Did you know that cloud cost optimization was the number one priority for 64 percent of enterprises in 2019? That is no wonder since the majority of them spend over one million U.S. dollars on public cloud every year.

Enterprise annual spend on public cloud worldwide in 2019 and 2020

Enterprise annual spend on public cloud worldwide in 2019 and 2020, by amount of spend

Source: Statista

Cloud technology is a highly available solution that provides plenty of benefits for companies, including easy on-demand sharing and scalability of resources to meet business requirements.

Case Study: Plant production legacy system migration to the cloud

As a part of your hybrid cloud strategy, public clouds allow you to:

So how does it come that the last mentioned above advantage — cloud cost reduction — turns into a pain point? Spiraling out of control prices for cloud services can be the first explanation that comes to mind. It is not the topmost, though.

Mismanaged resources, cloud waste, lack of governance strategy, or incompatible plan behind the company’s initial decision to move to the cloud can lead to an overall increase in your cloud spending and evoke the need to optimize cloud costs.

Cloud Computing Benefits

Five Cloud Cost Optimization Strategies

Regardless of whether your choice is a multi-cloud strategy or hybrid cloud environment, fixed or dynamic pricing model, there are several valuable practices to help you ensure cost-efficiency and leverage cloud computing infrastructure.

1. Use Cloud Cost Analytics

A good beginning is halfway to success. First of all, it is principal to understand where costs within your organization occur and pay attention to spending trends. Of course, it is important to know how much you pay for cloud services and in support of which infrastructure systems.

Full-spectrum visibility of costs makes it easier to control cloud-related spending. This can be facilitated by the usage of cloud cost management software provided by your cloud service provider (CSP) or an IT technology partner.

Quite often, this software goes with a cloud management platform (CMP) and helps you:

Generally, CMPs provide cost modeling and metrics that help you make informed decisions. You can compare your existing workloads in public and private clouds and evaluate spending related to each of them.

With the use of analytics dashboards and practical recommendations, companies can optimize cloud costs. Furthermore, they can enhance performance efficiency and automatically scale usage to optimal rates.

2. Apply Power Scheduling

When it comes to our home, most of us try to be careful about power consumption turning on the lights only when we need it. That is because we pay exactly for what we use. So why should it be different with cloud computing where charges in most cases are similar to utility bills based on usage?

One of the benefits the cloud can support you with is the possibility to spin up resources when you need them and vice versa. Powering down the instances when they are not in use is an effective way to save costs while deploying public cloud.

Cloud Cost Optimization: Apply Power Scheduling

In order to implement this strategy, it is essential to identify idle resources first and pinpoint those that can be shut down during off-hours. For example, development systems can be safely turned off during the weekends and overnight when no one is using the resources you pay for.

While you can manage this process manually, there is a better option to shut down and restart instances. Your CSPs bring down to your table such tools as:

These tools let you manage the entire process and configure a schedule to establish start and stop times.

Leveraging automation is especially valuable when you have teams working in different time zones. For instance, once the East Coast hits the work, power schedulers restart the development environment, and after the West Coast leaves, the system powers it down. Thus, it helps gain more control over resources and leads to cloud cost optimization.

3. Consider Instances

Cloud Cost Optimization: Consider Instances

Reserved Instances

Another valuable practice to optimize cloud costs is turning to the capacity reservation or simply Reserved Instances (RIs). This is a concept of billing discount that provides you with significant savings on cloud costs in comparison with the On-Demand pricing model.

Depending on the provider, the terms and conditions under which RIs are offered can vary. Generally, you get the discount based on the length of commitment – one or three years – and the amount of advance payment, if this option is applicable. In this case, you receive bills for the capacity you have reserved instead of the capacity you have consumed.

At first sight, it may sound simple and very tempting because CSPs could offer you discounts of more than 70%. But haste makes waste. Without proper planning of RIs lifecycle and analysis of your current cloud use, you risk facing sunk costs rather than achieving the highest savings.

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Services of cloud providers and optimization tools of third parties will help estimate RIs purchases and reduce the possible impact of unused resources.

Consider the following steps to take full advantage of reserved capacity:

Spot Instances

Spot Instances are available for less than On-Demand price and represent spare compute capacity of your cloud provider. CSPs constantly auction their excess capacity for your immediate use. This approach can be tricky and includes some hidden obstacles.

Since spot instances must be able to be shut down from time to time, they are better suited for batch workloads, like stateless microservices, where saving cost is crucial, but availability is not.

It is absolutely not the best choice for mission-critical tasks and tasks that cannot be terminated quickly. Yet, with the right strategy, companies can purchase this cost-saving option and successfully use it without risking downtime.

Burstable Instances

Burstable instances can be efficiently applied to optimize cloud costs as CSPs offer them at a reduced price. They are meant to provide a minimum level of CPU performance but can burst to maximum level when requested by workloads. Burstable instances use CPU credits.

Generally, when the instance is active and CPU performance is above the baseline, credits are burned down and vice versa. These instances are a perfect fit for a wide range of general-purpose apps with low CPU usage. Examples include small and medium databases, low usage web servers, or development environments.

4. Rightsize Your Cloud

The aim of rightsizing is to minimize costs and maximize performance by eliminating over- and under-utilized assets and ensuring that the workload of your infrastructure is supported by the right amount of resources.

This could be achieved in three steps:

In most scenarios, companies are not aware of how much capacity they actually need. Thus, they are overpaying for resources they never use.

Proper monitoring of memory, CPU, and network in tandem with a CMP would be a robust practice. It can help determine peak resource consumption and define thresholds for your infrastructure.

The process of rightsizing should be ongoing and involve continuous control of your cloud environment. Identifying assets that you can terminate, downsize, or upgrade directly entails cloud cost optimization and improves general performance. Furthermore, it enables your cloud to adjust to the real needs of the business.

5. Identify Shadow IT

With ongoing information technology consumerization, staff members independently install and use software, leaving the IT department uninvolved. This situation is referred to as shadow IT, and cloud services have become a large part of it.

Cloud Cost Optimization: Identify Shadow IT

According to this report, shadow IT initiatives comprise 20% to 40% of company technology funding. That makes it a considerable piece of hard to track spending. As a result, you can face additional obstacles for cloud cost optimization.

Apart from the increasing costs, shadow IT can compromise cloud security and lead to sensitive data leakage. Thereby, it can affect the reputation of the company.

CSPs or cloud access security broker vendors can offer solutions that help overcome shadow IT. You can also implement such measures as controlling app access, listing the types of available cloud services, and facilitating the process of software order and approval.

Other recommendations include:

Closing Thoughts

Gartner says that one of the trends driving cloud adoption in 2020 is cost optimization. Companies turn to public cloud infrastructure to achieve cost-efficiency, business continuity, and scalability.

Read more: Cloud application as a scalable and efficient solution for an Energy Company

While cloud setups hold great potential and help reach these aims, they can also reveal some challenges.

It is essential to find the right balance between performance and cost, iteratively track your infrastructure and bills. That is when cloud cost optimization tools prove to be useful. Leverage the solutions that CSPs offer and enforce them with technologies provided by third-parties.

We hope our best practices will guide you in managing resources and choosing the right configuration in accordance with your business goals.

Contact Velvetech to see how the cloud can add value to your business environment. Our team of dedicated professionals will be happy to assist you with infrastructure settings and cloud cost optimization.

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