Mastering Cloud Cost Optimization: 7 Best Practices For 2023

2023/08/19 08:52

As public cloud services expanded their offerings, organizations were enticed to migrate their applications to the cloud, drawn by the prospect of enhanced agility, flexibility, and cost-effectiveness through pay-as-you-go pricing. However, this transition to the public cloud also brought about new financial challenges, prompting the need for cloud cost monitoring and reporting across all teams. Despite the cloud's presence for some time, many companies still struggle to manage cloud costs efficiently, leading to overspending by 13% and wasting 32% of their cloud investments.

To address these issues, a new discipline emerged called FinOps. FinOps comprises a set of best practices aimed at fostering collaboration among engineering, finance, technology, and business teams within a cloud-based environment. One of the most significant hurdles in implementing cost-cutting methods is convincing leaders to consider costs. Given the current difficult economic climate, it's no surprise that 81% of IT leaders have received directives from their C-suite to restrict or avoid increased cloud investment and prioritize cloud cost optimization.

What is cloud cost optimization?

Cloud cost optimization combines strategies, techniques, best practices, and tools to help reduce cloud costs

Cloud cost optimization refers to the systematic approach of minimizing expenses and maximizing efficiency within cloud computing environments. This process entails analyzing and fine-tuning the utilization of cloud resources, such as storage, processing capacity, and network bandwidth, with the goal of reducing costs while maintaining or even enhancing performance levels.

By implementing cost optimization strategies, companies can effectively save on their cloud infrastructure without compromising the quality of their services. There are several methods to achieve cloud cost optimization, including rightsizing instances, optimizing resource allocation, utilizing Pay-as-you-go, implementing autoscaling, and more.

How to optimize cloud costs?

Simplifying your adoption of FinOps is crucial for effectively reducing cloud expenses. Here are two key steps that leaders can take to optimize their cloud costs:

1. Attain Cost Visibility

The initial phase of developing FinOps capabilities involves gaining a clear understanding of the cloud bill and pinpointing the teams, projects, or departments responsible for overspending. Providing engineers with accessible cost insights that align with their experience and habits enhances cost awareness and enables informed decision-making for new cloud initiatives.

1.1. Maintain Cloud Budgets
Keeping cloud budgets in check requires tracking cost data to assess how rapidly the budget is being utilized, ensuring that teams do not exceed their allocated limits. Consistently monitoring expenses on a daily or weekly basis and extrapolating to estimate monthly costs helps in identifying potential anomalies and taking timely action to prevent them from escalating into significant issues.

1.2. Identify Inconsistencies
Cloud services are dynamic and can quickly get out of control if real-time pricing data is not readily available. Monitoring cloud bills empowers teams to scrutinize daily expenses, identify any irregularities, and address them proactively before they escalate into major problems.

1.3. Understand True Cloud Costs
While developing cloud budgets, many teams consider the cost of provisioned resources as advertised by cloud providers. However, engineers sometimes overprovision their applications to ensure optimal performance and availability, resulting in higher costs. To avoid this, it is crucial to consider the actual cost of the requested resources, providing a more accurate picture of cloud spending.

Cloud cost optimization requires continuous monitoring and improvement to maximize the benefits of using the cloud efficiently and save costs

1.4. Utilize Engineer-Friendly Metrics and Tools
Enhancing cost awareness among engineers involves presenting them with cost management information in their preferred format. Integrating cost metrics with the observability tools engineers are familiar with, which monitor real-time application performance, simplifies the inclusion of cost considerations in infrastructure decision-making.

1.5. Leverage Historical Cost Data
Harnessing historical cost data is crucial in addressing cloud cost challenges. According to a survey, 55% of engineers dedicated several hours each week to resolving cloud cost issues, dealing with unexpected cost spikes and disparities between projected and actual expenses. For 11% of respondents, these cost-related disruptions persist for an entire sprint or even longer.

The implications for product development are significant. However, with access to historical cost data, engineers can swiftly identify discrepancies and avoid unnecessary time wastage. This empowers them to focus on critical tasks, optimizing their efforts and driving essential functions forward.

