Cloud cost optimization. The art of savings

Many businesses meet the need to modernize aging IT infrastructure. According to IDC, in 2022, companies worldwide purchased servers worth more than $122 billion.

There is always a risk of purchasing either an insufficient amount of equipment, subsequently purchasing it later at higher prices, or excess, which can lead to unacceptable downtime or storage of equipment in a warehouse.

The transition to cloud services allows businesses not to purchase server hardware and software and thus to avoid significant initial investments (CAPEX - capital expenditure). Instead, they pay only for the actual consumption of resources, transferring IT infrastructure costs to the operating expenses (OPEX). Reducing CAPEX and shifting infrastructure costs to OPEX brings financial flexibility.

However, according to a 2023 study from Flexera, 45% of companies exceed their budget on cloud services, while at the same time, 28% of companies consider their cloud spending to be suboptimal.

There are often cases when a specialist starts an expensive service and forgets to stop it after a short period of use. Such a service might be needed just for a few minutes but could be left without attention and forgotten for days, weeks, or months. The developer most likely is not financially responsible for such expenses, but it is unpleasant for the budget owner to learn about unexpected and sometimes significant expenses.

Therefore, control over cloud costs becomes a priority. According to the same Flexera report, a whopping 62% of organizations surveyed give this a top priority.

The balance between economy and development

The cloud has enormous potential. Effective cloud cost management helps you reduce costs and make efficient use of available resources.

Cloud cost optimization is a cost management strategy that involves monitoring and analyzing cloud services and resource usage. That is why it is certainly very important for modern business. First, it helps reduce operating costs, manage your budget predictably, and avoid unexpected expenses. Second, maximize the use of computing resources, providing higher performance and efficiency. Finally, it helps to increase the company’s competitiveness and focus on strategic objectives.

A good strategy will balance the necessary performance, cost, and security requirements. It will also ensure that cloud investments are optimal and support business continuity.

Common problems

One of the main challenges when optimizing cloud costs is the complexity of the infrastructure itself. Cloud systems can be unwieldy and leave businesses confused about which resources are being used and which can be optimized.

Lack of transparency in cloud resource usage and costs is another common problem. Company employees often do not have access to information about what services and resources they use, and how much it costs. This situation can lead to financial surprises and unnecessary expenses that could have been avoided.

Predicting future cloud resource usage and costs is also challenging. Business needs can change, and it is often impossible to accurately predict how many resources will be needed. Such uncertainty is unforgivable in business and can lead to a lack of resources or excessive waste. Effective optimization requires the ability to adapt to changing circumstances and forecasts.

Optimization techniques

One of the key ways to save money when using cloud infrastructure is to choose instances with the proper characteristics.

Instance in the programming context is translated as “an instance of an object.” For example, we have a notepad window - this is one instance of the notepad application or one instance, we open another notepad - we get two instances.

In the cloud-computing context, these are virtual computers or servers that are isolated virtual environments that can be launched, configured, and managed remotely via the Internet to perform computing tasks.

If your business needs to optimize cloud costs, here is what you should pay attention to first:

1. Correctly sized instances. Often, companies use instances that are too powerful for their needs, which further increases costs. Optimization starts with selecting the proper size instances to meet your actual needs.
2. Reserved instance usage allows you to get significant discounts on cloud resources. This is a good option for stable and predictable workloads to reduce costs over the long term.
3. Implementing automatic scaling adapts your infrastructure to changing workloads. This way, you can use only the resources you need during peak activity and scale them down during off-peak periods.
4. Use of spot instances - cheap but temporary cloud resources. They can be used for tasks that do not require constant availability.
5. Storage cost management. Don't forget to delete outdated data, and use storage with different access levels to optimize storage costs.
6. Serverless architecture allows you to pay only for the computing resources used. Serverless architecture is a way to create and run applications and services without the need to manage infrastructure.
7. Containerization allows you efficiently manage applications and their dependencies, simplifying deployment and scaling, which ultimately reduces costs.
8. Effective network management and choosing the right network solutions help reduce the cost of data transfer between resources in the cloud.

Cloud Cost Management Strategy

There are specific algorithms for fighting cloud overspending that increase cost awareness, reduce costs, and maximize impact.

