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6 ways to optimise cloud spend and control costs

For many businesses that have migrated to the cloud, managing costs, reducing wastage and optimising spend is a real issue.

As cloud services continue to rapidly mature, the conversation has naturally shifted from adoption to optimisation this year. CIOs are more interested in improving their infrastructure, reigning in costs and spearheading multi-cloud governance to keep overall cloud expenditure down - yet for various reasons, many struggle to control spend.

An extensive study conducted by 451 Research revealed 38.8 per cent of CIOs choose to migrate their business to the cloud to achieve greater cost-savings. Post-migration, however, over 53.2% of the same cohort cite cloud costs as their number one pain point. The report pinpoints two big reasons that lead to such uncontrolled cloud spend:

Jevons Paradox: Ease of access to technology and lower costs drive developers and administrators to consume more. Unit costs stay low, but total costs increase.

Resource sprawl: With ease of access, inevitably some resources get orphaned with no ownership; these continue to incur costs. Some resources are over-provisioned to provide extra capacity as a 'just in case' solution. Unexpected line items, such as bandwidth, are consumed. The IT department has limited visibility or control of these items.

It’s not just CIOs lamenting high cloud expenditure: 76 per cent of the 997 companies surveyed in RightScale’s 2018 ‘State of the Cloud Report cited managing cloud spend as a challenge, and 21 per cent say it’s a big issue. In the wake of such problems, 58 per cent of all respondents said optimising cloud costs is the top initiative for 2018.

The unfortunate reality is a large amount of enterprises aren't achieving their cloud optimisation goals because they fail to prepare a cost governance plan, or forget to control or limit their consumption, with 30 per cent of companies surveyed by RightScale spending at least US $1.2 million on public cloud annually. 

In this article, we go over 6 best practices required to assess and control your cloud costs and how a cloud optimisation strategy can provide you a cost-effective infrastructure environment that enables future innovation.


1. Create a cloud cost governance model

Optimise cloud spend with cost governance model


Many enterprises already on the public cloud fall into the trap of uncontrolled spending due to lack of consistent budgeting, planning and tracking. Before you begin using powerful software to help manage costs, you must first establish a consistent cloud cost governance model and back it with the right people, processes and tools.

Gartner examined IaaS and PaaS overspend in businesses using cloud platforms like Amazon Web Services (AWS) and Microsoft Azure in its extensive report, 'How To Manage Public Cloud Costs on AWS and Microsoft Azure’ and recommend the best way to start optimising cloud spend is implementing a fundamental five-step framework.

  • Plan: Create a forecast to set spending expectations.
  • Track: Observe your actual cloud spending and compare it with your budget to detect anomalies before they become a surprise.
  • Reduce: Quickly eliminate resources that waste cloud spending.
  • Optimise: Leverage the provider’s discount models and optimise your workload for cost.
  • Mature: Improve and expand your cost management processes on a continual basis.

This strategic approach is designed around achieving optimal cost management and realising the many promised cost benefits of cloud. We highly recommend giving the full report a read.


2. Monitor your cloud usage daily

With new instances and resources so easily provisioned in the public cloud, it’s critical to have a way to keep track of your usage across the organisation and help you actively control cost. Thankfully, all major providers offer inbuilt monitoring tools for businesses to leverage, which collect core telemetry and require minimal configuration to use.

  • Amazon Web Service (AWS) offers Amazon Cloud Watch for monitoring and management of apps and resources, Cost and Usage Report to provide estimated charges over tracked usage, and Trusted Advisor to optimise costs.
  • Microsoft Azure offers core monitoring over general resource management - Azure Monitor, Azure Advisor and Activity Log - and deep monitoring for powerful data analytics - Azure Application Insights and Log Analytics.
  • Google Cloud Platform offers Stackdriver Monitoring for monitoring and management of performance, up-time, and an overview of the health of cloud-powered apps.

While there are many third-party monitoring software tools available, the ease-of-access and native integration of these aforementioned options into your chosen public cloud platform should be a necessity, not an afterthought in your cloud setup. All of these services help you estimate costs and track usage on an hourly or daily basis (which is recommended over weekly or monthly reports), while consolidating the most important data into one dashboard.


3. Deploy and make tagging mandatory

Optimise cloud costs and spend by making tagging mandatory


Not knowing who is creating more servers or whether resources are being used in a cost-effective way is the biggest culprit behind uncontrolled cloud spend - which is why server tags are becoming more important to enforce.

