What is Cloud Cost Management? Best Practices & Optimization

This provides you the opportunity to examine the cause and take necessary actions to curtail unnecessary spend. In AWS, you can create custom cost and usage budgets through AWS Budgets. You can define the budget amount based on your cost forecasts and set up alerts to be notified when your usage or costs exceed your budgeted amount. Strategic purchasing of cloud resources can lead to considerable savings in the long run. Both AWS and GCP offer opportunities for discounts through their respective models of Reserved Instances and Committed Use Discounts.

“I’m mostly concerned about internal usage of our cloud footprint, ensuring that we’re becoming more efficient, and doing the things that will make our customers more successful,” Landis says. That includes helping business executives understand the economics and value of cloud. Hammering out goals and business drivers is the key to successful cloud management, Landis says. At a strategic level, this requires that enterprises start by defining and implementing a clear cloud governance model. Once a model is defined, they can implement solutions that provide deeper visibility and actionable insights for cost management.

Employ cloud cost management tools

Over time, cloud costs build organically and are not always applied to the right line items. Audit your cloud costs to identify areas where you may be overpaying or underpaying, overperforming or underperforming. When designing your applications and services, it’s imperative to consider cost optimization in the architecture. This can aid in efficient scaling and leveraging the cloud’s innate adaptability and scalability to the maximum.

cloud cost management best practices

In this post, I’ll outline some best practices for establishing effective cloud cost management in your organization. You can achieve cloud cost intelligence with the help of a solution like CloudZero. CloudZero is the only cloud cost intelligence platform that empowers engineering to understand and control cloud costs. CloudZero aligns costs to teams, customers, unit cost KPIs, product features, and more — so you can stop guessing and know precisely where to pull strings to balance cost and system performance.

What are the different types of cloud services?

These alerts can be set up in AWS, Azure, and GCP so that you don’t get surprised by unexpectedly high bills. Typically, this billing threshold is set up based on the previous month’s spending, so you have a baseline to start with for each account. If a billing alarm is received, you will then have an opportunity to investigate what is causing the increased cost and validate or remediate the cause before the billing cycle completes. Various types of alarms can be set for engineering, operations, and finance teams.

cloud cost management best practices

You’ll also need to consider all of the applications and data you have and decide what needs to be on the cloud and what can stay where it is. You don’t want to waste time migrating an application only to find out it needs https://www.globalcloudteam.com/ to stay on-premises. Some data may need to stay on your in-house servers to comply with regulatory requirements. Additionally, if there are applications you want to move, see if your providers offer cloud-based options.

Cost Management Challenges in the Cloud

If you’re not sure where to start, check out some of the metrics that companies like Lyft and Netflix are using. Snapshots are efficient for backing up data on EBS volumes to an S3 storage bucket. Typically, you only need the latest snapshot to restore data in case something goes wrong, though it’s advisable to keep snapshots for several weeks. Individually, storage costs for snapshots are minimal, but if obsolete snapshots are not deleted and continue to accumulate, they can add thousands of dollars to your bill in unnecessary storage costs.

Cloud cost intelligence tells you where you’re spending your money and what that means in the context of your business. It continuously delivers the data stakeholders need to detect and fix anomalies — and design and build cost-efficient products — automatically correlated to the activity generating the cost. Most organizations default to charging customers based on the metrics they already have access to.

Getting the Most out of Cloud Cost Management

However, cloud migration can be a time-consuming and expensive process, which means persuading executives to see the benefits can be a challenge. Over time, migrating to the cloud can actually save companies money on on-premises server space, operating costs, and software cloud cost management licensing. Because some on-premise data center costs are hidden, it can be difficult to balance those long-term savings with the upfront costs of cloud migration. Instead of picking the metrics that are best for the business, they pick the ones they can already track.

Unit economics can be a powerful tool for understanding realized business value and tracking the efficiency of your Kubernetes investments. But ensuring the configuration you pay for is the right fit is key to effectively managing cloud costs and achieving optimal performance. Taking this approach to cloud cost management should result in your organization realizing those promised benefits of the cloud. It’s also critical to account for economies of scale when it comes to cloud cost management. Things can change rather quickly for organizations of all sizes; they can either become acquired or acquire other entities, or grow on an exponential basis with new offices and branches spread across the globe. In this article, we’ll introduce 10 AWS cost management best practices that promote optimization, and how you can go beyond AWS cost management by using an advanced cloud cost intelligence tool.

Platform as a Service (PaaS)

Organizations can use rightsizing tactics like spot instances, reserve instances, saving plans, to implement better cloud optimization. Under this model, the cloud provider’s entire income is generated from advertising money. Users get a discount or “no charge” for using the cloud service in return for displayed advertisements.

  • Schedule on/off times for non-production instances for developing, testing, and staging.
  • Too often, cost only becomes a consideration after a product has been built and launched.
  • Team members who have access to the right data at the right time can make timely changes that impact the bottom line and product quality.
  • The catch is that spot instances can be stopped at short notice by the cloud provider.
  • If you have an exponential growth curve, you may reach a crossover point where the system is no longer profitable.
  • No matter where your company is in its cloud journey, moving to the cloud impacts employees on every level, even if they don’t work with cloud every day.

This makes sense on the surface, but it often becomes an issue when pricing strategies are not tied directly to cloud costs. Shared infrastructure – Shared systems can offer cost savings or engineering efficiencies, but make it challenging to split costs across multiple teams. Large organizations should consider how they will chargeback or account for shared costs. Gaining this level of granular cost intelligence is the first step in cloud cost optimization. Once you do that, you’ll be able to tell where you’re spending unnecessarily and where you can invest more to get higher returns. Yet, how you use that intel could be the key to success or failure of your cloud cost optimization strategy.


What’s worse, when initial forays into the cloud create these issues, decision-makers can restrict, reduce, or put an outright halt to future cloud initiatives. Cost data is connected to individual features, events, and teams, so there is no need to search for the cause of unexpected cost spikes. In short, cloud cost intelligence represents the ultimate in transparency, giving finance, developers, engineers, and any other relevant parties the information they need, when they need it, to control cloud costs. Modern cost platforms can rapidly scale down resource usage, thus costs, as your application requires fewer and fewer resources. In addition, some tools can terminate EC2 instances based on predefined times or capacity limits. Both measures are hard to take in real-time and manually without compromising performance.

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