2. Drive Cost Reduction through Automation

Achieving cost awareness is a vital initial step in embarking on a successful FinOps journey. Without understanding which teams or projects contribute to costs or cause sudden spikes, keeping cloud spending in check becomes a challenging task.

However, gaining cost visibility is often a manual process that involves techniques like labeling and configuration. This manual optimization necessitates employees to learn and apply various tasks, such as labeling, tagging, allocation, categorization, selection, monitoring, and reporting on cloud spend. Unfortunately, this becomes an everyday responsibility, making it time-consuming and potentially negating the resulting cost savings.

For organizations, relying solely on meticulous records of spending details is not sufficient. They seek to avoid unexpectedly large bills and uncover savings opportunities to weather financial uncertainties in shifting economies.

To address this, FinOps leaders prioritize optimizing cloud costs over mere visibility, and automation emerges as the solution to their challenges. Automated cloud management solutions can seamlessly integrate into the software development lifecycle when running cloud-native applications. In fact, automation serves as the backbone of cloud-native technologies and modern development practices. By embracing automation, organizations can efficiently reduce costs and achieve sustainable financial management in their cloud operations.

By effectively leveraging automation, businesses can streamline operations, eliminate manual inefficiencies, and achieve significant cost savings in the long run

2.1. Accelerated Development through Automation
Cloud migrations often entail shifts in methodologies, with agile development being a prime example widely embraced in the cloud. Within a dynamic cloud environment, teams iterate rapidly, release applications frequently, and maintain the reliability of their infrastructure.

Cloud-native development demands a unified approach to managing both infrastructure and application code. To fulfil these requirements, automation becomes pivotal. By automating deployments and adopting Infrastructure as code (IaC) methods using open-source tools, infrastructure code seamlessly becomes an integral part of the project. Storing it in a repository and versioning it alongside the rest of the code enables a faster development process. This cohesive automation strategy empowers teams to streamline their workflows, leading to more efficient and accelerated development in the cloud environment.

2.2. Harnessing the Power of Automated Development Pipelines
Automation plays a pivotal role in optimizing development pipelines, encompassing the entire process from development to testing and deployment. Embracing the industry-standard practice of continuous integration and continuous delivery (CI/CD) brings about a reduction in human error and ensures a consistent software delivery approach, ultimately enhancing team efficiency.

By employing automation in these pipelines, organizations gain the confidence to build and deploy applications to production environments seamlessly. This approach accelerates the development cycle and elevates business agility, enabling teams to stay agile, responsive, and proactive in meeting their software development objectives.

2.3. Optimizing Resource Utilization through Autoscaling
Engineers often adopt specific measures to ensure applications are readily available and can serve customers during peak periods. However, this approach can significantly impact cloud spending. To achieve continuous capacity management and maximize resource utilization, it is essential to leverage autoscaling. By carefully assessing and predicting development needs well in advance, autoscaling enhances both application availability and cost management. This proactive approach enables efficient resource allocation, ensuring that you have the right number of resources available when needed, ultimately leading to optimized performance and cost-effectiveness in the cloud environment.

Cloud cost optimization tools

Cloud cost optimization tools play a crucial role in analyzing resource utilization, identifying cost-saving opportunities, and automating optimization strategies, leading to significant cost savings over the long term.

Cloud cost optimization tools work by providing businesses with insights and functionalities to better manage and reduce their cloud expenses
1. Native tools from public cloud providers

Native tools from public cloud providers offer built-in cost-monitoring features that seamlessly interact with billing data. However, as your cloud usage expands, it's essential to consider advanced services, multiple accounts, and various cloud providers. Relying solely on native cost tools may not provide a comprehensive view or real-time data, particularly when using services from multiple cloud providers.

2. Custom and homegrown solutions

Another viable option is to develop your own tool, particularly when faced with the limitations of a traditional cost-monitoring platform that cannot effectively handle cost management for cloud-native applications. Building bespoke solutions allows for a highly customized approach that caters to the needs of different stakeholders involved in cloud planning, budgeting, and forecasting – from engineers and DevOps to finance and operations teams. By creating a tailor-made tool, organizations can address specific challenges and requirements, ensuring a more efficient and targeted cloud cost management strategy that aligns with their unique business goals and workflows.

