Cloud Cost Management: How To Control Cloud Infrastructure Costs

Sigma Software

The popularity of cloud computing continues to grow, and leading providers such as Amazon Web Services, Microsoft Azure, and Google Cloud are offering competitive pricing to attract businesses of all sizes - from startups and SMBs up to enterprises. Historically, computing costs were treated as capital costs, resulting in predictable resource procurement and never-ending budget planning.

With the active distribution of cloud technology since 2006, companies have finally been able to scale up and down on-demand and switch to a pay-as-you-go model (paying only for the resources they use). According to Gartner’s report,  by moving to the cloud, organizations can save nearly 30% of their costs in comparison to on-premise solutions.

However, many real-life examples show that cloud infrastructure costs can quickly get out of hand. Many aspects can drive up cloud expenditures that were once overlooked. Luckily, you can control those by leveraging a smart cloud cost management strategy. Cloud cost management is the process of managing cloud expenses efficiently by finding the most optimal solutions to maximize the usage of resources at the lowest possible cost.

According to Flexera State of the Cloud Report, 73% of companies adopting a cloud strategy concentrate on optimizing their existing cloud costs in the near future.  In this blog post, we'll give you insights on how to build an effective cloud cost management strategy and control expenditures on infrastructure maintenance.

Cloud Cost Control

 

The wise man learns from the mistakes of others

If you're sitting there looking sadly at a new bill from your cloud provider, don't worry. Even large companies have been in a similar situation. According to the Information report Adobe, Pinterest, and Capital One were among companies struggling with managing their cloud hosting costs.

  • Capital One

In 2017 Capital One decided to move its application to AWS as quickly as possible to reduce its data-center footprint and be able to scale on-demand. Once its legacy application was migrated (without proper planning and step-by-step strategy), their software engineers erratically began modernizing them for greater resiliency. As a result, Capital One’s cloud expenditures jumped 73 % between 2017 and 2018.

Take-home message: No strategy - no control. Think twice before making any changes before migration, optimization, or a coffee run. :)

  • Pinterest

In 2018, Pinterest spent around $190 million on AWS services, much more than they had primarily estimated. Pinterest projected the capacity they required and paid in advance for their AWS services at a lower price.

Nevertheless, during the holidays, they ran into an unexpected surge in traffic. The traffic growth resulted in a dramatic increase in their use of the cloud. Thus, they had to buy additional capacity at a much higher cost, so they spent $20 million more than they originally calculated.

Take-home message: A good strategy is not a panacea for overpayments. But at least it greatly reduces the risk of cost overruns.

  • Adobe

In 2013 the software company Adobe migrated its core software products to the Azure cloud, making them only available to customers via subscription. From that time their business expanded considerably.

However, in 2018, Adobe ran into a problem that cost them an arm and a leg. Their development team spent $80,000 a day on unplanned payments for computing operations. The mistake wasn’t discovered for more than a week. By that time, the bill had reached over half a million dollars.

Take-home message: Anyone can find themselves in a situation where costs increase dramatically. It is important to notice this as early as possible before there are more zeros on the check than you can count.

How to design a cloud cost management strategy: top 5 ways to maximize ROI

In all seriousness though, managing cloud infrastructure costs efficiently is possible for most companies. To avoid the above-mentioned cost overruns, there are a number of cloud cost control practices that businesses can apply to manage cloud costs and start saving today. Some of these practices include:

Cloud Cost Management Diagram

Visibility of Cloud Inventory

Lack of cloud resource visibility is one of the main reasons for the unexpected rise in cloud costs. Start with a thorough review of your whole infrastructure. If some of the resources are not used, but you are still charged for them, it makes sense to organize your idle resources into actionable workflows (such as archiving or termination) or stop instances when they’re not used.

You can also use your cloud provider's cloud cost management tools such as Amazon CloudWatch, Azure Monitoring, or Google Cloud Monitoring. Based on the gathered data, you can estimate workloads, scale instance sizes, and get alerts to track unused resources. This will help to control your spending.

Clear Cost Management Policies

One of the common reasons for cost overruns is that different teams within the company interact with the infrastructure without transparent cloud cost governance. Therefore, it is essential to have clear policies regarding who, how, and by what rules you manage your cloud infrastructure and control costs. These policies should be automated and should not require much manual effort during maintenance.

The main purpose of creating such a policy is to delineate responsibilities and define the rights of users in changing and controlling the infrastructure. Besides, it’s always a good idea to determine who is responsible for different aspects of the process.

Write down the processes and principles by which you work with the infrastructure, change & optimize it, and control costs. Vanishing silos between teams means all participants are involved in the process and understand who does what and is responsible for which part of the development cycle.

Automated Alerts and Notifications

Automatic alerts and notifications let you track reports of authorization failures, budget overruns, cost surges, and more. This provides timely information about current problems with your cloud expenses so you can quickly address them. Leading cloud providers offer cloud optimization tools for alerts and notifications.

With AWS cost monitoring tools, you can also track the estimated charges for each service on AWS that you use. Estimated costs are calculated and sent to CloudWatch multiple times per day as metric data. You receive automated alerts when your account billing surpasses the threshold you have set.

