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What is Cloud Cost Optimization?

It is very difficult for IT Stakeholders to keep track of the cloud costs that their company is incurring. Cloud providers give complex pricing matrices which makes it even more difficult for companies to assess their cloud costs.

Cloud Cost Optimization is the process of understanding where the money is being spent and then taking effective measures to keep the costs under control. It doesn't really mean to compromise on the services and features that cloud infrastructure brings, but to keep track of the costs and make informed decisions.

Brandon Medford and Craig Lowery (Gartner Analysts) estimations suggest that as much as 70% of cloud costs are wasted.

Now, let's understand the biggest reasons for increased cloud costings.

Biggest Contributors to Higher Cloud Costs

1. Storage Services Hidden Costs

Many developers forget that I/O (input/output) operation on storage files also cost money, storage comes at the cost of (per GB/month). When transferring data between different regions, it also costs per GB.

It is very common for developers to use read and write operations frequently during the development and testing phase in the local environment but while doing the same thing in the AWS S3 bucket, it costs loads of money.

While creating data-intensive applications, developers should keep in mind the hidden costs of storage. It is recommended to keep the I/O to local files until they are optimized for production in the cloud.

2. Unused Resources

Generally, it happens that we create new instances of cloud resources and often forget about them. For example, if you spin up an instance for testing but then you forget about it, even if it's not in use you will be charged for that resource.

It is recommended to keep track of the new instances you are creating and keep destroying the ones that are not required anymore.

10 Simple Ways to Reduce Cloud Costing

1) Find Out the Unused Resources

Your cloud cost optimization strategy should start with identifying the unused instances or unattached storage resources and destroying them.

It should be the responsibility of the IT Department to keep a check on the number of new instances or attached storage created. It sometimes happens that they remove the new instances but forget to delete the storage attached to them, which contributes to the cloud bills.

2) Utilizing Heat Maps

Heat Maps allows you to understand visually the peaks and dips in your cloud costs. It is one of the important aspects of cloud cost optimization. With this information, you can decide about the start and stop times of your instance to cut the costs.

It is recommended to automate the process of starting and stopping the servers instead of manually getting it done from the system administrator.

3) Reserved Instances

If you are seeing yourself committing to the cloud long term, consider investing in the Reserved Instances offered by AWS and Azure. RI's upfront payment and time commitment can get you huge discounts. This is one of the major steps for cloud optimization, as cloud savings can reach up to 75%.

Before committing to the reserved instances, it is important to analyze your past usage. Check out the costs of Azure RI and AWS RI for more information.

4) Identify Idle Resources

Even if you are having a CPU utilization of 1-5%, still you will be getting the bill for 100% utilization from cloud providers, which is a complete waste of money and resources. Addressing idle resources is an important step in the journey of cloud cost optimization.

Companies should identify such instances and start consolidating these jobs into fewer instances. It is quite common these days that companies want to operate with a low level of CPU utilization, so they can manage the spikes in the traffic, but this is not an optimal solution for this requirement.

Cloud Providers offer features like AutoScaling and Load Balancing, which allows you to manage the spikes in the traffic smoothly.

5) Spot Instances

Spot Instances are one of the good options to be considered for cost optimization. They are different from Reserved Instances but can prove to be very helpful. Spot Instances are more than 75% cheaper than On-Demand Instances.

Spot Instances are basically the purchasing option offered by AWS and customers can avail them at highly discounted rates. These can be beneficial for firms that are involved in financial or scientific analysis. They can spin up hundreds or thousands of machines for a short period of time and can be utilized for the jobs that will be terminated quickly.

6) Utilize Cost Monitoring Tools

Adopt the right tools to implement an effective cost management strategy.

AWS offers various cost management tools like AWS Cost Explorer which can analyze your past spending patterns for up to thirteen months prior and based on that can predict your bills for the coming three months.

It also offers AWS Budgets, using which you can set custom alerts whenever your spending exceeds a certain number. It can also be used to automatically limit resources to reduce cloud costs.

7) Limit Data Transfer Fee

Cloud providers charge extra money to move data between different cloud platforms or even between different regions. Firstly, you need to assess your cloud provider's data transfer fee and then accordingly limit the number of transfers.

8) Release Idle Elastic API Addresses

AWS offers you to have five Elastic IPs per region. In case of any failure, your IP gets mapped to another instance. The drawback here is that even if the Elastic IP is not in use, AWS stills charges you the full amount. You should keep track of the unused IP addresses and release the ones, not in use.

9) Automatic Infrastructure Provisioning

It is highly recommended to leverage the power of Infrastructure as Code (IaC) tools such as AWS CloudFormation, which can automate infrastructure provisioning and avoid manual tasks and errors in the process.

Rightsize your infrastructure by fully automating the management process and make it seamless.

10) Handle your Idle Redshift Clusters

While using Redshift clusters on-demand, you have to pay for the clusters even if they are idle and not in use. It is recommended to use the pause and resume feature to minimize Redshift idle spend.


It is not necessary for cloud cost optimization to be complicated but it does need a disciplined approach to establish a good rightsizing habit and continuously drive insights and action through analytics to lower your cloud costs.

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