Cloud cost optimization is crucial for organizations that want to leverage the benefits of cloud infrastructure while minimizing expenses. By monitoring and optimizing cloud spending, companies can achieve significant cost savings, accelerate innovation, maintain a competitive edge, and improve interactions with customers and employees. Pay-as-you-go pricing models offered by most public cloud providers enable businesses to scale their resources according to demand, with costs adjusting accordingly. However, without proper monitoring and optimization, cloud service costs can exceed expectations.
Cloud cost optimization involves employing strategies, techniques, best practices, and tools to reduce cloud costs, identify cost-effective ways to run applications in the cloud, and maximize business value. It helps identify unused resources, neglected tools, and areas of overspending to eliminate waste and improve cost efficiency.
To effectively optimize cloud costs
How do we prevent overprovisioning and overspending?
Cloud cost management tools are available to assist in tracking bills, features, and configurations, enabling organizations to optimize costs effectively. Cloud providers themselves offer cost management tools, such as Azure Cost Management, Google Cloud Cost Management, and AWS Cloud Financial Management tools. Independent companies also provide cloud cost tools that support multiple vendors, offering comprehensive reports that compare cloud costs with the expenses of building an on-premises server room.
Understanding and leveraging cloud pricing models is another aspect of cloud cost optimization. Cloud providers offer various pricing models and service levels that allow businesses to align resources and costs with application needs, availability requirements, and business value. Strategies like using reserved instances for prepaid instances, taking advantage of savings plan pricing based on commitments, utilizing Spot Instances for last-minute purchases, and minimizing data transfer fees contribute to cost optimization.
Considering FinOps for cloud cost optimization
The adoption of FinOps (Financial Operations) practices can further enhance cloud cost optimization. FinOps involves cross-functional teams comprising members from IT, finance, and engineering, who collaborate to bring financial accountability to cloud operations. By leveraging reporting and automation, FinOps practices continuously identify efficiency opportunities and optimize cloud resources in real-time. A mature FinOps practice ensures that over 90% of cloud spend aligns with forecasts, leaving minimal variance between projected and actual expenses.
The FinOps journey comprises into three phases
Inform, Optimize, and Operate. Organizations may be in different phases simultaneously, depending on their units, teams, or applications.
Inform
The Inform phase focuses on gaining visibility into cloud spending, accurate allocation, benchmarking, budgeting, and forecasting.
Optimize
The Optimize phase involves optimizing the cloud footprint through techniques like rightsizing environments, turning off unused resources, and leveraging discounts and reservations.
Operate
In the Operate phase, organizations continuously measure metrics against business objectives, emphasizing a culture of FinOps and establishing appropriate governance policies and models.
The FinOps Maturity Model
The FinOps Maturity Model defines three levels of maturity: Crawl, Walk, and Run.
- Crawl: At the Crawl level, organizations have basic reporting and tooling, allocate at least 50% of cloud spend, and address only low-hanging fruit.
- Walk: The Walk level signifies a better understanding of cloud optimization capabilities, addressing medium to high goals, and allocating around 80% of cloud spend.
- Run: At the Run level, organizations fully understand cloud optimization capabilities, set high goals, prefer automation, allocate over 90% of cloud spend, and achieve a forecast-to-spend accuracy of about 12%.
Cloud cost optimization and IBM
IBM offers hybrid cloud cost optimization through IBM Turbonomic. This platform enables IT teams to eliminate guesswork in resource provisioning, saving time and optimizing costs. By automating critical actions inreal-time, IBM Turbonomic ensures efficient utilization of compute, storage, and network resources throughout the application stack. It helps organizations avoid overprovisioning, reduce cloud costs, and achieve a better return on investment (ROI).
Cloud cost optimization is essential for controlling expenses, maximizing business value, and ensuring that cloud costs align with organizational goals. By monitoring and optimizing cloud spending, leveraging pricing models, adopting FinOps practices, and utilizing cost management tools, businesses can achieve significant cost savings while taking advantage of the benefits of cloud infrastructure. IBM Turbonomic is an example of a hybrid cloud cost optimization platform that can assist organizations in effectively managing and optimizing their cloud costs.
