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What Is Cloud Cost Optimization? How to Achieve It via FinOps

April 13, 2023

cloud cost optimization

When public cloud services expanded their offerings, organizations started moving their applications to the cloud, inspired by the promise of greater agility and flexibility combined with the cost-effectiveness of pay-as-you-go pricing.

Many soon learned that running workloads in the public cloud introduced a slew of new financial challenges. Cloud cost monitoring and reporting became part of every team's to-do list.

Although the cloud has been with us for a while, companies struggle to control cloud costs. Businesses often overspend by 13% and squander 32% of their cloud investments.

This increased focus on cloud cost management and optimization brought to life a new discipline called FinOps. FinOps is a set of best practices that help engineering, finance, technology, and business teams work together in a cloud-based environment. 

The most difficult aspect of implementing cost-cutting methods is convincing engineers to consider costs. Engineers seldom made such decisions before the cloud, which provided quick access to resources on a silver platter.

No wonder, in the current economic climate, 81% of IT leaders have been directed by their C-suite to restrict or avoid increased cloud investment and focus on cloud cost optimization. 

Implementing cost optimization strategies saves companies on their cloud infrastructure without sacrificing service quality. Cloud costs can be optimized in a number of ways, including rightsizing, resource allocation, reserved instances, autoscaling, and more.

How to optimize cloud costs

Streamlining your FinOps adoption is critical to reducing cloud bills. Here are two key steps leaders can take to optimize their cloud costs:

1. Achieve cost visibility 

The first step in building FinOps capabilities is understanding the cloud bill and identifying which team, project, or department causes overspend. Making cost insights accessible to engineers in a way that fits their experience and habits helps increase cost awareness and gain solid metrics to plan new cloud initiatives.

Keep cloud budgets in check

Cost-tracking data help review how quickly the cloud budget is spent and ensures your teams don’t exceed it. Monitoring costs involves looking at daily or weekly expenses and extrapolating them to reasonably approximate monthly expenses.

Find inconsistencies

Cloud services are dynamic. Things spiral out of control when your team can't access real-time pricing data. Monitoring your cloud bills allows you to check daily expenses, spot anomalies, and take action before they snowball into major problems.

Know the true cloud costs

Many teams consider the cost of provisioned resources when developing cloud budgets. These are the tariffs that each cloud provider makes public. However, engineers sometimes overprovision their applications and bypass the cap to ensure they work well and are always available.

This increases the real cost of consumed resources. To avoid overprovisioning, consider the cost of the requested resources rather than those already set up and get an accurate picture of your cloud spend.

Use engineer-friendly metrics and tools

Providing engineers with cost management information in their preferred way raises cost awareness and helps them make better infrastructure decisions. Engineers are accustomed to observability tools that monitor application performance in real time. Adding costs to the mix is ​​easy when you use a cloud cost management software that integrates metrics with these operational tools.

Leverage historical cost data

Fifty-five percent of engineers spend a few hours each week solving cloud cost issues, ranging from unexpected cost spikes to discrepancies between predicted and actual expenses. Cost-related disruptions last a sprint or longer for 11% of responders!

You can only imagine the impact on product development. With access to historical cost data, engineers can immediately spot discrepancies and avoid wasting time that could be better spent on mission-critical functions.

2. Reduce costs with automation

Gaining cost awareness is the first step on a FinOps journey. It's impossible to keep cloud spending under control without knowing which teams or projects add to the costs or account for sudden spikes.

However, cost visibility is often achieved manually with techniques like labeling and configuration. Manual optimization requires employees to learn to label, tag, allocate, categorize, select, monitor, and report on cloud spend. This isn’t a one-time but an everyday task. The work required to achieve cloud cost visibility can render the resulting cost savings insignificant.

This makes many cloud cost monitoring solutions time-consuming and difficult to scale. Organizations want more than just meticulous records of “who spends how much on what.” They want to stop paying unexpectedly large bills and discover savings to weather the financial storm when the economy shifts.

FinOps leaders care more about optimizing cloud costs than visibility, and automation is the answer to their problem. Automated cloud management solutions can be used throughout the software development lifecycle when running cloud-native apps. In fact, automation is the backbone of cloud-native technologies and modern development practices.

Faster development with automation

Changes in methodology are common in cloud migrations. A good example is agile development, which many teams have adopted in the cloud. In a dynamic cloud environment, teams iterate quickly, release apps frequently, and keep their infrastructure reliable.

