Enterprise expenditure on the cloud will increase from 9% in 2020 to 14% in 2024. The cost of cloud services is rising in tandem with rising demand. However, businesses now acknowledge that the substantial costs associated with cloud computing are eating into their IT budgets.
But here’s a number that could stun you even more: Over 70% of cloud spending is waste and inefficient, according to a survey conducted by Gartner.
This means it’s more crucial than ever for businesses to do thorough cloud cost analysis and keep close tabs on their cloud expenditures. Along similar lines, in this article, we will explore what cloud cost analysis and optimization are, along with their best practices.
What are Cloud Cost Analysis and Optimization?
A thorough review of your cloud budget’s use might shed light on whether or not you’re making the most of your current resources. Costs related to your cloud infrastructure may be calculated. In fact, cloud cost analysis keeps tabs on how much revenue is spent on various cloud-based services and resources and then identifies areas where savings might be made.
On the other hand, cloud cost optimization is an ongoing process that should result in savings over time by making better use of available resources and ensuring that all necessary functions are met. The business may do this by introducing data-driven buying strategies, periodically reviewing resource efficiency and utilization, raising awareness about the need for tagging and monitoring assets, and gathering key metrics for cloud cost analysis.
Cloud Cost Analysis and Optimization Strategies
Now, the time comes to discuss the best practices for analyzing and reducing cloud costs.
Right-Sizing and Instance Optimization
Right-sizing is the process of adjusting cloud resources to match an application’s or workload’s actual needs. It ensures that performance is not compromised while avoiding over-provisioning. Analyze resource usage patterns, such as CPU, memory, and I/O, to identify underutilized or overprovisioned instances. Remember that you may utilize cloud provider tools or other third-party tools to receive recommendations on optimal instance sizes and types.
Instance optimization goes hand-in-hand with the right sizing. It focuses on selecting the most cost-effective instance type for a particular workload. Cloud providers offer various instance types designed for specific use cases and resource requirements. Regularly evaluate and compare instance types to identify the ones that offer the best performance at the lowest cost. Here you can make use of cloud cost analysis or cloud cost management tools to analyze and forecast costs. It ensures you choose the most suitable instance type for your workload.
Reserved and Spot Instances
Reserved instances (RIs) are a cost-saving mechanism where you commit to a specific instance type for a defined period, typically one or three years, in exchange for a discounted rate compared to on-demand pricing. Analyze your long-term resource needs and identify workloads that are consistently running or have predictable demand patterns.
Spot instances are another cloud cost solution that involves taking advantage of unused capacity in the cloud provider’s data centers. These instances are available at significantly discounted rates compared to on-demand instances. However, they can be terminated with short notice when the provider needs the capacity. Spot instances are ideal for fault-tolerant and flexible workloads, including batch processing, data analysis, or testing environments.
Optimizing storage costs involves selecting the appropriate storage classes, lifecycle policies, and data compression techniques. Choose storage classes based on access frequency and retention period. The reason is that different classes have varying cost structures. For example, AWS offers storage classes like S3 One Zone-Infrequent Access and Glacier Deep Archive, while Azure provides options like Blob Storage Cool and Archive tiers.
Implement lifecycle policies to automatically transition data between storage classes or delete it when it reaches a specified age. Regularly review and modify these policies based on your organization’s data access patterns and retention requirements. Plus, utilize data compression and deduplication techniques to reduce the storage footprint and associated costs.
Monitoring and Cost Allocation
Continuous monitoring and cost allocation are required for identifying and addressing inefficiencies in your cloud environment. Implement comprehensive monitoring solutions, either from your cloud providers or third parties, to collect and analyze resource utilization and cost metrics. Set up alerts and notifications to identify anomalies or spikes in resource usage, which could indicate opportunities for cloud cost reduction or potential issues.
Cost allocation enables you to attribute costs to specific projects, teams, or departments within your organization. Use tags and metadata to label cloud resources. It makes tracking and analyzing costs by business unit or project easier. Ensure that tagging policies are consistently applied and enforced across the organization to facilitate accurate cost allocation and reporting.
Adopting a Multi-Cloud and Hybrid Cloud Strategy
Embracing a multi-cloud strategy can help organizations achieve better cloud cost analysis and optimization by leveraging different service providers’ competitive pricing and unique features. You can use cost-effective solutions tailored to your organization’s specific needs by evaluating and selecting the best offerings from multiple providers. Without a doubt, comparing price-performance ratios and identifying potential cost savings through discounts, reserved instances, or other pricing incentives can help organizations achieve greater cost efficiency.
A hybrid cloud strategy combines public cloud services with private cloud infrastructure and offers cost management flexibility. Organizations can achieve an optimal balance of security and cost-efficiency by placing workloads with sensitive data or strict regulatory requirements on private cloud infrastructure and less-critical workloads on public cloud platforms. Also, a hybrid cloud strategy enables businesses to shift workloads between environments as needed. It facilitates resource allocation adjustments in response to changing demands.
The lack of foresight and planning might have severe monetary consequences in an age of ever-increasing cloud spending. Consequently, it is important to pay close attention to cloud cost analysis and optimization in order to avoid unexpected surges, overpaying, or subpar performance while using the cloud to improve corporate operations.