14 Expert Tips to Effectively Manage Cloud Costs

Cloud computing is everywhere. Most companies rely on cloud computing to build ground-breaking services and provide the world with everything from on-demand car rides (Uber) to media streaming (Netflix). The cloud covers every business need, from flexibility to faster time to market and scalability, so it’s no wonder this is the place to be.

As exciting a time as it is for cloud-based businesses, not everything is rainbows and butterflies, especially when we talk money. 37% of cloud users have faced unexpected cloud costs over the last year, and a further 34% admit not being able to calculate how much their cloud vendor will charge them each month. 

Jumping into the deep end of cloud services without understanding the potential for hidden costs and indirect charges may leave a big hole in your wallet. In this article, we shed some light on the most common pitfalls you may face when setting up your organization in the cloud, so you can save money and still reap all the benefits.

A breakdown of cloud costs 

Before managing cloud costs, you must understand the inherent costs of cloud computing. The direct costs can be divided into three main categories:

• Computing – Costs are generally based on vCPU (virtual CPUs) and memory allocation. Vendors often offer a variety of options to suit your needs. Special hardware may be more expensive, and specific operating systems may require licensing fees.
• Data storage – While hard drives have become cheaper, cloud storage costs can increase. Customers are typically charged per GB/month and provisioned IO operations per second (IOPS), and the costs scale automatically based on usage.
• Networking – Cloud vendors charge customers for data transfer-based egress traffic (data leaving the cloud provider destined to networks outside of the cloud provider’s region and availability zone). Additional charges may apply for static IP addresses and VPNs.

Contrary to cloud computing, on-premises servers don’t get billed based on usage, but their costs include procurement, hosting, cooling, power, and networking, in addition to their setup, maintenance, and management costs. Once you expand on-premises computing, it is challenging to scale back down. You must also consider indirect business costs, such as downtime, and the time it takes to scale up. Lastly, managing physical security can often be overlooked, which is a vulnerability you don’t have to worry about in the cloud.

The hidden expenses of cloud services 

Direct cloud computing costs are easily accounted for when managing cloud environments or choosing a vendor. Most vendors offer flexible charging fees based on the resources you consume, which means that, yes, maybe a spike in traffic will have a higher cost, but unlike on-premise servers, the demand will be met, and you’ll pay for what you use. And a spike in traffic it’s usually positive for your business, so it is hardly a loss.

However, indirect costs associated with cloud computing may be challenging to predict and measure. Some hidden expenses may include:

• Vendor lock-in: The option to change vendors is essential to managing costs, but keeping your operation vendor-agnostic may be challenging. If you have adapted to the vendor’s platforms, switching vendors can be costly in time and money.
• Data transfer: Similar to vendor lock-in, you may wish to migrate your data. While the daily operations of incoming and outgoing traffic will be similar in size to complete data migration, a one-time high cost may be harder to stomach than many more minor charges over months.
• Unused resources: Whether it is a particular service you’re paying for or resources you have allocated, unused resources still cost you money. Unassigning resources and turning off unused services is a job that needs to be done, and work hours aren’t free either.

14 expert tips to effectively manage cloud costs 

There is always room for improvement regarding reducing cloud costs. Here are our best tips to get you started.

1. Implement Budget Alerts 

Set up budget alerts using cloud service provider tools like AWS Budgets or Google Cloud Platform’s Budget and alerts. This will notify you when your spending exceeds a predefined threshold.

2. Automate Scalability 

Use cloud services that support autoscaling, such as Amazon EC2 Auto Scaling or Google Cloud’s managed instance groups. This ensures optimal utilization of resources based on demand.

With autoscaling you can ensure you are not paying for unused resources and won’t get hit by overcharge costs. However, autoscaling is not complete unless you are able to do so across Clouds with ease and flexibility. Control Plane’s Capacity AI technology lets you pay for how much computing you use across all Cloud providers. Your application usage is billed by millicores and megabytes of memory, and your applications can scale up and down as you need, saving up to 70% of cloud consumption costs. 

3. Automate Identification and Deletion of Unused Resources: 

Autoscale sounds great but it can be a double-edged sword. With endless resources at your fingertips, it can be too easy for developers to allocate additional cloud resources, expecting them to auto-optimize. 

Creating new virtual machines for testing, cloning data, backups, and snapshots quickly and efficiently is excellent for an agile environment. Still, you must ensure you routinely purge any unused resources and data.

This is why your cloud management tool(s) of choice should track down unattached volumes, unused IP addresses, or underutilized instances. Regularly running cleanup scripts can help automate this process.

4. Optimize Instance Sizing 

Some resources can’t be easily autoscaled and must be correctly provisioned based on demand. Ensure you allocate instances with appropriate CPU, memory, and storage based on the application usage. Tracking any changes in the application over time will help forecast demand and set proper provisioning. 

Use monitoring and analytics to right-size your instances. Tools like AWS Cost Explorer’s Rightsizing Recommendations or Google Cloud’s Recommender can suggest modifications based on your usage patterns.

Again, this is where Control Plane, which provides a holistic platform solution, can bring cloud cost optimization different tools, which are Cloud provider agnostic, together under one roof.

5. Analyze Savings Plans vs. On-Demand Pricing 

Some vendors, such as AWS, offer saving plans based on long-term commitment. If you can accurately predict your cloud computing needs, you can save a lot on costs. This tip may seem contradictory to autoscale, but it is also about appropriate usage.

