The cloud has revolutionised the way businesses operate, offering unparalleled scalability and flexibility. However, as organisations increasingly move their workloads and applications to the cloud, managing costs becomes a critical challenge. In today's digital age, optimising cloud costs is not just about saving money but also a means to fund new initiatives and drive innovation. Given innovation is an investment in future revenue streams, securing as much budget for innovation increases the likelihood of greater ROI.
In this article, I will explore how organisations can harness cloud cost optimisation strategies to reduce their IT spending and allocate those savings towards funding your innovation.
Importance of Cloud Cost Optimization
Managing cloud costs is a top organisational challenge, with many companies struggling to control their spending. According to a recent study by Flexera, organisations waste an average of 32% of their cloud budget, making cost optimisation crucial. By optimising cloud costs, organisations can free up significant funds that can be reinvested into new projects, services or technologies. This approach not only improves the bottom line but also enables organisations to fund innovation and helps you stay ahead of the competition.
To effectively optimise cloud costs, organisations need a comprehensive approach that combines strategies, best practices and the right tools. This approach pivots around the concept of a Cloud Center of Excellence (CCoE) or a Cloud Business Office (CBO), which acts as the epicentre for Financial Operations (FinOps) practices. The CCoE or CBO brings together cross-functional teams, including finance, IT and business leaders, to drive the cost optimisation initiative.
A common approach to cost optimisation is to leverage the Well-Architected Framework (WAF) provided by cloud vendors like AWS and Azure or the Google Cloud Architecture Framework. These frameworks provide architectural best practices that help organisations design and build cloud solutions that are secure, efficient and cost-effective. By following these guidelines and implementing the recommended strategies, organisations can drastically optimise their cloud costs in a structured and methodical manner.
Cloud Cost Optimisation Options
The Google Cloud Architecture Framework and the Well-Architected Frameworks of AWS and Azure provide pillars for cost optimisation that organisations can leverage. These roughly break down into the below ten areas worth your consideration:
1. Accountability and Governance: Start by establishing governance, policies and automation to manage cloud spend and drive financial accountability across the organisation. Use tags to categorise and allocate costs effectively, enabling spend visibility at the project, department or team levels.
2. Utilise Discounts and Savings Plans: Start to leverage various discount programs offered by your cloud vendors, such as Savings Plans and Reserved Instances, to achieve significant cost reductions. These programs offer discounted pricing for long-term commitments and can result in substantial savings.
3. Embrace Serverless Architectures: Start moving to serverless computing platforms, such as AWS Lambda and Google/Azure Functions, which offer cost savings by eliminating the need to provision and manage infrastructure when applications are not in use. Pay only for actual usage while optimising costs without sacrificing performance.
4. Right Size Resources: If serverless is not an option for you, start to optimise resource allocation by right-sizing instances and storage. Analyse usage patterns and leverage cloud monitoring tools to identify over-provisioned or under-utilised resources. Downsize your resources to match your workload requirements and avoid unnecessary costs.
5. Delete Unnecessary Resources: Start to regularly review and remove unused or unattached resources, such as unutilised load balancers, instances, elastic disk volumes or even unused IP addresses. Bonus points to those who use tags and automation to delete expired project resources to reduce costs and eliminate waste.
6. Suspend Resources when Not in Use: Start to leverage cloud elasticity and autoscaling capabilities to automatically suspend resources during periods of low demand. By scaling resources up or down based on business needs, organisations can optimise costs without sacrificing any business performance. A common scenario is the automated practice of turning off non-production resources outside of core business hours and over the weekend.
7. Automate Cost Optimisation: As organisations scale, automation becomes crucial for efficient cost management. Start to utilise automated provisioning, deployment and monitoring tools to ensure that cost optimisation measures are continuously applied and aligned with usage patterns. Each cloud provider has tools to do this, or you can even use 3rd party or open-source tools to help.
8. Measurement and Reporting: Start defining key performance indicators (KPIs) and success metrics to measure the effectiveness of your cost optimisation efforts. Cloud vendors provide robust monitoring and reporting tools that enable organisations to track spending, identify spiky and flat trends, and make data-driven decisions.
9. Planning and Forecasting: Start modernising your budgeting and forecasting processes to align cloud spending with business objectives. This involves setting up budgets, leveraging cloud pricing models and utilising tools that forecast future costs based on usage patterns and trends. You can plan, forecast and optimise costs using the AWS Trusted Advisor, Google Cloud Cost Management tools and Azure Advisor.
10. Education and Awareness: Start to create a cost-conscious culture within your organisation by educating teams on cloud cost management best practices. This encourages teams to make informed decisions regarding resource usage, consider cost implications and drive continuous improvement. Give teams examples of how their savings are directly funding another developer FTE head, an entire portfolio of new projects or the EOY Christmas party.
Optimising cloud costs is crucial for funding new innovations while driving business growth. To gain a competitive edge, organisations today need to harness the power of cost optimisation strategies, frameworks and cloud vendor tools. Establishing a Cloud Center of Excellence (CCoE) or Cloud Business Office (CBO) will ensure you are implementing best practices and fine-tuning your cost optimisation efforts. Simply unlocking the potential of cost-efficient operations will fuel your journey towards business transformation without having to spend any more. Keep it real, as a single dollar saved in January is a 365-dollar saving in December.