3. Third-party cost visibility platforms

Consider exploring cloud cost management platforms that provide real-time monitoring and reporting of expenses. Third-party platforms are particularly beneficial for teams seeking a comprehensive view of their spending, facilitated by detailed cost allocation processes.

Implementing a successful FinOps approach hinges on the ability to provide real-time cost information to all employees, ranging from engineers to management. However, it's essential to recognize that various cloud cost optimization tools come with their own strengths and weaknesses. In many cases, organizations opt for a combination of multiple cloud cost monitoring and optimization approaches to address their specific needs effectively. This adaptive approach ensures that the organization can leverage the advantages of various tools while mitigating their individual limitations, resulting in a more robust and tailored cloud cost management strategy.

Cloud cost optimization best practices

Here are 7 cloud cost optimization best practices that can make a significant difference:

1. Utilize Cost-Reporting Solutions: 

Analyzing cloud costs manually can be daunting. Choose a cost-reporting solution that provides comprehensive insights and consider implementing a tagging and labeling system to attribute expenses to specific teams or projects.

2. Review Your Cost Optimization Strategy:

 Regularly assess your cloud cost optimization strategy and determine whether it aligns with the pre-reservation of resources or utilizing spot instances. Consider the factors influencing resource choices, whether driven by habit or data-driven analysis.

3. Evaluate the Drivers behind Cloud Resource Choices: 

Whether they stem from habitual practices or data-driven analysis. Understanding these factors will enable more informed decision-making in optimizing cloud costs.

Many businesses are grappling with soaring cloud expenses, making cloud cost optimization a critical need of the hour
4. Real-Time Cost Monitoring: 

Stay informed about the real-time cost of resources by setting up monitoring standards and alerts.

5. Eliminate Idle Resources: 

Identify and remove idle resources to reduce cloud bills without affecting application performance.

6. Address Overprovisioning: 

Investigate the resource requirements of applications and determine if there's a significant gap between the resources requested and provisioned. Mitigate overprovisioning to lower cloud costs without compromising performance or availability.

7. Consider Automated Solutions: 

Implement automated cloud cost optimization solutions to empower DevOps, engineers, and SRE specialists. Automation streamlines the configuration of cloud infrastructure, saving valuable time and enhancing overall business efficiency.

Let VNG Cloud optimize your cloud costs

VNG Cloud can provide solutions in cloud cost optimization through a range of services and tools tailored to meet the specific needs of businesses

vConsole - VNG Cloud Service is a website that offers comprehensive information about all the services provided by VNG Cloud, helping customers gain a more complete and overall understanding of the platform. The existing products/services available on the vConsole website include vServer, vStorage, vMonitor, vCDN, vColocation, and more.

On the vConsole website, VNG Cloud Service users can easily manage financial information related to the use of VNG Cloud Service's services, such as invoice details, payment history, credit usage history, statistics, and usage predictions.

Learn more about vConsole here.

In addition, to support businesses in expanding their operations, VNG Cloud has launched a dedicated Partner Portal channel for Partners and a Price Calculator tool with outstanding features:

About Partner Portal:
  • Discount management.
  • Partners and end users' account management.
  • Credit/discount fluctuation reports (detailed statistics on Partner/end-user discount history, credit history loaded into Partner's wallet, credit history allocated to Partner's end-user).
  • Revenue reports within a specific period.
About Price Calculator:
  • Service prices are updated to the latest at the time of quotation creation.
  • Provides cost estimates based on the desired service list for quotation viewing.
  • Supports users in entering discount levels directly on the tool.
  • Distinguishes user files (VNG Cloud's user, non-user, internal user) to display appropriate prices.
  • Supports downloading quotations in Excel format with standardized quotation templates.

Put an end to overspending on cloud resources and start optimizing your cloud cost management strategy today with VNG Cloud. Unlock your organization's potential for significant cost savings by exploring the latest cloud cost management statistics and adopting automated solutions.