A long-term plan will save money if you run an application with static resource consumption. But even more dynamic applications can be applied to saving plans. Monitoring your application’s resource consumption for a trial period using on-demand services and switching to a savings plan once you have more data is an effective way to save money long-term. Remember to use cloud service provider calculators to determine if a savings plan is the right choice for your workload.

6. Implement a Multi-Cloud Management Strategy

Employing a multi-cloud model has many benefits, such as avoiding vendor lock-in and reducing downtime risks. However, you must consider the additional costs associated with multi-cloud strategies:

• Vendor relationships – The more resources you buy from a vendor, the better deal you’ll get, so splitting up your cloud resources over multiple vendors may result in higher overall costs.
• Visibility issues – Managing multiple cloud infrastructures can be challenging as each vendor gives you insights only on their platform. Getting a complete picture of your cloud resources when you’re using a single vendor is a simple matter.
• Transferring resources – Moving your applications between vendors can have significant traffic charges, so you’ll need to be considered when choosing which application to deploy on which platform.
• Unused resources – Ensuring no instances are allocated unnecessarily is more challenging with you must oversee a multi-cloud setup.

Control Plane offers a competitive advantage over managing a multi-cloud model with our Universal Cloud Identity technology. Our platform will dynamically allocate resources based on your needs from multiple vendors, reducing much of the overhead costs associated with multi-cloud models while maintaining the benefits of uptime and avoiding vendor lock-in.

7. Idle Resource Management 

On-premise solutions must have available resources in case of a spike in traffic or usage, but cloud computing offers scaling. You may have applications that require dedicated instances, such as testing environments but aren’t used 100% of the time. Identify any idle resources and consolidate them to prevent waste.

To manage your cloud costs, consider implementing auto-shutdown scripts for non-production resources or use services like AWS Instance Scheduler to automate start-stop times.

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8. Analyze Reserved Instance Utilization 

Reserved instances are another way to save money if – and only if – you have a clear picture of your future usage. A 1-3 year commitment is a significant upfront investment, but you could save up to 70% of the cost. However, any reserved instances sitting idly still cost the total price, so consider carefully when and how to incorporate them into your cloud strategy.

Consider reserved instances only after thorough forecasting of your compute needs. Monitor reserved instance utilization and modify reservations as needed.

9. Implement Resource Tagging and Cost Allocation

Tagging resources improves the visibility of your cloud resources. There are many benefits to tagging, but cost allocation is the main benefit for our purposes. Resources assigned to different departments should be tagged as such, enabling you to match cloud expenses to department budgets. Use tag-based reports to analyze costs and optimize resource allocation.

10. Manage Shadow IT through Governance

Implement governance tools and policies to detect and manage shadow IT. Using Identity and Access Management (IAM) policies can help control access and avoid unauthorized use.

Employees may be tempted to use your company’s cloud resources for personal or unapproved professional use. You can use IT management solutions to gain visibility into shadow IT practices at your organization or monitor individual employees. 

11. Leverage Spot Instances for Non-Critical Workloads 

Like you, cloud vendors don’t like having idle infrastructure. If nobody is paying for an instance, it goes to waste. Many vendors offer spot prices on spare instances for steep discounts to prevent this waste. Take advantage of these discounts and use spot instances for fault-tolerant and flexible applications. Also, consider using spot instance automation tools to manage interruptions and maintain workload continuity.

12. Ensure Vendors’ Compliance with Security and Privacy Standards 

As your organization grows, you will be bound by compliance regulations. Having to investigate vendor compliance in addition to your organization’s compliance is a costly process. When choosing vendors, ensure they comply with any regulatory requirements you may need.

Evaluate your cloud service vendors for compliance with standards like ISO 27001, GDPR, and HIPAA. Non-compliance can lead to legal issues and financial penalties.

13. Consider Serverless Architecture for Event-Driven Use Cases

Serverless computing like AWS Lambda or Google Cloud Functions can be cost-effective for intermittent or event-driven workloads.

Unlike instance allocations, serverless architecture vendors only charge you for traffic and storage. In addition, serverless environments (can) save you time due to no setup requirements, saving you the need to allocate personnel for infrastructure management. Employ serverless architecture where appropriate. Control Plane supports serverless mode, giving you more flexibility and enabling you to pay only for what you need. 

14. Implement a Data Lifecycle Policy

Effective data management is mo re than provisioning and scaling data storage. Data lifecycle policies can automatically delete old data when it is no longer needed. Data migration may have steep traffic costs, but a lower cost per GB may be worth the price. But most importantly, data discovery is critical to understanding where you can reduce costs. After all, if you don’t know what data you have, you can’t know how to handle it.

Implement policies for your data storage that moves older or infrequently accessed data to more cost-effective storage tiers. Services like AWS S3 Lifecycle policies or Google Cloud’s Object Lifecycle Management can automate this process.

Reap the benefits – Avoid the pitfalls

A multi-cloud strategy can have many benefits, but you may spend more than you use without proper resource allocation. Minimizing unused resources and setting a realistic budget for your cloud investment is a start, but it’s only the beginning. As your company scales and your team’s workload grows, staying on top of your cloud costs will be increasingly challenging. 

Control Plane enables you to mix and match any service you need from AWS, GCP, and Azure, giving you the power of choice and complete control to use as many or as few cloud resources as you need. With cloud repatriation, you can move your workloads anywhere and still consume your cloud vendors’ services. Ready to enter a new world of cloud computing? Sign up here.