What is cloud cost optimization?

Think about your current budget, how much of it goes to cloud services and solutions? If you’re like any company using cloud tech, chances are a huge amount of your budget is sunken in maintaining the cloud that your critical solutions rely on.

Gartner estimates that this year, cloud market valuation will reach $678.8 billion, marking a 20.4% increase from last year’s numbers. With advancements in tech and innovations in AI, all eyes are on cloud tech, so much so that companies are diving headfirst into the tech and overspending. Vertice found that in 2023, the average company overspent on cloud by $3.8 million, with 56% of companies allocating more resources to cloud computing; stats like this are exactly why cloud cost optimization is needed.

Cloud cost optimization sees companies using varying techniques, strategies, tools, and other best practices in order to reduce their cloud costs and optimize their resource usage. As a result of optimizing, companies find themselves balancing cost and performance, ensuring that the resources they consume are reflected with the cost they pay. From identifying and stopping underused resources to stopping service usage completely, cloud cost optimization can be approached in many different ways depending on the needs of the company, but why does optimizing matter?

Why Optimize Cloud Costs?

As the name suggests, optimizing cloud costs yields the most positives for your company in the financial sector, cutting out cloud spending where it’s unnecessary while encouraging usage of other, more efficient resources. Companies that have begun optimizing their cloud spending and have continually kept up with this process have found these benefits:

Stronger Cloud Cost Savings and Budget Insights 

According to IBM, the typical organization wastes about 32% of their annual spending on cloud services. Spending can quickly become overlooked in the world of cloud, with new services and often over-provisioned resources draining your budget more and more. Perhaps the biggest benefits of optimizing your cloud spend is being able to decrease that statistic and save more on your cloud computing bills.

Cost savings in the cloud department positively affects other facets of your business as well. 

Less spending in the cloud sector of your business allows more cash allocation towards other departments of your business.  Departments that might’ve been overlooked because of a limited budget now have the chance to grow and innovate.

Having optimal cloud spending increases your budget oversight and transparency as well, ensuring that cloud teams are only spending on what they need and have the bandwidth to adjust accordingly. Without unexpected costs, you’re able to set stronger budget projections and create foolproof strategies. In addition, you won’t have to worry about pesky cloud computing hidden costs, with cloud cost visibility giving you a detailed usage/cost breakdown.

Efficient Cloud Optimization

A crucial part of cloud cost optimization is efficiently using your resources. Resource efficiency can be achieved by various means: cutting off resources that are over-provisioned, right-sizing resources that were inflated, or finding open-source alternatives, just to name a few. More efficient resource usage not only drives costs down, but also makes your cloud operations optimized as a whole.

Reduced Security Risks

Over-provisioned and unused resources can create opportunities for security leveraging. Optimizing your cloud usage reduces the grounds for attack and encourages high service visibility and monitoring in order to stay on top of your usage.

Cloud Cost Optimization Best Practices

Cloud cost optimization comes in many forms, especially depending on the stage of your application and the amount of cloud services you currently use. That being said, all companies in the process of optimizing cloud costs start by assessing their current bill.

A typical cloud bill would consist of these elements:

• Compute Resources Costs: costs incurred for processing power, usually based on instance size and operation duration
• Storage Costs: costs incurred for storing data within the cloud, with different add-ons and transfer fees costing more
• Managed Service Costs: the costs of using a cloud provider’s managed services, usually billed on the per-hour rate
• Data Transfer Costs: the costs of moving data in and out of your cloud, normally known as ingress and egress costs
• Support Costs: the costs for professional support

Understanding these costs and how your usage, or lack thereof, is affecting the grand total of each price element are key to optimizing your cloud costs. Along with analyzing your monthly cloud bill, here are some cloud cost optimization best practices: 

Identifying Areas of Improvement

Have you ever bought something you thought you would use everyday for it to be used only once? Many users fall under this same category when it comes to cloud resources.

Underutilized or overprovisioned cloud services and resources have been the bane for developers since the beginning of cloud computing- just check out this Reddit thread on accidental cloud spending. While understanding your bill is the first step to getting your cloud spend under control, identifying where you can de-provision resources is equally important. 

In today’s cloud environment, provisioning resources and instances is extremely easy, but with the amount of moving parts involved in cloud operations, forgetting to de-provision those resources is also extremely easy. Setting up a monitoring and analysis system to track resource usage and spending is a must. Many cloud providers offer in-house monitoring tools, though third-party tools are available if your needs are specific. Typically, monitoring tools will send alerts based on resource usage, namely CPU, disk, memory, and bandwidth, though configuration is flexible. Resources that are both on the low and overly high ends of the predetermined levels should be considered for removal if it makes sense to.

Heatmaps can also be used to identify usage patterns, giving development teams an idea of which resources are used the most and allowing them to adjust their budgets accordingly. This cloud cost forecasting is beneficial in allocating capital towards other departments as well.