Server tagging is the process of creating a name and value for the workloads you’re hosting in your cloud environment. Typical attributes include filtering by application, department, region, database or web server, and you can assign multiple tags to make it very clear which servers are being used and monitored by which departments.

Tags not only help organise your servers, but gather important information that can be used to develop valuable financial and usage reports for staff. Without them, it can be easy to accidentally create orphan workloads with usage unchecked - and with it, unexpected costs.

Experts recommend businesses in the cloud deploy tags consistently throughout their workloads and wrangle any untagged workloads to bring them back into the fold. Streamline your tagging by using automation tools that send alerts or shut down workloads not tagged, so you’re always aware of what’s running and what’s costing money.


4. Avoid lock-in with a multi-cloud strategy

RightScale reported over 84 per cent of businesses have a multi-cloud strategy in 2019, with public cloud adoption set to overtake it in growth in the next few years.

  • Despite the shift towards public cloud, many businesses prefer the multi-cloud strategy to optimise their cloud spend, according to BMC. 45 per cent of over 1,000 businesses surveyed view cost optimisation as the reason to use multiple cloud providers instead of one. 
  • 451 Research's Cloud Price Index also found using a multi-cloud setup can lead to savings up to 74% on direct expenditure, compared to using a single provider.

Vendor lock-in is naturally under the spotlight as more companies mature with their cloud infrastructure - and it's important to never be too dependent on one provider that it becomes too hard to migrate to another.

Experts recommend you actively compare and leverage competitive pricing, but also take into account the complexities of application integration with a multi-cloud model - which Xello can help you assess and implement.


5. Use a cloud cost monitoring tool

Optimise cloud spend with a cost monitoring tool


Enterprise cloud portfolios expand their cost models and services at a rapid pace, which makes the capabilities of cloud cost monitoring and optimisation (CCMO) tools essential to keep spend under control.

These solutions focus on increasing visibility of expenditure across your cloud and provides you the means to contextualise and integrate these financial insights into your processes.

With the right automated CCMO solution, businesses can achieve:

  • Granular cost breakdowns
  • Multi-cloud resource monitoring
  • Policy-driven auto-remediation
  • Saving trackers with visualisations

Forrester examined market leaders across both CCMO and hybrid cloud management (HCM) space in its ‘Cloud Cost Monitoring And Optimization, Q2 2018’ report and determined standalone cloud monitoring and management tools provide significant business value. On average, they cost much less to deploy than HCM counterparts, provide deeper cost monitoring and optimisation processes, and an overall faster return on investment (ROI):

CCMO customers quote ROI at between two and six months, which is far quicker than more costly tools that also cover compliance, orchestration, and other solutions.”

The report evaluated several vendors and classed Microsoft Azure and AWS as Strong Performers in the space. 

Manually performing cost analysis or handling multi-cloud governance often lacks greater control over cost inefficiencies or budget allocation and takes up valuable time. However, with the right CCMO system in place, often in-built in public cloud platforms, you can focus your efforts in other important parts of overall cost management.


6. Automate your cloud policies

A common scenario we encounter with our customers is cloud environments without any identity management, which result in multiple instances spun up and left on to rack up a costly usage bill. All of this is easily avoided when cloud policies are properly implemented, and future-proofed when you use the right automation tools.

49% of enterprises surveyed by RightScale still monitor and right-size their cloud instances and usage manually, despite having access to powerful monitoring and policies services. These tools are often natively integrated, in the case of AWS and Azure, and can be used to automate policies across your environment to implement the following:

  • Enforce specific expiration dates and tagging for workloads
  • Manage security and user access rights
  • Monitor usage and right-size instances
  • Shut down inactive servers and storage
  • Turn off workloads after hours
  • Use lowest cost regions

As RightScale notes, automation “represents an opportunity for increased efficiency and increased savings, since manual policies are difficult to monitor and enforce.” Not using these powerful tools to your advantage leads to operational inefficiencies and rising cloud costs.


Optimising cloud spend: Key takeaways

It’s not hard to understand why uncontrolled cloud spend occurs - and why success depends more on the maturity of your cloud management and governance practices than the nature of the workload. Now is the time to leverage the many tools and services available that can help you better optimise cloud spend across the organisation.

For more information on how public cloud services such as Microsoft Azure help businesses optimise their ongoing cloud expenditure, download our free Azure Optimisation Whitepaper and learn how to monitor consumption and control costs with much more transparency and efficiency than previously possible.

Azure Optimisation Whitepaper


Tags: AWS Cloud, Azure Cloud, Cost optimisation, Azure Optimisation