click here to see how aithentic platform can help streamline visibility into your cloud spend and to optimize your cloud costs. 

Common Cloud Pricing Models

Here are some of the most common cloud pricing models and how they potentially impact your cloud costs:

Pay-as-You-Go (On-Demand)

The pay-as-you-go model, also known as on-demand, is the most straightforward. You pay for the resources you use on an hourly, per-minute or per-second basis. This model offers maximum flexibility, but unsurprisingly it can also be the most expensive if not managed properly.

Reserved Instances (RI)

Reserved instances allow you to commit to a specific number of resources for a set period, typically one or three years. In exchange, you get a significant discount compared to on-demand prices. This model can be cost-effective if you have predictable workloads, but it requires careful planning and forecasting.

Spot Instances

Spot instances allow you to bid on spare capacity in the cloud provider’s data centers. If your bid is higher than the current spot price, you get the resources. However, if the spot price rises above your bid, your instances can be terminated with little notice. This model can offer significant savings, but it carries a higher risk of interruption. If your applications can handle interruptions and don’t require continuous availability, spot Instances are an option. This includes batch processing jobs, background jobs, or any workload that can be paused and resumed without significant issues.

Savings Plans (Committed Use)

Savings plans are a relatively new pricing model. The term ‘savings plans’ is used by Amazon Web Services (AWS), while Google Cloud calls it ‘committed use’ (similar plans are also offered by other cloud providers). Savings plans offer a similar discount to reserved instances, but with more flexibility. With savings plans, you commit to a certain level of spend, rather than specific resources. This gives you more freedom to change your usage patterns while still enjoying discounted prices.

The Challenges of Cloud Cost Management

The Invisible Cloud

With the cloud’s pay-as-you-go model, and many resources running in the cloud, it can be difficult to keep track of where the money is going. While the cloud offers flexibility and scalability, this can also lead to uncontrolled spending if not managed properly. The lack of a centralized view of all cloud resources can lead to wastage and increased costs. Therefore, gaining visibility into your cloud spending is critical for effective cloud cost management.

Moreover, the cloud pricing models are complex and varied, ranging from on-demand pricing, reserved instances, to spot instances, making it challenging to understand and manage cloud costs. Without sufficient visibility, it’s easy to lose track of your cloud spend and exceed your budget. This can have a significant impact on your overall business performance and profitability.

What’s next?

Accurately predicting your cloud usage is another challenge in cloud cost management. Due to the dynamic nature of cloud services, estimating future usage and costs can be difficult. Businesses often either over or under-predict their cloud usage, leading to inefficient budgeting.

Inaccurate budgeting can also result from not considering all cost factors. Cloud costs are not just about the cost of resources but also include network costs, data transfer costs, support costs, and more. Failing to account for these can result in unexpected costs and budget overruns.

Lastly, it can be challenging to forecast future cloud costs due to the constant changes in business needs, application requirements, and cloud pricing models. Therefore, organizations need to adopt a dynamic and flexible approach to budgeting and forecasting for effective cloud cost management.

Things get complicated.

Billing complexity is another significant challenge in cloud cost management. Cloud providers typically offer a wide range of services, each with its own pricing model, which can lead to complex and confusing bills. Understanding and managing these bills can be time-consuming and error-prone for businesses.

In addition, cloud bills often lack detailed breakdowns of the costs, making it difficult for businesses to identify where they are spending the most and where they can save. This lack of transparency can lead to over-spending and inefficient resource utilization.

While it’s an obvious advantage to exploit pricing models, cloud bills can get complex due to the wide range of discount options offered by cloud providers. Understanding and managing these discounts can be difficult but is crucial for minimizing cloud costs. Therefore, businesses need to invest in tools and strategies to simplify cloud billing and effectively manage cloud costs.

What we have learned about Cloud Cost Management

Here are a few strategies that can help you improve cost management and reduce your organization’s cloud costs.

1. Choosing the Right Tools is important

Choosing the right cloud cost management tools is crucial for effective cloud cost management. These tools can provide visibility into your cloud spending, help you track and manage your cloud usage, and enable you to optimize your cloud costs.

There are various cloud cost management tools available in the market, each with its own features and benefits. Some tools offer comprehensive cost management features, while others specialize in specific areas such as billing, reporting, optimization, and cloud automation.

2. Prepare to scale – its probably why you chose Cloud in the first place

Automatic scaling is another effective strategy for cloud cost management. It allows you to dynamically adjust your cloud resources based on the demand. This can help you optimize your cloud costs by ensuring that you only pay for the resources you need.

With automatic scaling, you can set rules to automatically scale up your resources during peak demand and scale down during off-peak hours. This not only helps you manage your cloud costs but also ensures that your applications have the resources they need to perform optimally.

However, implementing automatic scaling requires careful planning and monitoring. You need to understand your application’s performance and usage patterns to set the right scaling rules. Moreover, you need to regularly monitor and adjust your scaling rules to ensure they are effectively managing your costs.

3. Power Up….and Down

Power scheduling involves scheduling your cloud resources to turn on and off based on your business hours or usage patterns. This can help you save costs by ensuring that you only pay for the resources when they are in use.

For example, if your business operates from 9 am to 5 pm, you can schedule your cloud resources to turn off during the off-business hours. This can significantly reduce your cloud costs, especially for resources that are not needed 24/7.

Implementing power scheduling requires a good understanding of your business operations and cloud usage patterns. You also need to ensure that your scheduling does not impact your application’s performance or availability.

4. Right-Sizing is not a one-time exercise

Right-sizing is a critical strategy for cloud cost management. It involves optimizing your cloud resources to match your application’s requirements. This can help you avoid over-provisioning and under-provisioning, which can lead to increased costs and poor performance.

Right-sizing involves analyzing your cloud usage data to understand your application’s resource requirements. Based on this analysis, you can adjust your cloud resources to ensure they are just right for your application.

However, right-sizing is not a one-time activity. As your business needs and application requirements change, you need to continuously monitor and adjust your resources to ensure they are optimized for cost and performance.

5. Use it or lose it

Removing unused instances is another effective strategy for cloud cost management. Often, businesses spin up cloud instances for temporary use and forget to turn them off when they are no longer needed. These unused instances can add up to significant costs over time.

Therefore, it’s important to regularly review your cloud resources and remove any unused instances. This can not only help you save costs but also improve your resource utilization.

How does Aithentic help?

Our integrated SaaS platform enables you to not only categorize and breakdown your cloud spend costs by resources and responsible units but also provides options on cost savings through optimization.