For teams that often provision new resources based on new projects, resource-based monitoring and alerts can help curb your company’s overall cloud costs.

Rightsizing Your Cloud Services

The issue of unused resources stems from buying more than your application actually needs. Rightsizing involves analyzing your current cloud loadout and resources and modifying both to ensure that your application only uses what it needs. This doesn’t just mean reducing resources, rightsizing can also entail increasing resource utilization where capacity is close.

Achievable through different cloud cost management tools, rightsizing firstly involves monitoring and identifying resources where gaps can be filled or where deletion can be done. Rightsizing is typically approached through load balancing or autoscaling, automatically adjusting resource provisioning and consumption based on app workload.

A great resource for rightsizing is Kubernetes. Kubernetes automatically scales your workloads, ensuring that resources are efficiently consumed. In the case that your workloads require more resources, Kubernetes will automatically distribute that traffic to increase uptime alongside resource consumption through their load balancers. A problem with Kubernetes, however, is that it can be complex for many engineering teams.

Learn how you can reduce your cloud costs and optimize your workloads with the help of Lyrid Managed Kubernetes. 

Cloud Discounts and Savings Plans

Many cloud providers actually offer cloud discounts and savings plans to curb the cost of their services. Discounts are usually offered in the form of different instance types:

• Reserved Instances (RIs): A reserved instance is a discount that requires a usage commitment of a specific instance type for 1 to 3 years. Companies can save a considerable amount on their cloud spending, roughly 75% compared to on-demand instances. While this is beneficial for a financial standpoint, RIs require an upfront payment and are not recommended for unpredictable workloads.
• Spot Instances (SIs): Spot instances are instances that are auctioned off by cloud providers. Great for last minute purchases, SIs can be up to 90% off at times, with the discounts depending on availability. While SIs are extremely cost effective, they are also subject to the cloud provider's discretion; the underlying provider can interrupt SIs at any moment. These instances are ideal for noncritical workloads.

In addition to discounts, most cloud providers offer savings plans, typically based on the pay-as-you-go pricing model. Unlike instances, savings plans don’t commit you to using a certain instance and are generally offered permanently. 

Finding the Right Cloud Storage Option

One of the main contributors to your cloud bill, a competent storage option is extremely important for any business, no matter the size. While cloud storage might seem like a one-size-fits-all solution, utilizing wrong storage can actually drive your costs up while sacrificing your data efficiency. 

The most commonly used storage option is Amazon S3 Cloud Object Storage, with that option being extremely convenient and offering unlimited storage. Despite this, many businesses might find that S3 won’t fit their data needs. For a more tailored cloud storage solution, many organizations looks at the two most common storage solution options: 

• Block Storage: High performance cloud storage that splits data into equally-sized blocks that is suitable for transactional and structured data
• Object Storage: Cloud storage that stores data into objects, and those objects into flat data structures known as files. Object storage is a cost-effective option for storing unstructured data

Block storage and object storage serve wildly different uses cases, however making the most of these storage options makes all the difference. Finding the right storage can provide an optimized data experience, while reducing your data operating costs (outside of ingress and egress). 

Using Multiple Clouds

Whether you’re taking a multi-cloud and going cloud agnostic, or taking the hybrid cloud approach, working with multiple clouds is a game changer in cloud cost reduction. 

By going multi-cloud or cloud agnostic, you’re able to leverage all of your favorite features from individual cloud providers, without the vendor lock-in. This approach also allows you to take advantage of the different pricing plans from various cloud providers, giving you a cloud experience that is truly yours. 

Over 80% of organizations that use cloud take a multi-cloud approach for good reason. Not only do those organizations save more on cloud costs and aren’t trapped within a single provider, but they also enjoy higher flexibility and can avoid any service outages and performance issues that a single cloud might be experiencing.

Reduce Cloud Costs with Lyrid

Optimizing cloud spend is the natural next step for companies working with cloud providers. By avoiding unnecessary costs in the form of overprovision and underutilized resources, organizations are able to plan and set budgets that affect not only development divisions, but all facets of their business.

Whether your cloud cost optimization strategy calls for restructuring your storage approach or onboarding more cloud cost optimization tools, one thing is certain: Lyrid is here to help. 

Experience a cloud approach tailored to your business with Lyrid, a cost-effective multi-cloud solution aimed at automating cloud native deployments. Lyrid offers various solutions to help you optimize your cloud spending, without sacrificing performance. From Managed Kubernetes to dedicated object storage, Lyrid is dedicated to offering some of the best cloud solutions without having to break the bank. Just ask Aido Health; with Lyrid, Aido was able to reduce their cloud spend by 58%, futureproofing their tech stack and opening new revenue streams in the process.

To learn more about how Lyrid’s cloud cost optimization services, book a call with one of our product specialists!