With Microsoft Azure cost monitoring tools, there is also an option to set alerts and notifications when spending reaches or surpasses the amount determined in the budget alert plan. Cost alerts are created automatically and can be checked on the Azure portal. The system also sends email notifications to the users placed on the alert recipients list.

With Google Cloud cost monitoring tools, you can set Cloud Billing budgets to track all your cloud expenses versus your planned spending in one place. You will receive reports via email alerts or you can apply automated notifications to control infrastructure costs.

In addition to the cloud providers, there are already quite popular third-party provider tools such as СloudWize and Cloud Craft that help companies to regain visibility and maintain control over their cloud architecture to analyze and optimize costs.

Cost-saving infrastructure changes

If you are not very happy with the bills you receive from the provider, it makes sense to take a closer look at your infrastructure and try other approaches. For example:

Serverless architecture

Serverless architecture is a type of cloud model in which your cloud provider takes responsibility for servers running along with computing resources management. An organization that gets computing resources from a serverless provider is charged only for the resources their applications actually use. Thus, a company is charged only for the serverless function execution time.

Serverless Architecture

 

Consequently, the company does not need to reserve and pay for fixed bandwidth or a number of servers because the infrastructure scales up and down automatically. Your organization will have as much computing power as it requires without the necessity of purchasing new hardware when traffic grows.

Serverless architecture provides businesses with reduced operations time and lower costs. The serverless model allows you to avoid server operating costs such as access authorization, presence detection, image processing, and other expenses.

However, with serverless architecture, you don’t have full control over server hardware and runtime updates. The absence of hardware control and updates leads to fewer opportunities for independent security control, which can be an issue for applications that manage personal or sensitive data. A serverless solution may also not be a good fit for applications where speed is crucial because of the latency associated with certain tasks.

Any leading Cloud provider offers serverless these days:

  • AWS Lambda
  • Google Cloud Functions
  • Microsoft Azure Functions

 

Networking

When it comes to the cloud, networking is the foundation of a well-architected infrastructure, because users constantly need to be connected to the Internet and transfer data via cloud platforms. Data is shared over various regions too and with the movement of data, organizations face additional network costs.

In many cases, companies often overlook network costs. Initially, the choice of high availability zones might look good, but when traffic spikes occur, there is a huge increase in cloud expenses. This jump is the cost of outbound data transfer.

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When it comes to network spending, the first thing we recommend doing is to keep track of what goes in and out of the cloud platform. One of the ways to graphically represent the flow of data in a business information system is with Data Flow Diagrams.   

Cloud network cost optimization depends on the selected cloud region and availability zone, as not all network fees are the same. These charges vary from region to region (carbon penalties, real estate taxes, operating costs). Thus, cloud regions and availability zones for your application can make up the bulk of your cloud spending.

Business Discounts

Major cloud providers offer many programs with discount options that can help optimize cloud costs. A partnership program has a great variety of discounts on the total cloud cost, discounts on cost management tools, or even flexible payment terms.

Cloud Cost Doscount

 

AWS, Microsoft, and Google have discount schemes that decrease the basic cost of compute instances in return for a commitment to buy a particular level of resources in the future or acceptance of availability limitations. For instance, you can get a discount by pre-purchasing computer power — AWS Reserved Instances, Azure Reserved Instances, and Google Committed Use Discounts.

Enterprises can also search for some programs aimed at large-scale businesses to drive more substantial savings. If you have or predict a significant amount of infrastructure costs, be sure to check out:

Each of the leading cloud providers also offers free credit programs to startups to meet the specific requirements of this segment. You can get an additional discount by joining special startup programs. To manage your budget efficiently such programs include free credits for cloud services usage, free consulting services, and more. If you are a startup, check out:

All three of the top cloud providers also offer free trials (known as free tiers) for various individual services, so you can test the platform's capabilities before purchasing a license. These free tiers ("free for a limited time") give you an idea of how the services work without spending any money.

Next Steps toward Cloud Optimization

In our experience, the major drivers of cloud cost overruns are inefficiencies in the cloud strategy or the absence of such a strategy. Therefore, before cloud adoption, it is crucial to develop an effective strategy that will guide you in your cloud cost monitoring and optimization process.

If you are already in the cloud, but there is no strategy or you are not sure of it - it is high time to get down to business. You can ask your in-house team to help you or it’s always a good idea to meet with cloud experts that can help you create an effective cloud-cost strategy that will bring benefits to your business.

In this article, we have listed the most popular cloud cost optimization strategies, but we also recommend that your IT team review your cloud architecture and think about growth areas for improvement. The final outcome will be an environment with properly scaled resources that delivers the optimal balance of cost and infrastructure stability.

If you're just starting your cloud journey, keep in mind that cloud costs can sometimes be challenging to evaluate due to the complexity of the cloud infrastructure. If you have any questions or need help in your cloud cost monitoring and optimization, contact us today and we will assist you with the development of the most efficient cloud cost strategy plan.

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