Cloud-native development also requires managing infrastructure and application code in a unified environment. To meet these needs, you can automate deployments and use infrastructure-as-code (IaC) methods with open-source tools to make infrastructure code part of the project, store it in a repository, and version it like the rest of the code for a faster development process.

Automating development pipelines

Another area that benefits from automation is development pipelines – processes from development to testing and deployment. Continuous integration and continuous delivery (CI/CD) is now an industry standard to reduce human error and maintain a consistent software delivery method, thereby increasing team efficiency.

With automation-powered pipelines, you can confidently build and deploy applications to production environments, accelerating and improving business agility.

Resource autoscaling for maximum utilization

Engineers implement certain procedures to make applications available and serve customers at peak times. This directly impacts cloud spending. To use continuous capacity management based on autoscaling, assess and predict your development needs well in advance. Autoscaling improves both availability and cost management.

Cloud cost optimization tools

Cloud cost optimization tools analyze resource utilization, identify cost-saving opportunities, and automate optimization strategies, saving significant cloud costs over the long term.

Native tools from public cloud providers

Built-in cost monitoring tools are offered directly on cloud provider platforms and interact seamlessly with billing data. But as your cloud footprint expands, consider using advanced services, accounts, and cloud providers. Native cost tools may not give you a complete picture or access to real-time data, especially when using services from multiple cloud providers.

Custom and homegrown solutions

You can also build your own tool, especially when the only option is a traditional cost-monitoring platform that can’t handle cost management for cloud-native apps. Bespoke solutions can be tailored to each stakeholder – from engineers and DevOps to finance and operations – involved in cloud planning, budgeting, and forecasting.

Third-party cost visibility platforms

Another option to consider is cloud cost management platforms that allow you to monitor and report on expenses in real time. Third-party platforms work best for teams looking for a detailed picture of their spending based on cost allocation processes.

Setting up a FinOps approach is hard until you can give all employees – from engineers to management – real-time cost information. All cloud cost optimization tools come with pros and cons. Organizations often turn to multiple cloud cost monitoring and optimization approaches when a single solution doesn’t meet all their needs.

7 cloud cost optimization best practices

A few best practices can save the day when optimizing cloud costs.

  1. Check your cloud bill and allocate resources. Manually analyzing cloud costs can be challenging, so use a cost-reporting solution to get all the insights. Develop a tagging and labeling system to assign specific expenses to teams or projects.
  2. Create and review your cloud cost optimization strategy. Check whether it’s based on the pre-reservation of cloud resources or spot instances. 
  3. Consider the factors driving cloud resource choices – whether it's a habit or a data-driven analysis.
  4. Know how much the resources cost in real time. Set monitoring standards and alerts in place.
  5. Look for resources still running. Removing idle resources is a surefire way to lower cloud bills without impacting applications. 
  6. Check if your team is overprovisioning. How many resources are applications requesting? Do you see a large gap between the resources requested and provisioned for these applications? Mitigation is the first step to lowering cloud costs without sacrificing performance or availability. 
  7. Consider implementing an automated cloud cost optimization solution. DevOps, engineers, and SRE specialists will regain the time normally spent manually configuring cloud infrastructure, making your business more efficient. 

Let automation tackle your cloud costs

Why manually adjust cloud resources when automation can tackle many technical challenges? With automated cloud cost management, you can go beyond traditional cost management and reduce the cloud bill by a tremendous amount over the application's lifecycle.

Meanwhile, you can focus on delivering business value while optimizing cloud resources and reducing costs.

Stop overspending on cloud resources and start optimizing your cloud cost management strategy today. Discover the latest cloud cost management statistics and unlock your organization's potential for significant cost savings. 

cloud cost management software
Aim for zero cloud waste

Monitor your resource usage and computing needs and save on cloud costs with cloud cost management software.

cloud cost management software
Aim for zero cloud waste

Monitor your resource usage and computing needs and save on cloud costs with cloud cost management software.

What Is Cloud Cost Optimization? How to Achieve It via FinOps Explore the world of FinOps and discover how to optimize cloud costs with our comprehensive guide. Streamline FinOps adoption and reduce cloud bills today.
Laurent Gil Co-founder and CPO at CAST AI, Laurent is responsible for product and business development. He was co-founder and Chief Product and Business Officer at Zenedge, acquired by Oracle in 2018. Laurent was also CEO and co-founder of Viewdle, acquired by Google in 2012.

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