1. Financial management policy. Budgets must be defined, rules governing the use of cloud resources, and procedures for approving expenditures must be established. This way, the entire team will have an understanding of budget constraints and cost-effectiveness.
2. Usage monitoring. It's important to track the cloud resource usage and how much it costs. This will provide visibility into the current state and identify excess costs or ineffective use. You need to react quickly and take corrective measures.
3. Regular audits are necessary to examine cloud spending in detail and identify potential areas for optimization. During these reviews, costs that can be reduced or optimized can be identified.
4. Stakeholder involvement. Successful optimization requires the active participation of all team members. Every employee must understand the importance and benefits of optimization and be involved in identifying and implementing improvements.

There are many helpful tools that provide detailed spending information and allow you to create budgets and set cost management rules. These tools help you track and analyze cloud resource usage.

FinOps: Uniting finance and technology

How can you effectively manage your cloud costs and avoid financial surprises? Let's look at a typical situation.

The company introduces cloud technologies and provides free access to them for developers, hoping for their responsible and optimal use of resources. However, practice shows that this does not always work. Professionals often run over-powered virtual machines in pursuit of maximum performance and reliability. Or they forget to promptly deactivate unnecessary resources, remove unused disks, and so on. As a result, resources are not used, but expenses continue. However, restricting the freedom to use resources can eliminate the benefits of cloud technologies.

There needs to be a balance that satisfies those responsible for the finances and those who use the cloud resources (developers). Developers need freedom to choose resources to complete their tasks, but finance professionals must be able to predict and optimize costs according to business objectives.

The concept of FinOps comes to the rescue by combining financial and technical practices to manage costs. It establishes a dialogue between finance and technical departments, promotes understanding and collaboration, and ensures cost transparency. In this way, it is possible to resolve some conflicts of interest between the financial service and the IT department, ensuring a balance of interests of all departments of the company.

FinOps (Financial Operations) is a set of practices and methodologies for effectively solving internal financial and organizational business problems:

• Cost monitoring and analysis. Identify where and how resources are used, and identify potential areas for growth or reduction.
• Budgeting and forecasting. Plan your expenses, avoiding unexpected financial surprises.
• Resource optimization – identifying unused or redundant resources and taking steps to optimize them.
• Aligning expenses with business goals. Every cloud spend should serve a specific purpose and deliver business value.
• Ensuring transparency - creating an accounting and reporting system so each team member can easily track and understand cloud spending.
• Training and knowledge sharing - to involve more people in the cost management process.
• Collaboration between departments. FinOps helps achieve a balance between the technical and financial aspects of managing cloud costs.

External optimization assistance

Many cloud providers also offer cloud cost optimization services. They analyze current infrastructure, identify opportunities for improvement provide recommendations, and sometimes help implement effective strategies to reduce costs.

SIM-Networks has significant experience creating IT infrastructure and provides companies with valuable solutions to optimize cloud computing costs. Our team of experts has specialized competencies in solving complex problems to improve the efficiency of cloud resources and implement innovative solutions that help reduce costs while maintaining high performance.

In our practice, there was an indicative case when, before making a final decision, the client wanted to get an accurate assessment of the necessary computing power to ensure the efficient operation of his business. We proposed using the scalability of cloud solutions as a tool for assessing the load on computing resources. Our solution included advanced deployment of the IT infrastructure in the SIM Cloud. This allowed the client to accurately determine his needs and avoid unnecessary costs when purchasing equipment and software.

SIM-Networks is committed to providing businesses with the necessary tools and expertise to achieve their goals. We believe that sharing knowledge and experience can help businesses make their cloud computing operations cost-effective and contribute to their growth and success.

Conclusions and prospects

Cloud cost optimization is significant in modern business computing strategies. This process includes several key aspects: selecting the right instances, establishing cost management policies, and monitoring and analyzing costs.

Cloud cost optimization is not just a strategy to reduce costs. It is also a way to improve the efficiency and manageability of computing resources. This is not a single measure, but an ongoing process. Reducing costs in the cloud is a task not only for the IT department but the entire company. Properly configured infrastructure in the cloud allows organizations to quickly respond to changing needs and remain competitive.

With the variety of tools, services, and techniques available, organizations are well-positioned to achieve significant savings and more efficient use of their cloud resources. This reduces the financial burden and allows you to focus on innovation and business development.

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