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  • Blog January 30, 2020

    Best Practices for Cloud Cost Optimization

    3 Minutes Read

The cloud promises (and delivers) great benefits to organizations across the globe—agility, scalability, and of course, cost savings through a pay-as-you-go pricing model. Although a company is only billed for what they use, determining what has been used and how it is itemized on a cloud vendor’s invoice can be a daunting task that can make CIOs’ heads spin. Most organizations have multiple teams using cloud resources in different capacities round the clock, and cloud bills can quickly evolve into a twisted mass of charges that are unclear and challenging to follow.

According to Gartner, as much as 70% of cloud costs are wasted. Cloud cost optimization the process of eliminating waste, right sizing services, identifying unutilized or mismanaged resources, and finding opportunities for discounts. Demystify your cloud bill and improve your bottom line with the following best practices for cloud cost optimization.

As of 2019, 90% of companies were on the cloud and by 2021, 94% of workloads will be processed by cloud data centers (Cisco).

Assess Cloud Asset Utilization

One of the biggest drains on your cloud resources is unutilized assets. Companies around the globe spend millions on virtual machines (VMs) that were spun up to perform a test or short-term function, and then are left idle. Sometimes referred to as “zombie servers”, these unused VMs no longer serve any functional purpose for your organization, but are still a line item on your cloud bill. Another common waste is storage or services that are “orphaned” once the resource that used them is deleted. According to Michael Liebow, global managing director of Accenture Cloud, these unused assets can inflate your cloud bill by up 20 to 40 percent.

In addition to assessing which assets you aren’t using and removing them, you should search through your instances to find which ones are idle or under-utilized. An enterprise is billed for 100% of an instance, even if only 1% of it is used, so combining tasks into fewer instances can save you money and clean up unnecessary clutter. With auto-scaling and load balancing in the cloud environment, IT managers no longer need to worry about leaving space for spikes in traffic. Combining jobs allows you to free up precious cloud resources for future needs.

Finding your underutilized assets can be challenging, as some monthly cloud bills contain millions of lines of charges. Cloud bills are often sent every 30 days, which is often too much lag time to catch unused assets and free yourself of them before being charged. Requesting daily line items and implementing FinOps software can help you manage costs in real-time.

Right-size Your Cloud Configuration

Right-sizing is the method of finding your best-fit cloud configuration in order to achieve maximum performance for minimal costs. The process includes finding the optimal network settings, storage, computing, graphics, and more for your instances. Without right-sizing your cloud spend can quickly spiral out of control, but with over 25 million cloud configuration options, it’s not always an easy task to undertake.

In order to right-size your cloud configurations, you must start with a very clear picture of your usage patterns and existing infrastructure. The first step is running an inventory of all applications you have running, both on physical and virtual machines. Next you want to assess your performance metrics and usage patterns to determine your compute, storage, and network needs, as well as identify the times of day that assets can be turned off or taken offline.

The cost benefits of the cloud cannot be fully realized unless your workload is accurately right-sized. It’s essential to continually perform in-depth right-sizing analyses to maximize your ROI.

Prepay with Reserved Instances

For applications with relatively predictable resources and workload requirements, Reserved Instances (RIs) can provide significant cost savings. According to Amazon, RIs can provide up to a 75% discount when compared to on-demand pricing, and they can help your organization plan and budget for years in advance, as most RI bundles come in 1 to 3-year contracts.

Most 1-year Standard Reserved Instances come with the flexibility to change your instances size, networking type, and availability zone. Convertible 3-year Reserved Instances are even more flexible, giving you the freedom to change operating systems, tenancies, and instance families with ease.

Before purchasing RIs, make sure that you do a thorough analysis of your past usage in order to calculate your needs. Azure’s RI pricing guide and the AWS Management Console are great resources for calculating your needs.

Capitalize on Spot Instances

Spot Instances are essentially spare computing capacity that you can bid on, and they offer discounts up to 50-90% off the price of on-demand instances. However, spot instances are not always readily available and can be terminated with very little warning, which means they are best suited for quick tests, batch jobs, or tasks that can be terminated quickly.

With most spot instances, your bid price will not change while your instance runs. If there is a price spike, you will receive a 2-minute warning and your instance will be terminated. Various vendors also have spot packages that allow you to specify the duration you need and negotiate a price based on that timeframe.

Spot instances are an affordable way to insert a bit of flexibility and extra coverage in your
cloud
computing package, allowing you to enable new types of applications.

Consider Volume Discounts

According to a 2018 Gartner survey, 81% of organizations using public cloud are using more than one. Of course there are advantages to avoiding vendor lock-in by using multi-cloud solutions, but it is worth considering whether or not your organization would benefit from the potential volume discounts that come from using a single cloud vendor.

Using a single cloud vendor can be well suited to start-ups or organizations that don’t have a huge need for cloud computing yet, or organizations that are using the cloud to host a single application, such as a CRM (customer relationship management) or ERP (enterprise resource planning) tool. That being said, the single-cloud option can benefit larger enterprises as well. If your organization has a large enough cloud spend and has a history of positive experiences with one vendor, it might be worthwhile to consider the significant discounts and loyalty programs that come with meeting certain spending thresholds. Additionally, one must consider the hidden costs of using multiple cloud vendors, which include training staff on each program, administrative hassles, and paying for traffic back and forth.